EDGAR 10-K Filing

Company CIK: 1096934
Filing Year: 2022
Filename: 1096934_10-K_2022_0001437749-22-007399.json

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ITEM 1. BUSINESS
ITEM 1.
BUSINESS
Overview
Enterprise Diversified, Inc. (formerly White Dove Systems, Inc., Interfoods Consolidated, Inc., and then Sitestar Corporation) was incorporated in Nevada on December 17, 1992. On June 1, 2018, the Company amended its Articles of Incorporation to change the name of the Company to “Enterprise Diversified, Inc.” Unless the context otherwise requires, and when used in this Report, the “Company,” “ENDI,” “we,” “our,” or “us” refers to Enterprise Diversified, Inc. and its subsidiaries.
During the year ended December 31, 2021, the Company operated through four reportable segments:
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Asset Management Operations - this segment includes revenue and expenses derived from our various joint ventures, service offerings, and initiatives undertaken in the asset management industry;
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Real Estate Operations - this segment includes (i) prior to its sale on May 17, 2021, our equity in Mt Melrose, LLC, which manages properties held for investment and held for resale located in Lexington, Kentucky, and (ii) revenue and expenses related to the management of legacy properties held for investment and held for resale through EDI Real Estate located in Roanoke, Virginia;
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Internet Operations - this segment includes revenue and expenses related to our sale of internet access, hosting, storage, and other ancillary services; and
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Other Operations - this segment includes any revenue and expenses from nonrecurring or one-time strategic funding or similar activity that is not considered to be one of our primary lines of business, and any revenue or expenses derived from corporate office operations, as well as expenses related to public company reporting, the oversight of subsidiaries, and other items that affect the overall Company.
During periods prior to the quarter ended June 30, 2019, the Company also operated through a fifth reportable segment, Home Services Operations, comprised of former subsidiary Specialty Contracting Group, LLC’s operation of HVAC and plumbing companies in Arizona. However, for the year ended December 31, 2021, and for all prior periods presented, Home Services Operations are reported as discontinued operations.
The management of the Company also continually reviews various business opportunities for the Company, including those in other lines of business.
Asset Management Operations
The Company operates its asset management operations business through its wholly-owned subsidiaries, Willow Oak Asset Management, LLC (“Willow Oak”) and Willow Oak Capital Management, LLC.
Willow Oak is an asset management platform focused on growing and enhancing the alternative investment landscape. Willow Oak seeks partnerships with alternative investment managers in the early stages of growth in order to build a network of unique investment opportunities for investors and scalable, professional operations for managers. Willow Oak offers affiliated managers strategic consulting, operational support, and growth opportunities through minority partnerships and other bespoke relationships. Affiliations to date include fund reinvestments, fund launching, investor relations, and fund management administrative support. The Company intends to actively expand its Willow Oak platform with additional offerings that enhance the value of the Willow Oak platform to managers and funds across the investing community.
On August 21, 2020, Willow Oak created two wholly-owned entities, Willow Oak Asset Management Affiliate Management Services, LLC (“Willow Oak AMS”) and Willow Oak Asset Management Fund Management Services, LLC (“Willow Oak FMS”), to support this partnership model in perpetuity. Willow Oak AMS earns gross revenue shares commensurate with ownership stakes in investment management firms in exchange for the provision of benefits of affiliation and ongoing fund management services (“FMS”). Willow Oak FMS earns a direct fee from affiliated limited partnerships for rendering administrative, compliance program management, and tax and audit liaison services.
Real Estate Operations
As has been previously reported, in December 2017, ENDI created a wholly-owned subsidiary named Mt Melrose, LLC, a Delaware limited liability company (“New Mt Melrose”), to acquire a portfolio of residential and other income-producing real estate in Lexington, Kentucky, pursuant to a certain Master Real Estate Asset Purchase Agreement entered into in December 2017 with a like-named seller, Mt. Melrose, LLC (“Old Mt. Melrose”), a Kentucky limited liability company owned by Jeff Moore, then an ENDI director. During January and June 2018, New Mt Melrose, consistent with the terms of the purchase agreement, completed two bundled acquisitions from Old Mt. Melrose of residential and other income-producing real properties located in Lexington, Kentucky. As has been previously reported, on June 27, 2019, the Company sold 65% of its membership interest in New Mt Melrose to an unaffiliated third-party purchaser, Woodmont Lexington, LLC (“Woodmont”). As consideration for the transaction, Woodmont paid the Company $100,000 and agreed to assume full responsibility for the management and operation of New Mt Melrose and its real estate portfolio. As a result of no longer having a controlling financial interest, the Company deconsolidated the operations of New Mt Melrose as of June 27, 2019. As was previously reported in the Company’s Current Report on Form 8-K filed with the SEC on May 20, 2021, on May 17, 2021, the Company entered into an agreement with Woodmont that terminated and effected a sale to Woodmont of the Company’s remaining membership interests in New Mt Melrose in conjunction with a cash payment to the Company. As of the quarterly period ended June 30, 2021, and subsequently the year ended December 31, 2021, the Company does not hold any remaining interests in the New Mt Melrose entity. See Notes 4 and 11 for more information.
Our other real estate operations include activity from a legacy real estate investment portfolio held through EDI Real Estate, LLC, a wholly-owned subsidiary. The portfolio, primarily located in the Roanoke area of Virginia, includes a residential rental property and vacant land. The residential property is a single-family home that is currently rented and managed through a third-party property manager.
Internet Operations
The Company operates its internet operations segment through Sitestar.net, a wholly-owned subsidiary that offers consumer and business-grade internet access, wholesale managed modem services, web hosting, third-party software as a reseller, and various ancillary services. Sitestar.net provides services to customers in the United States and Canada.
Other Operations
Other operations include nonrecurring or one-time strategic funding or similar activity that are not considered to be one of the Company’s primary lines of business. This activity includes opportunities such as the Company’s financing arrangement regarding Triad Guaranty, Inc.
Other operations also include any revenue or expenses derived from corporate office operations, as well as expenses related to public company reporting, the oversight of subsidiaries, and other items that affect the overall Company.
Discontinued Operations - Home Services Operations
Prior to May 24, 2019, the Company operated its home services operations segment through its subsidiary, Specialty Contracting Group, LLC (formerly known as HVAC Value Fund, LLC). The Company had organized and launched this subsidiary in June 2016, initially with an unaffiliated third party. Specialty Contracting Group was focused on the management of HVAC and plumbing companies in Arizona.
As has been previously reported, in May 2019, the Company, via Specialty Contracting Group, completed a divestiture of the home services operations to an unaffiliated third-parity purchaser, Rooter Hero Plumbing, Inc. (“Rooter Hero”).
See Note 3 for more information.
Products and Services
Asset Management Operations
The Company operates its asset management operations business through its wholly-owned subsidiaries, Willow Oak Asset Management, LLC (“Willow Oak”), Willow Oak Capital Management, LLC, Willow Oak Asset Management Affiliate Management Services, LLC (“Willow Oak AMS”), and Willow Oak Asset Management Fund Management Services, LLC (“Willow Oak FMS”).
In 2016, the Company made a seed investment, through Willow Oak, to assist in the launch of Alluvial Fund, LP, a private investment fund that was launched on January 1, 2017, by an unaffiliated sponsor and general partner, Alluvial Capital Management, LLC. The Company had determined that Willow Oak’s support of Alluvial Capital Management, LLC and its direct investment in Alluvial Fund were both beneficial and necessary undertakings in conjunction with establishing an asset management operations business and gaining credibility within that industry. As a special limited partner, Willow Oak earned a share of management and performance fees earned. On May 31, 2021, however, Willow Oak initiated a series of liquidating distributions of its investment in Alluvial Fund according to a mutually agreed upon cash distribution schedule with the general partner. On December 31, 2021, Willow Oak initiated its third and final liquidating cash distribution totaling $3,734,465 in respect of such withdrawal. This brings the total cash distribution amount to $17,772,369 for the year ended December 31, 2021. In accordance with the partnership terms of Alluvial Fund, a portion of Willow Oak’s capital account will be retained by the general partner until the fund’s activities for the year ended December 31, 2021, have been finalized through an independent audit. The retained amount will not be actively invested and will not be subject to investment gains or losses. The retained amount is represented by the investment redemption receivable amount on the accompanying consolidated balance sheets. Investment gains and losses for activity during the year ended December 31, 2021, and for prior periods presented, are reported as revenue on the accompanying consolidated statements of operations. As of December 31, 2021, Willow Oak no longer holds any remaining investment in Alluvial Fund.
In furtherance of establishing the asset management operations business, Willow Oak signed a fee share agreement in June 2017, with Coolidge Capital Management, LLC (“Coolidge”), whose sole member is Keith D. Smith, an ENDI director. Willow Oak is the sole member of Bonhoeffer Capital Management, LLC, the general partner to Bonhoeffer Fund, LP, a private investment partnership launched by Willow Oak and managed by Coolidge. Under their agreement concerning Bonhoeffer Fund, LP, Willow Oak paid all start-up expenses and pays agreed-upon operating expenses that are not partnership expenses, Coolidge is responsible for all investment management, and Willow Oak receives 50% of all performance and management fees earned. Additionally, Willow Oak FMS earns a direct fee from the private limited partnership for the administrative, compliance program management, and tax and audit liaison services it renders.
On November 1, 2018, Willow Oak Asset Management, LLC entered into a fund management services agreement with Arquitos Investment Manager, LP, Arquitos Capital Management, LLC, and Arquitos Capital Offshore Master, Ltd. (collectively “Arquitos”), which are managed by our Board chairman and principal executive officer, Steven L. Kiel, to provide Arquitos with Willow Oak’s Fund Management Services (“FMS”) consisting of the following services: strategic planning, investor relations, marketing, operations, compliance program management and legal coordination, accounting and bookkeeping, annual audit and tax coordination, and liaison to third-party service providers. Willow Oak earns monthly and annual fees as consideration for these services. On November 1, 2020, this arrangement was renewed with revised terms that include an exchange of services between Willow Oak and Arquitos. Steven Kiel, through Arquitos, has been contracted to perform ongoing consulting services for the benefit of Willow Oak in the following areas: strategic development, marketing, networking and fundraising. In exchange, Willow Oak continues to provide ongoing FMS services. Willow Oak continues to earn monthly and annual fees as consideration for these services.
On October 1, 2019, Willow Oak partnered with Geoff Gannon and Andrew Kuhn to form Focused Compounding Capital Management, LLC (“Focused Compounding”). This joint venture, of which Willow Oak Capital Management is a 10% beneficial owner, manages capital through separately managed accounts and a private investment fund launched January 1, 2020. Willow Oak provides ongoing FMS and operational support in addition to having covered all one-time expenses associated with the launch of Focused Compounding Fund, LP. As consideration for the arrangement, Willow Oak Capital Management is entitled to 10% of gross management and performance fees earned by Focused Compounding. Additionally, Willow Oak FMS earns a direct fee from the private limited partnership for the administrative, compliance program management, and tax and audit liaison services it renders.
On September 29, 2020, Willow Oak, through Willow Oak AMS, executed a strategic relationship agreement with SVN Capital, LLC whereby Willow Oak would receive certain economic and other rights in exchange for the provision of certain ongoing FMS and operational services offered through Willow Oak FMS. Pursuant to these economic rights, Willow Oak is entitled to 20% of gross management and performance fees earned by the firm. Additionally, Willow Oak FMS earns a direct fee from SVN Capital Fund, LP, a private investment fund launched by the firm’s managing member, for the administrative, compliance program management, and tax and audit liaison services it renders.
Real Estate Operations
As has been previously reported, in December 2017, ENDI created New Mt Melrose, a wholly-owned subsidiary at that time, to acquire a portfolio of residential and other income-producing real estate in Lexington, Kentucky, pursuant to a certain Master Real Estate Asset Purchase Agreement entered into in December 2017 with the seller, Old Mt. Melrose. During January and June 2018, New Mt Melrose, consistent with the terms of the purchase agreement, completed two bundled acquisitions from Old Mt. Melrose of residential and other income-producing real properties located in Lexington, Kentucky. As has been previously reported, on June 27, 2019, the Company sold 65% of its membership interest in New Mt Melrose to Woodmont, which agreed to assume full responsibility for the management and operation of New Mt Melrose and its real estate portfolio. As a result of no longer having a controlling financial interest, the Company deconsolidated the operations of New Mt Melrose as of June 27, 2019. As was previously reported in the Company’s Current Report on Form 8-K filed with the SEC on May 20, 2021, on May 17, 2021, the Company entered into an agreement with Woodmont that terminated and effected a sale to Woodmont of the Company’s remaining membership interests in New Mt Melrose in conjunction with a cash payment to the Company. As of the quarterly period ended June 30, 2021, and subsequently the year ended December 31, 2021, the Company does not hold any remaining interests in the New Mt Melrose entity. See Notes 4 and 11 for more information.
As has been previously reported, in July 2017, ENDI created a wholly-owned real estate subsidiary named EDI Real Estate, LLC, to hold ENDI’s legacy portfolio of real estate. As of December 31, 2021, through EDI Real Estate, LLC, ENDI owns a legacy real estate investment portfolio that includes one residential property and vacant land. Our real estate portfolio under EDI Real Estate, LLC is primarily located in Roanoke, Virginia. The portfolio includes an occupied single-family home that is managed by a third-party property management company. The lease in effect as of December 31, 2021, is based on a month-to-month provision, as the initial annual term of the lease has been completed. An outside property management company manages this rental property on behalf of the Company.
State and municipal laws and regulations govern the real estate industry in general and do not vary significantly throughout our real estate holding areas. State laws, including the Virginia Residential Landlord and Tenant Act, in addition to local ordinances, govern our rental property and also do not vary significantly throughout our real estate holding areas.
Internet Operations
The Company operates its internet operations segment through Sitestar.net, a wholly-owned subsidiary. Sitestar.net is an Internet Service Provider (ISP) that offers consumer and business-grade internet access, wholesale managed modem services, web hosting, third-party software as a reseller, and various ancillary services. We provide services to customers in the United States and Canada. This segment markets and sells narrow-band (dial-up and ISDN) and broadband services (DSL, fiber-optic, and wireless), as well as web hosting and related services to consumers and businesses.
Our primary competitors include regional and national cable and telecommunications companies that have substantially greater market presence, brand-name recognition, and financial resources compared to Sitestar.net. Secondary competitors include local and regional ISPs.
The residential broadband internet access market is dominated by cable and telecommunications companies. These companies offer internet connectivity through the use of cable modems, Digital Subscriber Line (DSL) programs, and fiber. These competitors have extensive scale and significantly more resources than Sitestar.net. Competitors often offer incentives for customers to purchase internet access by offering discounts for bundled service offerings (i.e., phone, television, and Internet). While we are a reseller of broadband services including DSL and fiber services, our profit margin is heavily influenced by these competitive forces.
There are currently laws and regulations directly applicable to access or commerce on the internet, covering issues such as user privacy, freedom of expression, pricing, characteristics and quality of products and services, taxation, advertising, intellectual property rights, information security, and the convergence of traditional telecommunications services with Internet communications. We may be positively or negatively affected by the repeal, modification, or adoption of various laws and regulations. These changes may occur at the international, federal, state, and local levels, and may cover a wide range of issues.
As of December 31, 2021, the focus of our internet operations segment is to generate cash flow, work to make our costs variable, and reinvest in our operations when an acceptable return is available. We did not make significant reinvestments into the internet operations segment during the year ended December 31, 2021.
Management routinely endeavors to identify the market value for domain names owned by the Company in order to assess potential income opportunities. Management evaluates these domain names for third-party sales potential, as well as for other marketing opportunities that could generate new revenue from current customers who utilize the domains.
Other Operations
Other operations include nonrecurring or one-time strategic funding or similar activity and other corporate operations that are not considered to be one of the Company’s primary lines of business. Below are the main recent activities comprising other operations.
Financing Arrangement Regarding Triad Guaranty, Inc.
In August 2017, the Company entered into an agreement with several independent third parties to provide debtor-in-possession financing to an unaffiliated third party, Triad Guaranty, Inc., through Triad DIP Investors, LLC. The Company initially contributed $100,000. Triad Guaranty, Inc. exited bankruptcy in April 2018, and the Company subsequently entered into an amended and restated promissory note. As part of the amended and restated promissory note, the Company provided an additional contribution in the amount of $55,000 in May 2018. The terms of the promissory note provided for interest in the amount of 10% annually and the issuance of warrants in Triad Guaranty, Inc. equal to 2.5% of the company. On December 31, 2020, the Company accepted a revision of terms to the original promissory note, which includes, among other things, an extension of the loan maturity date to December 31, 2022, an increase of interest to the amount of 12% annually, and a provision to settle all currently accrued interest through the issuance of Triad Guaranty, Inc. common shares. In line with the revision of note terms, during the three-month period ended March 31, 2021, the Company was issued 454,097 shares of Triad Guaranty, Inc. in lieu of interest accrued on the note receivable as of December 31, 2020.
On December 27, 2021, the Company completed the purchase of a comparable investment consisting of (i) another Triad Guaranty, Inc. promissory note in the original principal sum of $155,000, having the same terms as the December 31, 2020, financing agreement, along with (ii) 393,750 common shares of Triad Guaranty, Inc., for $25,000 from a related party. The value of this purchase is reflective of the implied collectability of the promissory note and the relative illiquidity of Triad Guaranty, Inc. stock. The Company determined that the December 27, 2021, transaction represents an active market transaction of similar assets to the Company’s existing Triad Guaranty, Inc. assets. As a result, the Company recorded a total $189,515 impairment on December 31, 2021, to its existing Triad Guaranty, Inc. promissory note and common stock to reflect the market value implied by the December 27, 2021, transaction. As of December 31, 2021, the Company holds its interests in both promissory notes for $50,000 under notes receivable on the accompanying consolidated balance sheets and has attributed no value to its 847,847 aggregate shares of Triad Guaranty, Inc. common stock. See Note 6 for more information.
Corporate Operations
Corporate operations include any revenue or expenses derived from corporate office operations, as well as expenses related to public company reporting, the oversight of subsidiaries, and other items that affect the overall Company.
Human Capital
As of December 31, 2021, we employed six full-time individuals through the asset management, real estate, internet, and other operations segments. We also utilize outside contractors as necessary to assist with consulting, technical support, and customer service. Our employees are not unionized, and we consider relations with employees to be favorable.
Proposed Merger with CBA
As previously announced on December 29, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with ENDI Corp., a Delaware corporation (“ENDI”), Zelda Merger Sub 1, Inc., a Delaware corporation (“First Merger Sub”), Zelda Merger Sub 2, LLC, a Delaware limited liability company (“Second Merger Sub”), CrossingBridge Advisors, LLC, a Delaware limited liability company (“CrossingBridge”), and Cohanzick Management, L.L.C., a Delaware limited liability company (“Cohanzick” and, together with the Company, ENDI, First Merger Sub, Second Merger Sub and CrossingBridge, the “Parties”).
Pursuant to the terms of the Merger Agreement, the Company will merge with First Merger Sub, a wholly-owned subsidiary of ENDI, with the Company being the surviving entity (the “First Merger”), and CrossingBridge will merge with Second Merger Sub, also a wholly-owned subsidiary of ENDI, with CrossingBridge being the surviving entity (the “Second Merger” and, together with the First Merger, the “Merger”). In connection with the Merger, each share of common stock of the Company will be converted into the right to receive one (1) share of Class A common stock, par value $0.0001 per share, of ENDI (the “Class A Common Shares”), and Cohanzick, as the sole member of CrossingBridge, will receive 2,400,000 Class A Common Shares and 1,800,000 shares of Class B common stock, par value $0.0001 per share, of ENDI (the “Class B Common Shares”, and together with the Class A Common Shares, the “Common Shares”), a Class W-1 Warrant to purchase 1,800,000 Class A Common Shares and a Class W-2 Warrant to purchase 250,000 Class A Common Shares. The Class A Common Shares and Class B Common Shares are identical other than the Class B Common Shares have the right to designate directors (as described below) and that the Class B Common Shares shall not be entitled to participate in dividends or other distributions with respect to the Class A Common Shares and shall not receive any assets of ENDI in the event of a liquidation. The warrant to purchase 1,800,000 Class A Common Shares and the warrant to purchase 250,000 Class A Common Shares to be issued to Cohanzick may be exercised in whole or in part at any time prior to the date that is five (5) years after the date of the Merger closing, at an exercise price of $8.00 per Class A Common Share subject to certain customary adjustments. Each of the warrants may also be exercised on a “cashless” basis at any time at the election of the holder and if not fully exercised prior to the expiration date of the warrant, shall be automatically exercised on a “cashless” basis. In addition, Cohanzick or its designee has agreed to purchase an aggregate of 100,000 Class A Common Shares, and shall have the right, but not the obligation, to purchase an additional 250,000 Class A Common Shares (collectively the “Additional Shares”), not later than five (5) business days following the consummation of the Merger at a price equal to the lesser of $8.00 or the 60 day volume weighted average price of Enterprise Diversified’s common shares as of the Merger closing date (the “Closing”), excluding the highest and lowest trading days. Certain of our officers, directors and employees shall have the right, but not the obligation, to purchase up to a further 55,000 Class A Common Shares on the same terms as the purchase of the Additional Shares. During the year ended December 31, 2021, ENDI incurred $1,148,971 of transaction costs directly associated with due diligence, public reporting, and legal advice associated with the Merger Agreement.
The Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement have been approved by our board of directors and by the board of managers of Cohanzick and remains subject to the approval of our stockholders. Holders of our common shares shall have dissenters’ rights as provided by Section 92A of the Nevada Revised Statutes. The Company and ENDI have filed a draft registration statement on Form S-4, including a prospectus registering the issuance of the ENDI Class A Common Shares, Class B Common Shares, Warrants and Class A Common Shares underlying the Warrants and draft proxy statement of the Company relating to the meeting of stockholders of the Company to approve the Merger Agreement and the transactions contemplated thereby, including the Merger. Further, as discussed in more detail below, certain of the Company’s stockholders have entered into voting and support agreements pursuant to which such stockholders have agreed to vote their shares of capital stock of the Company in favor of the Merger.
The Merger Agreement contains customary representations and warranties of the Company, CrossingBridge, ENDI, Cohanzick and the merger subsidiaries, and certain of the parties to the Merger Agreement have agreed to customary covenants, including, among others, covenants relating to: (1) the conduct of their respective businesses during the interim period between the execution of the Merger Agreement and the consummation of the Merger; (2) the use of reasonable best efforts to obtain governmental and regulatory approvals; and (3) obligations of the Company to convene a meeting of its stockholders to approve the Merger Agreement and the transactions contemplated thereby, including the Merger.
Completion of the Merger is subject to various customary conditions, including, among others, (1) approval of the Merger Agreement and the transactions contemplated thereby, including the Merger, by our stockholders, (2) the draft registration statement on Form S-4 being declared effective by the U.S. Securities and Exchange Commission (“SEC”), (3) the quotation of ENDI’s Class A Common Shares on the OTC Market, (4) the absence of any law, order or regulatory ruling prohibiting the consummation of the Merger and (5) the truth of each party’s representations and warranties, and the performance of each party’s covenants.
The Merger Agreement contains certain termination rights including upon: (1) the mutual written agreement of the Company and CrossingBridge to terminate the Merger Agreement, (2) the written notice of either the Company or CrossingBridge if the Merger has not closed by June 30, 2022, (3) a material breach of the Merger Agreement by us or CrossingBridge, which breach cannot be cured within thirty (30) days, (4) the failure to obtain any required regulatory or governmental approvals, (5) the failure to obtain the approval of the Company’s stockholders, or (6) the failure of our board of directors to make, or the withdrawal, amendment or qualification, in a manner adverse to CrossingBridge, of a recommendation in favor of the merger, or the failure of our board to include its recommendation in the proxy statement or the recommendation by the board of an alternative proposal or similar actions. In the event of the termination of the Merger Agreement pursuant to clause (6) of the preceding sentence, we shall pay a fee in the amount of $1,000,000 to CrossingBridge.
Pursuant to the Merger Agreement, ENDI has agreed that at the Closing, it will enter into a registration rights agreement with certain stockholders of ENDI following the Closing that are deemed to be affiliates of ENDI immediately following the Closing, under which such stockholders’ Class A Common Shares, including the Class A Common Shares underlying any warrants issued in connection with the Merger, will be registered for resale under the Securities Act of 1933, as amended. In addition, ENDI has agreed that at the Closing, it will amend and restate its certificate of incorporation to provide for, among other things, the rights of the holders of the Class B Common Shares to designate certain members of ENDI’s board of directors.
The amended and restated certificate of incorporation of ENDI will provide that so long as the holders of Class B Common Shares and their affiliates own at least 25% of the outstanding Common Shares, the holders of Class B Common Shares shall have the right to designate 60% of the authorized number of directors on ENDI’s board of directors (rounded up or down to the nearest whole number as necessary in light of the actual number of members of the board of directors). So long as the holders of Class B Common Shares and their affiliates own at least 15% but less than 25% of the outstanding Common Shares, the holders of Class B Common Shares shall have the right to designate 40% of the authorized number of directors on ENDI’s board of directors (rounded up or down to the nearest whole number as necessary in light of the actual number of members of the board of directors). So long as the holders of Class B Common Shares and their affiliates own at least 5% but less than 15% of the outstanding Common Shares, the holders of Class B Common Shares shall have the right to designate one (1) director on ENDI’s board of directors. At the closing, the Class B Common Shares shall be entitled to designate 3 of the 5 members of ENDI’s board of directors.
ENDI has also agreed at the Closing, it will enter into a stockholder agreement and separate voting agreement with Cohanzick and certain stockholders of ENDI pursuant to which, among other provisions, from and after the date that the holders of Class B Common Shares are no longer entitled to elect at least one (1) director to ENDI’s board of directors pursuant to the amended and restated certificate of incorporation as described above, so long as David Sherman and his affiliates, who will collectively beneficially own approximately 61.3% of the issued and outstanding voting stock of ENDI immediately following the Merger (assuming the Additional Shares are not issued), beneficially own at least 25% of the outstanding Common Shares, will have the right to nominate up to 60% of the authorized number of directors on the ENDI board, and the stockholders named therein have agreed to vote in support of such director nominees. David Sherman is the controlling member of Cohanzick and together with his affiliates has an economic interest of approximately 87% of Cohanzick. The number of directors David Sherman and his affiliates are permitted to nominate to ENDI’s board of directors decreases to 40% if David Sherman and his affiliates cease to beneficially own less than 25% but at least 15% of the outstanding Common Shares. So long as David Sherman and his affiliates own at least 5% but less than 15% of the outstanding Common Shares, David Sherman and his affiliates shall have the right to nominate one (1) director.
The Merger Agreement has been included as an Exhibit to this annual report and the description of the Merger Agreement and the transactions contemplated herein is qualified in its entirety by reference to the content of the Merger Agreement. It is not intended to provide factual information about the parties or any of their respective subsidiaries or affiliates. The Merger Agreement should not be read alone, but should instead be read in conjunction with the other information regarding the Merger Agreement, the Merger, the Company, CrossingBridge and the other parties to the Merger Agreement and their respective affiliates and their respective businesses, that will be contained in, or incorporated by reference into, the Registration Statement that will include a proxy statement of the Company and a prospectus of ENDI.
Voting and Support Agreement
In connection with the Merger Agreement we and certain of our stockholders holding an aggregate of approximately 34% of the issued and outstanding voting capital stock of the Company have entered into a voting and support agreement (the “Support Agreement”) pursuant to which such stockholders of the Company have agreed to vote their shares of capital stock of the Company in favor of the Merger Agreement and the transactions contemplated thereby, including the Merger, and against any action, agreement, transaction or proposal that would result in a breach of any covenant or other provision of the Merger Agreement or that would reasonably be expected to result in the transactions contemplated by the Merger Agreement from not being completed. Pursuant to the Support Agreement, the stockholders party thereto have also agreed to waive their dissenters rights under Nevada law with respect to the Merger, not to solicit or support any corporate transaction that constitutes or could reasonably be expected to constitute, an alternative to the Merger, and not to sell, transfer, assign or otherwise take any action that would have the effect of preventing or disabling the stockholder from voting its shares of the Company in accordance with its obligations under the Support Agreement. The Support Agreement automatically terminates upon the termination of the Merger Agreement or upon the mutual agreement of the parties to the Support Agreement. The Support Agreement is included as Exhibit 2.2 to this annual report. The description of the Support Agreement is qualified in its entirety by reference to the content of the Support Agreement, which is filed herewith as Exhibit 2.2.
Because of the material conditions to closing, including the approval of our stockholders of the Merger Agreement, we cannot assure you that the Merger will close as scheduled or at all, or on the terms described herein. If consummated, the Merger may result in significant changes to the business of the Company and the terms of an investment in shares of our common stock.
No Offer or Solicitation
This Annual Report on Form 10-K is not intended to and shall not constitute a proxy statement or the solicitation of a proxy, consent or authorization with respect to any securities in respect of the Proposed Merger and shall not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities or a solicitation of any vote of approval, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
Available Information
Enterprise Diversified, Inc. files annual, quarterly, and current reports and other documents with the Securities and Exchange Commission (SEC) under the Securities Exchange Act. Also, the SEC maintains an internet website that contains reports, proxy and information statements, and other information regarding issuers, including the Company, that file electronically with the SEC. The public can obtain any documents that the Company files with the SEC at http://www.sec.gov. The Company also makes available free of charge on or through the Company’s website, http://www.enterprisediversified.com, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC.

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ITEM 1A. RISK FACTORS
ITEM 1A.
RISK FACTORS
This item is not required for smaller reporting companies.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
ITEM 2.
PROPERTIES
The Company operates its Asset Management, Real Estate, Internet, and Other operations remotely-that is, without any dedicated office space.
As of December 31, 2021, through EDI Real Estate, LLC, the Company owns various real estate properties consisting of one residential property and interests in two undeveloped lots. Subsequent to December 31, 2021, the last remaining residential property owned by EDI Real Estate, LLC was sold.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3.
LEGAL PROCEEDINGS
Pursuant to Item 103 of Regulation S-K, as amended, the information required by this Item 3 is provided by cross-reference to the Company’s legal proceedings disclosure located under the Litigation & Legal Proceedings heading in Note 11 to the accompanying consolidated financial statements (see page 40).

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5.
MARKET FOR COMPANY’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Enterprise Diversified’s Common Stock is listed on the OTC QB Markets (“OTCQB”) under the symbol “SYTE.”
Record Holders
As of March 25, 2022, we had approximately 116 stockholders of record. This number does not reflect the number of individuals or institutional investors holding stock in nominee name through banks, brokerage firms, and others.
Equity Compensation Plans
On November 7, 2019, Enterprise Diversified’s Governance, Compensation, and Nomination Committee of the Board of Directors approved the creation of an equity incentive program for board members as well as eligible senior management. The Committee determined that it was advisable, and in the best interests of the Company and its stockholders, to provide guidelines for the issuance of equity incentive awards, such as restricted stock and restricted stock units, to attract, retain, and motivate eligible persons whose present and potential contributions are important to the long-term success of the Company and its subsidiaries and to align their interests with those of the Company’s stockholders. Consistent with this and the Company’s intention to retain its cash, it was also determined that such a program would provide for a more-formal process by which amounts of director’s fees and annual management bonuses accrued from time to time could be paid, at the direction of the Committee, in shares of Common Stock in lieu of cash. The provisions of the program were memorialized as the Enterprise Diversified, Inc. 2020 Equity Incentive Plan (the “2020 EIP”), which was approved and adopted by the Board effective as of January 31, 2020. The 2020 EIP may be amended or terminated at any time by the Board or the Committee. Effective January 31, 2021, the Board adopted an amendment to the 2020 EIP solely to increase the stated number of shares available for issuance thereunder, so as to accommodate the Company’s February 3, 2021 issuance of shares noted below.
Dividends
To date, we have not paid any cash dividends on our capital stock. We intend to retain our cash and, therefore, do not anticipate paying any cash dividends in the foreseeable future.
Issuances of Unregistered Shares of Common Stock
On February 3, 2021, the Company issued a total of 45,143 unregistered shares of its Common Stock to members of the Board of Directors and select senior management in lieu of cash payment of certain accrued director’s fees and annual management bonuses, in line with the 2020 EIP described above. The number of shares issued was determined by the Governance, Compensation, and Nomination Committee of the Board of Directors using the volume weighted average price of a share of Common Stock for the ninety (90) days immediately preceding January 31, 2021, which equaled $5.3166. To the extent this issuance constituted an offer or sale of securities under the Securities Act, it was exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act and Regulation D Rule 506, as a transaction by an issuer not involving a public offering.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6.
[RESERVED]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section is intended to provide readers of our financial statements information regarding our financial condition, results of operations, and items that management views as important. The following discussion and analysis should be read in conjunction with the Company’s accompanying consolidated financial statements and accompanying notes as of and for the years ended December 31, 2021 and 2020. The discussion of results, causes, and trends should not be construed to imply any conclusion that such results or trends will necessarily continue in the future. Additionally, it should be noted that a uniform comparative analysis cannot be performed for all segments, as a segment’s limited financial history or recent restructuring results in less comparable financial performance.
Summary of Financial Performance
Common stockholders’ equity increased from $14,043,411 at December 31, 2020, to $17,105,760 at December 31, 2021. This change was primarily attributable to $4,225,702 of net income in the asset management operations segment, $824,284 of net income in the real estate operations segment, $434,228 of net income in the internet operations segment, and was partially offset by $2,661,865 of net loss in the other operations segment. There was no reportable income attributed to discontinued operations for the year ended December 31, 2021. Corporate expenses for the year ended December 31, 2021, included in the net loss from other operations, totaled $2,148,641. Total comprehensive net income for the year ended December 31, 2021 equaled $2,822,349.
Balance Sheet Analysis
This section provides an overview of changes in our assets, liabilities, and equity and should be read together with our accompanying consolidated financial statements, including the accompanying notes to the financial statements. The table below provides a balance sheet summary for the periods presented and is designed to provide an overview of the balance sheet changes from quarter to quarter.
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
December 31, 2020
ASSETS
Cash and equivalents
$ 13,487,482
$ 9,316,890
$ 9,399,112
$ 292,767
$ 341,007
Accounts receivables, net
351,405
302,548
369,893
130,155
144,791
Investment redemption receivable
3,734,465
5,579,679
-
-
-
Investments, at fair value
-
3,765,834
8,512,439
15,736,234
13,574,462
Real estate, total
26,911
27,334
27,732
239,500
241,876
Goodwill and other assets
340,495
490,599
493,618
508,094
555,044
Total assets
$ 17,940,758
$ 19,482,884
$ 18,802,794
$ 16,906,750
$ 14,857,180
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable
$ 11,474
$ 67,585
$ 48,920
$ 60,734
$ 65,524
Accrued expenses
645,798
465,606
117,103
137,803
306,063
Income taxes payable
6,532
360,000
-
-
-
Deferred revenue
171,194
198,199
198,045
198,848
192,088
Notes payable and other liabilities
-
-
24,461
247,305
250,094
Total liabilities
834,998
1,091,390
388,529
644,690
813,769
Total stockholders’ equity
17,105,760
18,391,494
18,414,265
16,262,060
14,043,411
Total liabilities and stockholders’ equity
$ 17,940,758
$ 19,482,884
$ 18,802,794
$ 16,906,750
$ 14,857,180
Financial Condition, Liquidity, and Capital Resources
During the year ended December 31, 2021, Enterprise Diversified carried out its business strategy in four operating segments: Asset Management Operations, Real Estate Operations, Internet Operations, and Other Operations. Our primary focus is on generating cash flow so that we have the flexibility to pursue opportunities as they present themselves. We will only invest cash in each segment if we believe that the return on this invested capital is appropriate for the risk associated with the investment. This consideration is measured against all investment opportunities available to us and is not limited to these particular segments or the Company’s historical operations.
Cash and equivalents totaled $13,487,482 at year-end December 31, 2021, compared to $341,007 at year-end December 31, 2020. Real estate held for investment decreased to $26,911 at year-end December 31, 2021, compared to $241,876 at year-end December 31, 2020, and long-term investments decreased to $0 at year-end December 31, 2021, compared to $13,574,462 at year-end December 31, 2020. Total accrued expenses increased to $645,798 at year-end December 31, 2021, compared to $306,063 at year-end December 31, 2020, and total notes payable decreased to $0 at the year ended December 31, 2021, from $250,094 at year-end December 31, 2020. The increase in cash and equivalents and decrease in long-term investments are primarily attributed to the series of liquidating distributions the Company initiated from Alluvial Fund during the current year. The decreases in real estate and notes payable are primarily due to the opportunistic sales of certain EDI Real Estate rental properties. The increase in accrued expenses is largely a product of additional legal and professional fees incurred as part of the Business Combination, which is further described in Note 11. The Company does not expect to make significant reinvestments into property and equipment used in operating activities at this time.
The Company currently believes that our existing balances of cash, cash equivalents, and cash generated from operations will be sufficient to satisfy our currently anticipated cash requirements through at least the next 12 months.
The aging of accounts receivable as of December 31, 2021, and December 31, 2020, is as shown:
December 31, 2021
December 31, 2020
Current
$ 348,745
$ 142,121
30 - 60 days
1,545
1,836
60 + days
1,115
Total
$ 351,405
$ 144,791
We have no material capital expenditure requirements.
During the quarterly period ended June 30, 2020, the Company received loan proceeds in the amount of $125,102 under the Paycheck Protection Program, as amended (the “PPP”), administered by the U.S. Small Business Administration. The PPP, established as part of the U.S. Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”), generally provided for economic assistance in the way of loans to qualifying business for amounts up to two-and-a-half times the average monthly payroll expenses of the qualifying business. Under the PPP, amounts of loan principal and accrued interest were eligible for forgiveness after a period, as selected by the borrower, of either eight or twenty-four weeks, provided the borrower used the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintained its payroll levels. The amount of loan forgiveness was subject to reduction if the borrower terminated employees or reduced salaries during the selected time period.
The Company applied for and was granted loan forgiveness by the Small Business Administration for the full value of its PPP loan in December 2020. The principal value of the loan, along with accrued interest, has been recognized as other income on the accompanying consolidated statements of operations for the year ended December 31, 2020.
During the quarterly period ended September 30, 2018, EDI Real Estate, LLC, as a borrower, issued a promissory note secured by certain properties held for investment. This note carried an annual interest rate of 5.6% and fully matured on September 1, 2033, with early payoff permitted. The interest rate on this note was subject to change once each five-year period based on an index rate plus a margin of 2.750 percentage points. The index rate was calculated as a monthly average yield on U.S. Treasury Securities, adjusted to a constant maturity of five years. During the quarterly period ended September 30, 2021, the remaining loan balance was paid in full and no future payments are required.
During the quarterly period ended September 30, 2017, EDI Real Estate, LLC, as a borrower, issued a promissory note secured by a property held for investment. This note carried an annual interest rate of 6%, accrued interest quarterly, and was due September 15, 2022, with early payoff permitted. During the quarterly period ended June 30, 2021, the balance of this note was paid in full in conjunction with the sale of the property. No future payments are required.
Notes payable as of December 31, 2021 and 2020, consisted of the following:
Interest Rates
Average Term
Interest-bearing amount due on promissory note through EDI Real Estate, LLC
5.60%
15 years
$ -
$ 154,094
Interest-bearing amount due on real estate held for investment through EDI Real Estate, LLC
6.00%
5 years
-
96,000
Less current portion
-
(5,609 )
Long-term portion
$ -
$ 244,485
Other Contractual Obligations
In 2016, the Company made a strategic determination to fund a seed investment, through Willow Oak, to assist in the launch of Alluvial Fund, LP, a private investment fund that was launched on January 1, 2017, by an unaffiliated sponsor and general partner, Alluvial Capital Management, LLC. The Company had determined that Willow Oak’s support of Alluvial Capital Management, LLC and its direct investment in Alluvial Fund were both beneficial and necessary undertakings in conjunction with establishing an asset management operations business and gaining credibility within that industry. Investment gains and losses are reported as revenue on the accompanying consolidated statements of operations. During the year ended December 31, 2021, the Company completed a liquidating withdrawal schedule from the Alluvial Fund in order to further strengthen the Company’s assertion that it is not subject to the application of the Investment Company Act of 1940, further discussed below. As of December 31, 2021, Willow Oak no longer holds any investment in Alluvial Fund.
As has been previously reported, on June 27, 2019, the Company sold 65% of its membership interest in Mt Melrose, LLC to Woodmont. Under the terms of the parties’ membership interest purchase agreement, the Company had agreed to indemnify Woodmont against certain losses actually incurred by Woodmont as a result of breaches of the Company’s representations and warranties made under the agreement. Also, in connection with the transaction, the Company and Woodmont had entered into a certain Amended and Restated Limited Liability Company Agreement of Mt Melrose, LLC, which had set forth the general terms and conditions governing the arrangements between the two members. In line with the Company’s sale of its remaining membership interests in Mt Melrose to Woodmont effective May 17, 2021, all of such contractual obligations have been terminated, and are no longer in effect as of the quarterly period ended June 30, 2021.
Also through the asset management operations segment, an operating lease on office space in New York City commenced on October 1, 2017, and extended through September 30, 2020. On October 1, 2020, the Company renewed this lease on a month-to-month basis at a reduced rate for limited storage access given the state of the New York City rental market as a result of the COVID-19 pandemic.
Through the former home services operations segment, an operating lease on warehouse and office space in Scottsdale, Arizona, commenced on May 1, 2018. This lease would have extended through May 31, 2021. This lease was not conveyed with the divestiture on May 24, 2019. Specialty Contracting Group, LLC (formerly known as HVAC Value Fund, LLC) was the lessee party to the lease. However, Specialty Contracting Group, in connection with its dissolution and winding up, surrendered possession of the premises to the landlord, in default of this lease. As of December 31, 2020, the remaining balance of the lease liability has been written off as the likelihood for any future collection is remote. This reduction in liability is included as income from discontinued operations on the accompanying consolidated statements of operations for the year ended December 31, 2020.
Discussion Regarding COVID-19 Potential Impacts
Due to the continuing uncertainty surrounding the COVID-19 pandemic, management has continued to regularly monitor and assess all Company operations for potential impacts of the COVID-19 pandemic, including as infectious variants such as Omicron have emerged. As of the year ended December 31, 2021, the Company has not been forced to make significant operational changes as a result of the pandemic. Management does not anticipate additional challenges in meeting existing obligations, nor do we expect significant customer or vendor interruptions. However, the extent to which the continuing COVID-19 pandemic ultimately may impact our business, financial condition, liquidity, and results of operations likely will continue to depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the continuing pandemic, the direct and indirect impact of the continuing pandemic on our employees, customers, and service providers, as well as the U.S. economy, and the actions taken by governmental authorities and other third parties in response to the continuing pandemic.
Discussion Regarding the Company’s Status Under the Investment Company Act of 1940
As discussed above, the Company, directly and through our subsidiaries, currently is engaged primarily in asset management operations, real estate operations, and internet operations lines of business-that is, in businesses other than that of investing, reinvesting, owning, holding, or trading in securities. We are not engaged primarily, nor do we propose to engage primarily, in the business of investing, reinvesting, or trading in securities; nor does the Company propose to operate any of its businesses in a manner that would cause the Company to be subject to regulation as an “investment company” under the Investment Company Act of 1940 (the “1940 Act”).
However, beginning during the quarterly period ended March 31, 2021, and continuing, to date, on an ongoing basis, representatives from the Securities and Exchange Commission (“SEC”) Division of Investment Management and the Company have engaged in informal discussions and correspondence regarding a general inquiry by the SEC as to the Company’s current status under the 1940 Act, namely as a result of the apparent quantitative significance of the Company’s assets that from time to time may have constituted “investment securities” in relation to the Company’s total assets.
In prior reporting periods, management had determined that our ownership of “investment securities” (as defined in the 1940 Act) exceeded 40% of the value of the Company’s total assets (exclusive of government securities and cash items), as measured under the 1940 Act. Our ownership of “investment securities” was largely comprised of our investment and limited partnership interests in Alluvial Fund, LP. In this respect, as the composition of our assets had changed over time, including by virtue of our previous sale of membership interests in Mt Melrose, LLC and our previous divestiture of the former Home Services Operations segment, the impact of our long-standing Alluvial Fund investment to the composition of our total assets, as measured under the 1940 Act, had become more pronounced, albeit inadvertently.
As a result of such discussions and correspondence among the Company and the SEC, the Board of Directors of the Company reconfirmed, during the quarterly period ended March 31, 2021, that the Company has a bona fide intent to be engaged primarily in lines of business not constituting that of investing, reinvesting, or trading in securities, nor that of acquiring, owning, or holding “investment securities,” and the Board resolved to explore certain strategic options so as to eliminate as soon as is reasonably possible any uncertainty in regard to the Company’s status under the 1940 Act.
Subsequently, as of the quarterly period ended September 30, 2021, management determined that our ownership of “investment securities” fell below the 40% threshold established by the 1940 Act. This decrease was attributed to the completion of the Company’s withdrawals from the Alluvial Fund, LP, as previously discussed.
Results of Operations
Asset Management Operations
The Company operates its asset management operations business through its wholly-owned subsidiaries, Willow Oak Asset Management, LLC (“Willow Oak”), Willow Oak Capital Management, LLC, Willow Oak Asset Management Affiliate Management Services, LLC (“Willow Oak AMS”) and Willow Oak Asset Management Fund Management Services, LLC (“Willow Oak FMS”). These subsidiaries were formed on October 10, 2016, May 24, 2018, and August 21, 2020, respectively. During the segment’s first year of operations, Willow Oak entered into three fee share agreements with multiple private investment partnerships and made an additional investment through another partnership arrangement. During the year ended December 31, 2018, two new partnerships were formed, multiple fee share agreements were entered into, and a new service offering, Fund Management Services, was launched. During the year ended December 31, 2019, one new joint venture was formed in which Willow Oak Capital Management is a non-managing beneficial owner. During the year ended December 31, 2020, we assisted in the launch of a new private investment fund, and two new wholly-owned entities, Willow Oak AMS and Willow Oak FMS, were formed to advance strategic relationships with external investment firms. Additionally, Willow Oak formalized a new strategic relationship with an investment firm, becoming a non-managing beneficial owner in exchange for the provision of certain ongoing FMS and operational services.
As of December 31, 2021, Willow Oak no longer holds any remaining investment in Alluvial Fund, LP. The realized and unrealized investment gains and losses earned during the current year and in prior periods presented are reported as revenue on the accompanying consolidated statements of operations. This treatment can result in reporting negative revenue figures for a given period. Willow Oak continues to earn revenue through its remaining fee share arrangements, as well as through fund management services.
During the year ended December 31, 2021, the asset management operations segment produced $4,650,298 of revenue. There were no costs of revenue and operating expenses totaled $424,596. Net income for the year ended December 31, 2021, totaled $4,225,702. This compares to the year ended December 31, 2020, when the asset management operations segment produced $3,690,473 of revenue, there were no costs of revenue, operating expenses totaled $425,704, and other income totaled $2,283. The increase in revenue in 2021 is due to market volatility and increased returns through the Company’s Alluvial investment along with an increase in fee share revenues from the new fund management services agreements and affiliate fee share relationships. Asset management operations operating expenses remained comparable year over year.
On December 31, 2021, Willow Oak initiated its third and final liquidating cash distribution totaling $3,734,465 in respect of such withdrawal. This brings the total cash distribution amount to $17,772,369 for the year ended December 31, 2021. In accordance with the partnership terms of Alluvial Fund, a portion of Willow Oak’s capital account will be retained by the general partner until the fund’s activities for the year ended December 31, 2021, have been finalized through an independent audit. The retained amount will not be actively invested and will not be subject to investment gains or losses. The retained amount is included within the investment redemption receivable amount on the accompanying consolidated balance sheets. As of December 31, 2021, Willow Oak no longer holds any remaining investment in Alluvial Fund. This compares to the year ended December 31, 2020, when the fair value of long-term investments held through the asset management operations segment totaled $13,520,616.
The tables below provide a summary of income statement amounts over time. These figures are specific to the asset management operations segment and are presented for the annual and quarterly periods designated below.
Annual
Year Ended December 31, 2021
Year Ended December 31, 2020
Revenues
$ 4,650,298
$ 3,690,473
Cost of revenue
-
-
Operating expenses
424,596
425,704
Other income
-
2,283
Net income
$ 4,225,702
$ 3,267,052
Asset Management Operations Revenue
Year Ended December 31, 2021
Year Ended December 31, 2020
Unrealized gains on investment activity
$ 4,178,870
$ 3,424,267
Performance fee revenue
308,466
116,179
Management fee revenue
78,504
60,419
Fund management services revenue
84,458
89,608
Total revenue
$ 4,650,298
$ 3,690,473
Quarterly
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
Revenues
$ 94,125
$ 806,314
$ 1,556,005
$ 2,193,854
Cost of revenue
-
-
-
-
Operating expenses
80,788
113,158
112,939
117,711
Net income
$ 13,337
$ 693,156
$ 1,443,066
$ 2,076,143
Real Estate Operations
During the year ended December 31, 2021, the real estate operations segment generated revenue of $356,560, which includes rental revenue of $17,060, and the cost of revenues of $248,424, which includes $8,695 of cost of rental revenues. Operating expenses during the year ended December 31, 2021, were $39,185 and other income totaled $755,333. Net income for the real estate operations segment for the year ended December 31, 2021, totaled $824,284. Other income for the year ended December 31, 2021 is primarily attributable to the gain recognized on the sale of the remaining noncontrolling Mt Melrose entity membership interests totaling $778,872. This compares to the year ended December 31, 2020, when the real estate operations segment generated revenue of $578,313, including rental revenue of $59,313, cost of revenues of $326,636, including cost of rental revenues of $43,726, operating expenses of $31,937, other expenses of $17,064, and total net income of $202,676. Other expenses incurred during the year ended December 31, 2020, were primarily interest-related expenses. The current year decreases in revenue and cost of revenue are due to the diminishing real estate portfolio. The slight increase in operating expenses during the current year is primarily attributable to the amortization of the remaining debt issuance expenses associated with the previously outstanding mortgage payable. The remaining balance of this mortgage was paid in full during the current year.
EDI Real Estate Operations
For the year ended December 31, 2021, depreciation expense on the EDI Real Estate portfolio of properties was $3,727. This compares to depreciation expense for the year ended December 31, 2020, when depreciation expense on the EDI Real Estate portfolio of properties was $15,774.
During the year ended December 31, 2021, three properties held for resale and one vacant lot were sold for gross proceeds of $339,500. Net proceeds totaled $80,259. This compares to their total carrying value of $211,238, which resulted in a net gain of $128,262 being recognized during the current year. This compares to the year ended December 31, 2020, when four properties held for resale were sold for gross proceeds of $519,000 and net proceeds totaled $229,209. This compared to their total carrying value of $232,744, which resulted in a net gain of $286,256 being recognized during the year ended December 31, 2020. No properties were purchased during the years ended December 31, 2021 or 2020.
No impairment adjustments were recorded during the years ended December 31, 2021 and 2020.
Through EDI Real Estate, as of December 31, 2021 and 2020, the EDI Real Estate portfolio of properties included the following units:
EDI Real Estate
December 31, 2021
December 31, 2020
Units occupied or available for rent
Vacant lots held for investment
Total units held for investment
Units held for investment consist of single-family residential rental units.
The lease in effect as of December 31, 2021, is based on a month-to-month provision, as the initial annual term has been completed. An outside property management company manages this rental property on behalf of the Company.
EDI Real Estate
December 31, 2021
December 31, 2020
Total real estate held for investment
$ 43,821
$ 303,158
Accumulated depreciation
(16,910 )
(61,282 )
Real estate held for investment, net
$ 26,911
$ 241,876
Mt Melrose Operations
For the years ended December 31, 2021 and 2020, prior to the sale of the remaining membership interests on May 17, 2021, the Company’s remaining investment in Mt Melrose was carried on our consolidated balance sheets for $53,846. This carrying value was reflective of the mechanics of the June 27, 2019 transaction, as the Company could not obtain current appraisals for each individual property at that time. By way of the Mt Melrose transaction, the Company was able to significantly reduce direct and overhead expenses, improve net cash flows, and fully deconsolidate approximately $6.4 million of debt. Additionally, the Company was afforded the opportunity to refocus growth opportunities to its asset management operations segment. These circumstances, rather than the cash consideration received, are what strategically prompted the majority sale of the Mt Melrose entity. Additional debt restructurings and sales of previously inactive real estate properties allowed the portfolio to continue its redirection, which management believes provided long-term returns greater than its carrying value. Management’s belief was substantiated as the Company recognized a gain of $778,872 during the quarterly period ended June 30, 2021, and current year ended December 31, 2021, on the sale of its then-remaining membership interests in the Mt Melrose entity. This gain is recognized on the accompanying consolidated statements of operations as a gain on sale of noncontrolling interest in subsidiary. As of the quarterly period ended June 30, 2021, and subsequently as of year-end December 31, 2021, the Company no longer holds any interest in the Mt Melrose entity. As noted above, this compares to the year ended December 31, 2020, when the Company’s remaining investment in Mt Melrose was carried on the consolidated balance sheets for $53,846. See Notes 4 and 11 for more information.
The tables below provide a summary of income statement amounts over time. These figures are specific to the real estate segment as a whole and are presented for the annual and quarterly periods designated below.
Annual
Year Ended December 31, 2021
Year Ended December 31, 2020
Revenues
$ 356,560
$ 578,313
Cost of revenue
248,424
326,636
Operating expenses
39,185
31,937
Other income (expense)
755,333
(17,064 )
Net income
$ 824,284
$ 202,676
Quarterly
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
Revenues
$ 9,300
$ 1,800
$ 335,724
$ 9,736
Cost of revenue
4,105
236,209
7,644
Operating expenses
(751 )
15,202
18,249
6,485
Other income (expense)
(12 )
(332 )
760,472
(4,795 )
Net income (loss)
$ 5,934
$ (14,200 )
$ 841,738
$ (9,188 )
Internet Operations
Revenue attributed to the internet operations segment during the year ended December 31, 2021, totaled $895,385 and cost of revenue totaled $270,627. Operating expenses for the segment totaled $212,217 for the year ended December 31, 2021, and other income totaled $21,687. Net income for the internet operations segment was $434,228 for the year ended December 31, 2021. Other income for the year ended December 31, 2021, consists primarily of gains recognized on the sales of an unused Autonomous System Number and a domain name. This compares to the year ended December 31, 2020, when revenue totaled $978,946, cost of revenues totaled $321,582, operating expenses were $193,791, other income was $4,251, and net income was $467,824. Other income for the year ended December 31, 2020, is primarily the result of refundable sales tax credits and credit card rewards. The year over year decrease in revenue and cost of revenue is in line with the decline in total customer accounts.
As of December 31, 2021, we have a total of 6,973 customer accounts across the U.S. and Canada. This compares to the year ended December 31, 2020, when we had a total of 7,009 customer accounts. While the total number of customer accounts did not decrease significantly year over year, the sales mix has shifted slightly from higher revenue, lower margin products to lower revenue, higher margin products. As of December 31, 2021, approximately 49% of our internet segment revenue is driven by internet access services, with the remaining 51% being earned though web hosting and other web-based storage services. This compares to the year ended December 31, 2020, when approximately 60% of our internet segment revenue was driven by internet access services, with the remaining 40% being earned though web hosting and other web-based storage services.
Amortization expense on domain names used for internet operations during the year ended December 31, 2021 totaled $7,278. There was no comparable amortization expense on domain names for the year ended December 31, 2020.
Approximately 92% of our customer accounts are U.S.-based, while 8% are Canada-based. Revenue generated by our U.S. customers totaled $851,274 and revenue generated by our Canadian customers totaled $44,111 during the year ended December 31, 2021. This compares to revenue generated by our U.S. customers of $929,383 and revenue generated by our Canadian customers of $49,563 during the year ended December 31, 2020.
The tables below provide a summary of income statement amounts over time. These figures are specific to the internet operations segment and are presented for the annual and quarterly periods designated below.
Annual
Year Ended December 31, 2021
Year Ended December 31, 2020
Revenues
$ 895,385
$ 978,946
Cost of revenue
270,627
321,582
Operating expenses
212,217
193,791
Other income
21,687
4,251
Net income
$ 434,228
$ 467,824
Quarterly
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
Revenues
$ 221,103
$ 218,097
$ 223,919
$ 232,266
Cost of revenue
66,772
61,863
70,029
71,963
Operating expenses
60,426
54,905
50,345
46,541
Other income
1,036
19,930
Net income
$ 94,941
$ 121,259
$ 103,905
$ 114,123
Other Operations
The Company’s other operations segment did not produce any revenue or cost of revenue during the year ended December 31, 2021. Operating expenses totaled $2,148,641, other expenses were $146,692, and income tax expense totaled $366,532 for the year ended December 31, 2021. Included in other expenses for the year ended December 31, 2021, is an impairment expense of $189,515 related to the Company’s promissory note from and common stock of Triad Guaranty, Inc. See Note 6 for more information on the Company’s considerations surrounding its Triad investments. Corporate operating expenses accounted for the full $2,148,641 of reported operating expenses for the year ended December 31, 2021. The total net loss attributed to the other operations segment was $2,661,865 for the year ended December 31, 2021. This compares to the year ended December 31, 2020, when our other operations segment again produced no revenue and no cost of revenue. Operating expenses totaled $966,862, other income was $143,528, and there was no income tax expense. Included in other income for the year ended December 31, 2020, for the other operations segment is $125,839 of debt extinguishment as a result of the forgiveness of the Company’s PPP loan. Corporate operating expenses accounted for the full $966,862 of reported operating expenses. This resulted in a net loss of $823,334 for the other operations segment for the year ended December 31, 2020.
Income tax expense was higher for the year ended December 31, 2021, primarily due to the tax effects of the Company’s liquidation of its investment in Alluvial Fund, LP. The Alluvial fund liquidation resulted in the recognition of previously unrealized net investment gains. The Company was able to offset a significant portion of the realized investment activity with net operating losses that had been carried forward from prior years. The Company did not recognize any income tax expense for the year ended December 31, 2020, as the Company operated at a tax loss for the year, and any deferred liabilities associated with unrealized gains in the Alluvial Fund investments were offset by deferred tax assets. The Company continues to provide a full valuation allowance against its net deferred tax assets, including net operating loss carryforwards, as of the year ended December 31, 2021. See Note 13 for more information.
Corporate expenses were higher for the year ended December 31, 2021 primarily due to an increase in legal fees, director fees, and consulting fees, which are associated with the Company’s Business Combination. See Note 11 for more information.
The tables below provide a summary of income statement amounts over time. These figures are specific to other business segments, including corporate and various other investments, and are presented for the annual and quarterly periods designated below.
Annual
Year Ended December 31, 2021
Year Ended December 31, 2020
Revenues
$ -
$ -
Cost of revenue
-
-
Operating expenses
2,148,641
966,862
Other income (expense)
(146,692 )
143,528
Income tax expense
(366,532 )
-
Net loss
$ (2,661,865 )
$ (823,334 )
Quarterly
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
Revenues
$ -
$ -
$ -
$ -
Cost of revenue
-
-
-
-
Operating expenses
1,222,809
477,234
241,345
207,253
Other income (expense)
(170,605 )
14,248
4,841
4,824
Income tax expense
(6,532 )
(360,000 )
-
-
Net loss
$ (1,399,946 )
$ (822,986 )
$ (236,504 )
$ (202,429 )
Discontinued Operations - Home Services Operations
As noted previously, Specialty Contracting Group, LLC’s historical operations are now classified as “discontinued operations” in our consolidated financial statements, and all presented prior periods have also been reclassified to discontinued operations for comparability. For the year ended December 31, 2021, there was no reportable net income from discontinued operations related to the home services segment. This compares to net income reported from discontinued operations related to the home services operations segment for the year ended December 31, 2020, of $165,186. Included in this amount is $147,113 of extinguished debt from expired historical obligations. Also included in net income from discontinued operations for the year ended December 31, 2020, is a $20,484 loss recovery on discontinued operations that represents royalties earned in accordance with the Rooter Hero royalty arrangement mentioned previously.
Summary Discussion of Critical Accounting Estimates
Our accounting policies are more fully described in Note 2, Summary of Significant Accounting Policies, to the accompanying consolidated financial statements (see page 29). As disclosed in Note 2, the preparation of financial statements requires the use of judgments and estimates. We base our estimates on historical experience and on various other assumptions we believe to be reasonable according to current facts and circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates. We considered the following to be our most critical accounting estimates that involve significant judgment:
Fair-Value of Long-Term Assets
Goodwill
The Company tests its goodwill annually as of December 31, or more often if events and circumstances indicate that those assets might not be recoverable. Impairment testing of goodwill is required at the reporting-unit level (operating segment or one level below operating segment). The impairment test involves calculating the impairment of goodwill based solely on the excess of the carrying value of the reporting unit over the fair value of the reporting unit. Prior to performing the impairment test, the Company may make a qualitative assessment of the likelihood of goodwill impairment to determine whether a detailed quantitative analysis is required. This qualitative assessment and the ongoing evaluation of events and circumstances represent critical accounting estimates. Management considers a variety of factors when making these estimates, which include, but are not limited to, internal changes in the segment’s operations, external changes that affect the segment’s industry, and overall financial condition of the segment and Company.
Management did not identify any events or circumstances throughout the year that would indicate potential goodwill impairment, nor did management’s qualitative assessment performed on December 31 indicate a potential goodwill impairment. Total goodwill reported on the consolidated balance sheets is $212,445 at December 31, 2021.
Notes Receivable
Notes receivable are recorded at their principal amount and interest is accrued quarterly based on the applicable interest rate. The Company makes an assessment of the ultimate collectability of each note receivable on an annual basis based upon the financial condition of the borrower. This estimation of collectability represents the critical accounting estimate. Management considers multiple factors when making this estimate, which include, but are not limited to, the perceived risk profile of the borrower, current financial condition and liquidity of the borrower, and availability and perceived value of the borrower’s collateral.
Management’s assessment of the collectability of the Triad Guaranty, Inc. note receivable was adjusted during the current year in accordance with the above mentioned December 27, 2021, transaction. This transaction indicated a decrease in the market’s perceived collectability of the original Triad Guaranty, Inc. note. The Company recorded an impairment expense of $144,105 to its historical promissory note from Triad Guaranty, Inc., which is included on the accompanying consolidated statement of operations for the year ended December 31, 2021. The Company’s historical Triad Guaranty, Inc. note is included on the consolidated balance sheets for $25,000 as of the year ended December 31, 2021. The remaining notes receivable balance on the consolidated balance sheet is comprised of the Company’s December 27, 2021 purchase of an additional Triad Guaranty, Inc. note receivable, also for $25,000, as of the year ended December 31, 2021.
Long-Term Investments
When investment inputs or publicly available information are limited or unavailable, management estimates the value of certain long-term investment using the limited information it has available. This estimation process, which was used to measure the value of the Company’s common stock in Triad Guaranty, Inc., represents a critical accounting estimate. Management utilizes the available inputs to perform an initial valuation estimate and subsequently updates that valuation when additional inputs become available.
The Company historically measured its investment in the Triad Guaranty, Inc. stock at its cost basis, which was equal to the amount of accrued interest on the historical Triad Guaranty, Inc. promissory note as of December 31, 2020. The above mentioned December 27, 2021, transaction, however, indicated a decrease in the market’s valuation of the common stock of Triad Guaranty, Inc. The Company recorded an impairment expense of $45,410 to its historical Triad Guaranty, Inc. common stock, which is included on the accompanying statement of operations for the year ended December 31, 2021. The Company has attributed no value to its historical Triad Guaranty, Inc. stock as of December 31, 2021, on the accompanying consolidated balance sheets.
Other Intangible Assets
When management determines that material intangible assets are acquired in conjunction with the purchase of a business, the Company determines the fair values of the identifiable intangible assets by taking into account internal and external appraisals. The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment. These initial appraisals, as well as the subsequent evaluation of events and circumstances that may indicate impairment, represent critical accounting estimates.
Management did not identify any events or circumstances throughout the year that would indicate potential impairment of the Company’s domain names, nor did management’s assessment performed on December 31 indicate potential impairment of the Company’s domain names. The total value of the Company’s domain names, net of amortization, reported under other assets on the consolidated balance sheets is $61,972 as of the year ended December 31, 2021.
Deferred Tax Assets and Liabilities
Income taxes are accounted for under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax benefits or consequences of events that have been included in the consolidated financial statements. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management’s analysis of the amount of deferred tax assets that will ultimately be realized represents a critical accounting estimate.
As of the year ended December 31, 2021, the Company recognized a net deferred tax asset of $1,432,017. In an effort to remain conservative and limit the potential financial impact of management’s estimate, the Company has provided a full valuation allowance against its net deferred tax assets as of the year ended December 31, 2021. This results in no value being attributed to the Company’s net deferred tax assets on the accompanying consolidated balance sheet as of the year ended December 31, 2021. See Note 13 for more information.
Contingencies, Commitments, and Litigation
Liabilities are recognized when management determines that contingencies, commitments, and/or litigation represent events that are more likely than not to result in a measurable obligation to the Company. Management’s analysis of these events represents a critical accounting estimate.
As of and during the year ended December 31, 2021, management did not identify any such events that would more likely than not result in a measurable obligation to the Company. Accordingly, the Company has not recorded any such liabilities related to contingencies, commitments, and/or litigation on the accompanying consolidated balance sheets as of the year ended December 31, 2021.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This item is not required by smaller reporting companies.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8.
FINANCIAL STATEMENTS
The information required by this Item 8 may be found immediately after the signatures to this Report and is incorporated herein by reference.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no change in the independent accountants engaged to audit the financial statements of the Company and its subsidiaries during the last two fiscal years ended December 31, 2021. There have been no disagreements with such independent accountants during the last two fiscal years ended December 31, 2021, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of our principal executive officer and principal financial officer, have evaluated the effectiveness of the design and operation of our “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of December 31, 2021. Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures. Based upon this evaluation, and based upon material weaknesses in our internal control over financial reporting identified as of the date of our most recent evaluation of internal controls over financial reporting, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of December 31, 2021.
Management’s Report on Internal Control over Financial Reporting
The management of Enterprise Diversified, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of our consolidated financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the consolidated financial statements. Under the supervision and with the participation of our management, including our Executive Chairman and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included evaluation of such elements as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment. Based on this evaluation, our management concluded that, as of December 31, 2021, our internal control over financial reporting was not effective based on such criteria. We have reviewed the results of management’s assessment with our Board of Directors. In addition, we will evaluate any changes to our internal control on a quarterly basis to determine if a material change occurred.
Material Weaknesses in Internal Controls
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements would not be prevented or detected on a timely basis.
As a result of our evaluations, we identified the following material weaknesses in our internal control over financial reporting as of December 31, 2021:
Segregation of Duties: The Company has a lack of segregation of duties due to the limited size of its staff. Specifically -
●
There is not a formal review of all adjusting journal entries;
●
Revenues for the internet operations segment are processed by a single individual;
●
There is not a formal procedure for the review and assignment of access rights within certain software systems; and
●
The individual with responsibility for reviewing journal entries, reviewing bank and credit card payments, and other reconciliations also has a wide range of access within the Company’s systems and is an authorized signor on bank accounts.
Financial Close and Reporting: The Company does not have effective internal controls over all parts of the financial close and reporting process in that one individual is responsible for reconciling significant accounts, preparing the most significant journal entries, evaluating complex transactions and reporting requirements, and also is responsible for the financial statement close, consolidation, and reporting process.
Changes in Our Internal Controls
During the years ended December 31, 2021 and 2020, the Company continued to uphold its established processes and controls surrounding its financial reporting, but did not make any significant modifications to its control environment. The Company continues to make efforts to reinforce its internal control enviornment by utilizing an external accounting firm during its financial closing process, engaging third-party consultants to review the accounting and related dislcosures for transactions that management and the board of directors determine to be particularly complex, and maintaining strict document retention policies and procedures that allow for full visibility of all financial statements and schedules by all ENDI managers and the Executive Chairman.

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ITEM 9B. OTHER INFORMATION
ITEM 9B.
OTHER INFORMATION
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
The information required by this item is incorporated herein by reference from the Company’s definitive Proxy Statement for the 2022 annual meeting of stockholders under the sections entitled “Information with Respect to Nominees,” “Management,” and “Corporate Governance.”

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference from the Company’s definitive Proxy Statement for the 2022 annual meeting of stockholders under the section entitled “Executive Compensation.”

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated herein by reference from the Company’s definitive Proxy Statement for the 2022 annual meeting of stockholders under the sections entitled “Security Ownership of Directors and Executive Officers” and “Information as to Certain Stockholders.”

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated herein by reference from the Company’s definitive Proxy Statement for the 2022 annual meeting of stockholders under the sections entitled “Determinations Regarding Independence” and “Transactions with Related Persons.”

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Our independent public accounting firm is Brown, Edwards & Company, L.L.P., Lynchburg, Virginia, PCAOB Auditor ID 423.
The information required by this item is incorporated herein by reference from the Company’s definitive Proxy Statement for the 2022 annual meeting of stockholders under the section entitled “Ratification of the Selection of Independent Registered Public Accounting Firm.”
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)
Financial Statements - Contained in Item 8:
Page
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets - December 31, 2021 and 2020
Consolidated Statements of Operations - Years Ended December 31, 2021 and 2020
Consolidated Statements of Changes in Stockholders’ Equity - Years Ended December 31, 2021 and 2020
Consolidated Statements of Cash Flows - Years Ended December 31, 2021 and 2020
Notes to Consolidated Financial Statements
(b)
Exhibits - The following exhibits are filed as part of this Annual Report on Form 10-K or are incorporated herein by reference:
Exhibit
Description
2.1
Agreement and Plan of Merger, dated December 29, 2021, by and among Enterprise Diversified, Inc., ENDI Corp., Zelda Merger Sub 1, Inc., Zelda Merger Sub 2, LLC, CrossingBridge Advisors, LLC and Cohanzick Management, LLC (m)
2.2
Voting and Support Agreement, dated December 29, 2021, by and between Enterprise Diversified, Inc. and the parties signatory thereto (n)
3.1(i)
Articles of Incorporation of the Registrant (December 17, 1992) (a)
3.1(ii)
Amended Articles of Incorporation (July 29, 1998) (a)
3.1(iii)
Amended Articles of Incorporation (October 26, 1998) (a)
3.1(iv)
Amended Articles of Incorporation (July 14, 1999) (a)
3.1(v)
Amended Articles of Incorporation (July 28, 1999) (a)
3.1(vi)
Certificate of Amendment to the Articles of Incorporation (January 23, 2018) (c)
3.1(vii)
Certificate of Change Pursuant to Nevada Revised Statutes Section 78.209 (June 1, 2018) (e)
3.1(viii)
Certificate of Amendment to the Articles of Incorporation (June 1, 2018) (f)
3.1(ix)
Certificate of Designation of Series A Preferred Stock of Enterprise Diversified, Inc. (i)
3.1(x)
Certificate of Amendment to the Articles of Incorporation (June 16, 2021) (l)
3.2(i)
Bylaws of the Registrant (December 17, 1992) (a)
3.2(ii)
Amended Bylaws of the Registrant (January 28, 2015) (b)
4.1
Tax Benefit Preservation Plan, dated as of July 24, 2020, by and between Enterprise Diversified, Inc. and Colonial Stock Transfer Company, Inc., as rights agent (j)
4.2
Description of Registrant’s Securities (pursuant to Item 601(b)(4)(vi) of Regulation S-K) **
10.3
Employment Agreement dated January 25, 2017 by and between Sitestar Corporation and Tabitha Keatts (d)
10.5
Employment Agreement effective as of October 5, 2018 by and between the Registrant and Alea A. Kleinhammer (g)
10.7
Enterprise Diversified, Inc. 2020 Equity Incentive Plan (h)
10.8
Amendment to Enterprise Diversified, Inc. 2020 Equity Incentive Plan adopted January 31, 2021 (k)
List of Subsidiaries **
31.1
Certification of Principal Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a) **
31.2
Certification of Principal Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a) **
Certification Pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **
Exhibit
Description
Pursuant to Rule 405 of Regulation S-T, the following materials from Enterprise Diversified Inc.’s Annual Report on Form 10-K for the year ended December 31, 2021, and the year ended December 31, 2020, formatted in Inline eXtensible Business Reporting Language (iXBRL): (i) Consolidated Balance Sheets as of December 31, 2021 and 2020; (ii) Consolidated Statements of Operations for the Years ended December 31, 2021 and 2020; (iii) Consolidated Statements of Stockholders’ Equity for the Years ended December 31, 2021 and 2020; (iv) Consolidated Statements of Cash Flows for the Years ended December 31, 2021 and 2020; (v) Notes to Consolidated Financial Statements
Cover page Interactive Data File (formatted as Inline XBRL and combined in Exhibit 101)
(a) Filed as an exhibit to Registrant’s Form-10SB, as amended, initially filed with the Securities and Exchange Commission on October 22, 1999, and incorporated herein by reference.
(b) Filed as an exhibit to Registrant’s Form 8-K filed with the Securities and Exchange Commission on January 28, 2015, and incorporated herein by reference.
(c) Filed as Exhibit 3.1 to Registrant’s Form 8-K Amendment No. 1 filed with the Securities and Exchange Commission on January 24, 2018, and incorporated herein by reference.
(d) Filed as Exhibit 10.2 to Registrant’s Form 8-K filed with the Securities and Exchange Commission on January 26, 2017, and incorporated herein by reference.
(e) Filed as Exhibit 3.1 to Registrant’s Form 8-K filed with the Securities and Exchange Commission on June 7, 2018, and incorporated herein by reference.
(f) Filed as Exhibit 3.2 to Registrant’s Form 8-K filed with the Securities and Exchange Commission on June 7, 2018, and incorporated herein by reference.
(g) Filed as Exhibit 10.12 to Registrant’s Form 10-K for the fiscal year ended December 31, 2018, filed with the Securities and Exchange Commission on April 1, 2019, and incorporated herein by reference.
(h) Filed as Exhibit 99.1 to Registrant’s Form 10-K for the fiscal year ended December 31, 2019 filed with the Securities and Exchange Commission on March 30, 2020, and incorporated herein by reference.
(i) Filed as Exhibit 3.1 to Registrant’s Form 8-K filed with the Securities and Exchange Commission on July 29, 2020, and incorporated herein by reference.
(j) Filed as Exhibit 4.1 to Registrant’s Form 8-K filed with the Securities and Exchange Commission on July 29, 2020, and incorporated herein by reference.
(k) Filed as Exhibit 10.8 to Registrant’s Form 10-K for the fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission on March 29, 2021, and incorporated herein by reference.
(l) Filed as Exhibit 3.1 to Registrant’s Form 8-K Amendment No. 1 filed with the Securities and Exchange Commission on July 8, 2021, and incorporated herein by reference.
(m) Filed as Exhibit 2.1 to Registrant’s Form 8-K filed with the Securities and Exchange Commission on December 29, 2021, and incorporated herein by reference.
(n) Filed as Exhibit 2.2 to Registrant’s Form 8-K filed with the Securities and Exchange Commission on December 29, 2021, and incorporated herein by reference.
** Filed herewith