This Quarterly Report on Form 10-Q, including, without limitation, Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein, contains statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. The words “believe,” “estimate,” “expect,” “intend,” “anticipate,” “plan,” and similar expressions and variations thereof identify certain of such forward-looking statements which speak only as of the dates on which they were made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties which may affect the Company’s business and prospects, including changes in economic and market conditions, acceptance of the Company’s products, maintenance of strategic alliances, and other factors discussed elsewhere in this Form 10-Q, and that actual results may differ materially from those indicated in the forward-looking statements as a result of various factors.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

~~Table of Contents~~

UNAUDITED CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF ~~CHANGES IN STOCKHOLDERS’ EQUITY~~CASH FLOWS

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

~~Table of Contents~~

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

~~Table of Contents~~

~~ENTERPRISE DIVERSIFIED, INC.~~

~~and Subsidiaries~~

~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)~~

~~Nine Months Ended September 30,2019~~ ~~and~~ ~~2018~~

2019

2018

Non-cash and other supplemental information:

Transfer of property, plant and equipment to held for resale $ 822,829 $ —
Transfer of land to held for investment $ 145,000 $ 145,406
Transfer of real estate held for investment to held for resale
$ 121,558 $ —
Effects of adoption of new lease guidance
$ 59,563 $ —
Continuing operations cash paid for interest
$ 174,951 $ 254,028
Discontinued operations cash paid for interest
$ 7,754 $ 12,112
Effects of adoption of new lease guidance on discontinued operations $ 58,127 $ —
Assets and debt consolidated as part of subsidiary acquisition
$ — $ 1,006,600
Assumption of debt in subsidiary acquisition
$ — $ 4,565,277
Asset acquisition equity activity
$ — $ 4,065,834
Real estate held for investment acquired through debt obligations
$ — $ 1,383,339
Equipment acquired through debt obligations of discontinued operations $ — $ 60,752

	2019		2018
Non-cash and other supplemental information:
Transfer of property, plant and equipment to held for resale	$	822,829		$	—
Transfer of land to held for investment	$	145,000		$	145,406
Transfer of real estate held for investment to held for resale	$	121,558		$	—
Effects of adoption of new lease guidance	$	59,563		$	—
Continuing operations cash paid for interest	$	174,951		$	254,028
Discontinued operations cash paid for interest	$	7,754		$	12,112
Effects of adoption of new lease guidance on discontinued operations	$	58,127		$	—
Assets and debt consolidated as part of subsidiary acquisition	$	—		$	1,006,600
Assumption of debt in subsidiary acquisition	$	—		$	4,565,277
Asset acquisition equity activity	$	—		$	4,065,834
Real estate held for investment acquired through debt obligations	$	—		$	1,383,339
Equipment acquired through debt obligations of discontinued operations	$	—		$	60,752

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~

~~Table of Contents~~

ENTERPRISE DIVERSIFIED, INC.

and Subsidiaries

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization and Lines of Business

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 ~~period~~quarter ended ~~September 30, 2019,~~March 31, 2020, the Company operated through ~~five~~four reportable ~~segments~~:segments: Asset Management Operations, Real Estate Operations, Internet ~~Operations, Home Services~~ Operations, and Other Operations. Other Operations include corporate operations and ~~investment~~nonrecurring or one-time strategic funding or similar activity that is not considered to be one of our primary lines of business. ~~As of January 1, 2019, legacy real estate operations, previously reported under Other Operations, are now being reported under~~During periods prior to the ~~Real Estate Operations segment. As~~quarter ended March 31, 2020, the Company also operated through a fifth reportable segment, Home Services Operations. However, as of the ~~period~~quarter ended ~~September 30, 2019,~~March 31, 2020, and for all prior periods presented, ~~home services operations~~Home Services Operations are reported as discontinued operations. The management of the Company also continually reviews various ~~investment~~business opportunities for the Company, including those in other lines of business.

~~Note Regarding Recent Transactions~~

On May 24, 2019, as per the Current Report on Form 8-K filed with the SEC on May 28, 2019, the Company completed an asset sale transaction of its Home Services Operations, via its subsidiary, Specialty Contracting Group, LLC (formerly known as HVAC Value Fund, LLC), to an unaffiliated third-party purchaser, Rooter Hero Plumbing, Inc. (“Rooter Hero”). In the transaction, the Company sold and conveyed all of the subsidiary’s personal property and customer lists and records, excluding stock inventory and other current assets. As part of the transaction, Rooter Hero assumed the subsidiary’s obligations under lease and/or loan agreements for all outstanding vehicles and equipment, as well as the obligations to service all of the subsidiary’s customer accounts going forward. No cash consideration was exchanged in the transaction. As consideration for the transaction, Rooter Hero will pay monthly royalties for the next 60 months following the closing, calculated on the basis of revenue received from the customer accounts sold. Under such royalty arrangements, the Company will receive 7.5% of monthly revenue generated from qualified sales during the first year, and 5% of monthly revenue during years two through five. The operations of Specialty Contracting Group, LLC are considered a component of, and the sale reflects a major strategic shift in, the Company’s business. As such, Specialty Contracting Group, LLC historical operations are now classified as “discontinued operations” in the Company’s financial statements. ~~See Note 3 for more information.~~

Additionally, on June 27, 2019, as per the Current Report on Form 8-K filed with the SEC on July 3, 2019, the Company sold 65% of its membership interest in Mt Melrose, LLC 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 Mt Melrose and its real estate portfolio. The Company has retained a 35% membership interest in Mt Melrose, with Woodmont owning the other 65% membership interest. While the operations of Mt Melrose, LLC are considered a component of the Company’s business, the sale did not represent a major strategic shift in the Company’s business. While we deconsolidated the operations of Mt Melrose, LLC on June 27, 2019, as a result of no longer having a controlling financial interest, Mt Melrose, LLC’s historical operations continue to be reflected as “continuing operations” in the Company’s financial statements. ~~See Note 4 for more information.~~

~~Note Regarding Historic Consolidation of Old Mt. Melrose~~

Previously, as of the quarterly periods ended March 31, 2018, June 30, 2018, and September 30, 2018, the Company had determined that Old Mt. Melrose (as defined below) was a “variable interest entity” because the seller’s equity interests in Old Mt. Melrose were not effective in determining whether the seller or New Mt Melrose (as defined below) had a controlling financial interest, and that New Mt Melrose’s rights under the Cash Flow Agreement were deemed to be variable interests in Old Mt. Melrose. As its primary beneficiary, New Mt Melrose previously consolidated Old Mt. Melrose’s financial results beginning on January 10, 2018. The fair values of the assets and liabilities of Old Mt. Melrose had been allocated accordingly on the unaudited condensed consolidated balance sheets for the quarterly periods ended March 31, 2018, June 30, 2018, and September 30, 2018.

However, as of November 1, 2018, pursuant to a certain Termination of Master Real Estate Asset Purchase Agreement and Cash Flow Agreement, New Mt Melrose no longer had a controlling financial interest in Old Mt. Melrose and was no longer considered Old Mt. Melrose’s primary beneficiary. Consequently, as of November 1, 2018, the Company no longer consolidates the assets and liabilities of Old Mt. Melrose, and the balance of noncontrolling interest as of ~~December 31, 2018, is appropriately reflected as zero on the accompanying unaudited consolidated statements of stockholders’ equity. See Note 5 for additional information.~~

Asset Management Operations

~~Enterprise Diversified, Inc. created a wholly owned~~The Company operates its asset management ~~subsidiary on October 10, 2016, named~~operations business through its wholly-owned subsidiaries, Willow Oak Asset Management, LLC (“Willow Oak”)~~. While not considered an investment company under the Investment Company Act of 1940,~~ and Willow Oak ~~follows specialized accounting guidance for investment companies.~~Capital Management, LLC.

In 2016, the Company ~~agreed~~made a strategic determination to ~~make~~fund a seed investment, ~~totaling $10 million~~ through Willow Oak, to assist in the launch of Alluvial Fund, LP, a private investment ~~partnership~~fund that was launched on January 1, ~~2017. Under a side letter agreement between~~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 of March 31, 2020, Willow Oak continues to hold its remaining direct investment in Alluvial ~~Fund,~~Fund. Investment gains and losses are reported as revenue on the ~~fund’s general partner, Willow Oak may not make a full withdrawal from its capital account prior to a date five years after the effective date~~accompanying unaudited condensed consolidated statements of the side letter agreement. However, on January 1, 2018, pursuant to an amendment to the side letter agreement dated December 15, 2017, the Company caused $3.0 million to be withdrawn from Alluvial Fund in order to partially fund the Company’s acquisition of real estate from Old Mt. Melrose (as defined below). Alluvial Fund focuses on investing in what it believes are deeply mispriced securities in the United States and abroad. Alluvial Fund focuses on small companies, thinly traded issues, and special situations, seeking to identify value that its management believes the market has yet to recognize.operations.

In furtherance of establishing the asset management operations business, Willow Oak signed a fee share agreement onin June ~~13,~~ 2017, with Coolidge Capital Management, LLC (“Coolidge”), whose sole member is Keith D. Smith, ~~who is also~~ 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.~~partnership managed by Coolidge. Under their agreement concerning Bonhoeffer Fund, LP, Willow Oak ~~pays~~paid all start-up expense and pays agreed-upon operating expenses that are not partnership expenses, ~~under the limited partnership agreement~~Coolidge is responsible for all investment management, and Willow Oak receives 50% of all performance and management fees earned by the general partner. Bonhoeffer Fund utilizes a value-oriented approach to invest in undervalued businesses worldwide that show evidence of compound mispricings, miscategorized business classifications, or are in a state of distress and/or transition exhibiting recurring revenue.earned.

On November 1, 2018, Willow Oak entered into a fund management services agreement with Arquitos Investment Manager, LP, which is managed by our Board chairman and principal executive officer, Steven L. Kiel, to provide Arquitos with Willow ~~Oak~~Oak’s Fund Management Services (“FMS”), consisting of the following services: investor relations, marketing, administration, legal, accounting and bookkeeping, annual audit coordination, and liaison to third-party service providers. As consideration for the services, Arquitos pays Willow Oak a monthly fixed fee and an annual performance-based fee.

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Real Estate Operations

In December 2017, ENDI created a ~~wholly owned~~wholly-owned subsidiary named Mt Melrose, LLC, a Delaware limited liability company (“New Mt Melrose”), ~~on January 10, 2018, which acquired~~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 onin December ~~10,~~ 2017 with a like-named seller, Mt. Melrose, LLC (“Old Mt. Melrose”), a Kentucky limited liability company owned by Jeff Moore, ~~formerly~~then an ENDI director. OnDuring January ~~10,~~and June 2018, New Mt Melrose, consistent with the terms of the purchase agreement, completed ~~a first acquisition~~two bundled acquisitions from Old Mt. Melrose of 44 residential and other income-producing real properties located in Lexington, Kentucky. On June 29, 2018, New Mt Melrose, consistent with the terms of the purchase agreement, completed a second acquisition from Old Mt. Melrose of an additional 69 residential and other income-producing real properties located in Lexington, Kentucky. The Company accounted for the first and second purchases of properties as an asset acquisition (consisting of a concentrated group of similar identifiable assets, including land, buildings, improvements, and in-place leases). OnAs has been previously reported, on June 27, 2019, the Company sold 65% of its membership interest in New Mt Melrose ~~LLC. The Company deconsolidated the operations of New Mt Melrose, LLC on June 27, 2019, as~~to Woodmont. As a result of no longer having a controlling financial ~~interest.~~interest, the Company deconsolidated the operations of New Mt Melrose as of June 27, 2019. See ~~Notes~~Note 4 ~~and 5~~ for more information.

Pursuant to that certain Termination of Master Real Estate Asset Purchase Agreement entered into effective November 1, 2018, between the Company and Old Mt. Melrose, the parties mutually agreed to terminate the Master Real Estate Asset Purchase Agreement as of November 1, 2018. Accordingly, neither the Company nor New Mt Melrose has any further rights or obligations concerning additional acquisitions of real properties from Old Mt. Melrose under the Master Real Estate Asset Purchase Agreement. A third-party property manager was engaged as of November 1, 2018, to manage certain of the real properties previously acquired. Management determined that it was necessary to right-size New Mt Melrose operations to reduce its level of high-interest debt. Accordingly, New Mt Melrose began to immediately sell various properties with an emphasis on selling properties that h~~ave high-interest-rate loans and do not produce income.~~

In an effort to expedite the optimization of the Mt Melrose portfolio, management determined that a dedicated operator was necessary to manage the subsidiary. On June 27, 2019, as per the Current Report on Form 8-K filed with the SEC on July 3, 2019, the Company sold 65% of its membership interest in Mt Melrose, LLC 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 Mt Melrose and its real estate portfolio. The Company has retained a 35% membership interest in Mt Melrose, with Woodmont owning the other 65% membership interest~~. See Note 4 for more information.~~

2017, ENDI created a ~~wholly owned~~wholly-owned real estate subsidiary ~~on July 10, 2017,~~ named EDI Real Estate, LLC to hold ENDI’s legacy portfolio of real estate. As of ~~September 30, 2019~~,March 31, 2020, through EDI Real Estate, LLC, ENDI owns a legacy real estate investment portfolio that includes ~~nine~~six residential properties and vacant land. Our real estate portfolio under EDI Real Estate, LLC is primarily ~~focused~~located in ~~the~~ Roanoke, ~~area of~~ Virginia. The portfolio includes single-family homes, both rented and vacant, that are managed by a third-party property management company.

Internet Operations

The Company operates its internet operations segment through Sitestar.net, a ~~wholly owned~~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.

Discontinued Operations - Home Services Operations

Prior to May 24, 2019, the Company operated its home services operations segment through its ~~wholly owned~~ 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. The Company, along with JNJ Investments, LLC, an unaffiliated third party, organized and launched Specialty Contracting Group, LLC on June 13, 2016. On May 18, 2018, the Company terminated its operating agreement with JNJ Investments, LLC, dated June 13, 2016.

As of December 31, 2017, Specialty Contracting Group had closed on six acquisitions for an aggregate purchase price of approximately $2.02 million, which included earn-outs of approximately $325,000. For all six acquisitions, all asset allocations made by management were final and all earn-outs hadhas been ~~paid in full as of December 31, 2018.~~

~~On May 24, 2019, as per the Current Report on Form 8-K filed with the SEC~~previously reported, on May ~~28,~~24, 2019, the Company completed ~~an asset sale transaction of~~ its Home Services Operations to an unaffiliated third-party purchaser, Rooter Hero Plumbing, Inc. (“Rooter Hero”). In the transaction, the Company sold and conveyed all of Specialty Contracting Group’s personal property and customer lists and records, excluding stock inventory and other current assets. As partdivestiture of the ~~transaction,~~home services operations to Rooter Hero assumed the subsidiary’s obligations under lease and/or loan agreements for all outstanding vehicles and equipment, as well as the obligations to service all of the subsidiary’s customer accounts going forward. No cash consideration was exchanged in the transaction. As consideration for the transaction, Rooter Hero will pay monthly royalties for the next sixty months following the closing, calculated on the basis of revenue received from the customer accounts sold. Under such royalty arrangements, the Company will receive 7.5% of monthly revenue generated from qualified sales during the first year, and 5% of monthly revenue during years two through five.Hero. See Note 3 for more information.

Other Operations

Other operations include ~~investment~~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 ~~business units~~activities that comprise other operations. Additional investment activity that is not specifically mentioned below is included in the accompanying unaudited condensed consolidated financial statements.

Huckleberry Real Estate Fund ~~Investment~~

OnIn January ~~30,~~ 2017, the Company, through Willow Oak, committed to make a capital contribution to Huckleberry Real Estate Fund II, LLC, a private investment fund, in the aggregate amount of $750,000. OnIn May ~~14,~~ 2018, Willow Oak transferred the Huckleberry investment to EDI Real Estate, LLC, another ~~wholly owned~~wholly-owned subsidiary of the Company. Under the fund’s operating agreement, the fund’s managing member shall have sole discretion regarding the amounts and timing of any distributions to the members of the fund. The carrying value of this investment included in the accompanying unaudited condensed consolidated balance sheets as of ~~September 30, 2019, and~~ ~~December 31, 2018, is $0 and $468,750, respectively. The decrease in carrying value period over period was due to return of capital that was received prior to June 30, 2019.~~

During the quarter ended March 31, 2019, all contributed capital was returned in full and a gain of $212,631 was recognized as revenue through the other ~~segments~~operations segment on ~~the accompanying~~our unaudited condensed consolidated statements of ~~operations.~~operations for the quarterly period ended March 31, 2019.

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Triad DIP Investors ~~Investment~~

OnIn August ~~24,~~ 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 ~~originally~~initially contributed $100,000. Triad Guaranty, Inc. exited bankruptcy onin April ~~27,~~ 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 onin May ~~18,~~ 2018. The terms of the promissory note ~~provide~~provided for interest in the amount of 10% annually ~~a repayment date no later than April 29, 2020,~~ and the issuance of warrants in Triad Guaranty, Inc. equal to 2.5% of the company. ~~Accordingly, on April 28, 2018,~~On November 12, 2019, the Company ~~was issued~~exercised its warrants ~~to purchase~~and purchased 450,000 shares ~~for $0.01 per share. Due to~~of Triad Guaranty, Inc. Subsequently, on December 30, 2019, the Company monetized all 450,000 shares. The promissory note had an original repayment date of April 29, 2020, but as of the quarterly period ended March 31, 2020, the Company is evaluating a ~~lack~~renegotiation of ~~available financial data, these warrants have not been valued on the accompanying unaudited condensed consolidated balance sheets.~~terms.

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.

Principles of Consolidation

The accompanying unaudited consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, and ~~its wholly owned subsidiaries~~those entities in which it otherwise has a controlling financial interest, including: Willow Oak Asset Management, LLC, Willow Oak Capital Management, LLC, Mt Melrose, LLC (“New Mt Melrose”) prior to ~~the loss~~cessation of control resulting from the sale of 65% of the equity in New Mt. Melrose on June 27, ~~201~~92019 (see Note 4), Specialty Contracting Group, LLC prior to ~~its asset sale~~the divestiture transaction on May 24, 2019 (see Note 3), Sitestar.net, Inc., and EDI Real Estate, LLC. Additionally, during the period from January 10, 2018, through September 30, 2018, the accompanying unaudited consolidated financial statements include the accounts of Old Mt. Melrose, which was, at that time, determined to be a variable interest entity.

All intercompany accounts and transactions have been eliminated in consolidation.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying interim consolidated financial statements are unaudited. These unaudited interim consolidated financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all the information and footnotes required by U.S. Generally Accepted Accounting Principles (“GAAP”) for complete financial statements. The December 31, ~~2018~~2019 consolidated balance sheet included herein was derived from audited consolidated financial statements as of that date. Certain information and footnote disclosure normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to instructions, rules, and regulations prescribed by the SEC. We believe that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited interim consolidated financial statements are read in conjunction with the audited financial statements and notes previously filed in our Annual Report on Form 10-K for the year ended December 31, ~~2018~~.2019. In the opinion of management, the unaudited interim consolidated financial statements reflect all the adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company’s financial position as of ~~September 30, 2019~~March 31, 2020 and the results of operations for the three ~~and nine~~ months ended ~~September 30,~~ ~~2019~~March 31, 2020 and ~~2018~~.2019.

Use of Estimates

In accordance with GAAP, ~~in the United State of America,~~ the preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period.

On an ongoing basis, management evaluates its estimates and judgments, including, among other items, those related to fair value of investments, revenue recognition, accrued expenses, financing operations, fair value of goodwill, fixed asset lives and impairment, lease right-of-use assets and impairment, deferred tax assets, liabilities and valuation allowance, other assets, the present value of lease liabilities, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. These accounting policies are described at relevant sections in the notes to the consolidated financial statements.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash, cash equivalents, accounts receivable, and ~~accounts~~note receivable. The Company places its cash with high-quality financial institutions and, at times, may exceed the FDIC and CDIC insurance limit. The Company extends credit based on an evaluation of customers’ financial condition, generally without collateral. Exposure to losses on receivables is principally dependent on each customer’s financial condition. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses.

Cash and Cash Equivalents

~~The~~For purposes of the statements of cash flows, the Company defines cash equivalents as all highly liquid instruments purchased with a maturity of three months or less.

Investments

The Company holds various ~~recurring~~ investments through its asset management operations and real estate operations segments. Additionally, ~~one-time~~ investments ~~can~~may be held and reported under the Company’s “other” segment. Assets held through these segments do not have a readily determinable value as these investments are not publicly traded, nor do they have published sales records. These investments are remeasured to fair value on a recurring basis. See Note 65 for more information.

As of ~~September 30,~~March 31, 2020 and December 31, 2019, the Company also holds its remaining ~~35%~~equity investment in Mt Melrose, LLC through its real estate operations segment. The Company has determined that its remaining equity investment does not have a readily determinable fair value, and the Company will account for the investment at cost, less any impairment, as adjusted for changes resulting from observable price changes. When fair value becomes determinable, the investment will be marked to fair value on a periodic basis.

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Accounts Receivable

The Company grants credit in the form of unsecured accounts receivable to its customers. The estimate of the allowance for doubtful accounts, which is the recorded allowance for doubtful accounts and bad debt expense, is based on management’s assessment of current economic conditions and historical collection experience with each customer. Specific customer receivables are considered past due when they are outstanding beyond their contractual terms and are written off from the allowance for doubtful accounts when an account or invoice is individually determined to be uncollectible.

Real estate operations segment rental accounts are typically paid by tenants via cash or check no later than the fifth of the month. Any accounts collected after the fifth are charged either a flat-rate late fee or a daily-rate late fee based upon the lease agreement. If payments are not provided in a timely manner, then the amount due is designated as an account receivable. If accounts remain uncollected, then standard operating procedures are followed to commence a notice process for the tenant to either pay the amount due or vacate the property. Accounts receivable from rental revenue are generally considered unrecoverable after 90 days unless the Company reasonably believes that recovery is probable. These procedures typically result in low amounts of past due receivables.

The internet operations segment attempts to reduce the risk of non-collection by including a late-payment fee and a manual-processing-payment fee to customer accounts. Receivables more than 90 days past due are no longer included in accounts receivable and are turned over to a collection agency. Accounts receivable more than 30 days are considered past due.

~~Inventory~~As of March 31, 2020 and December 31, 2019, allowances offsetting gross accounts receivable on the accompanying consolidated balance sheets totaled $615 and $307, respectively. For the quarterly periods ended March 31, 2020 and 2019, bad debt expense from continuing operations was $405 and $5,863, respectively.

~~Inventory is carried on the balance sheet at either the lower of purchased cost or net realizable value. Inventory is evaluated periodically for any obsolete or damaged stock.~~

Property and Equipment

Property and equipment are recorded at cost. Expenditures for maintenance and repairs are charged to operations as incurred, while renewals and betterments are capitalized. Gains and losses on disposals are included in the results of operations. Depreciation is computed using the straight-line method based on the estimated useful lives for each of the following asset classifications:

Furniture and fixtures (in years)			5
Equipment (in years)			7
Building improvements (in years)			15
Buildings (in years)			27.5

~~Impairment of Long-lived Assets~~

~~Long-lived assets to be held~~Property and ~~used~~equipment are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable.

The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment. If there are indications of impairment, then the Company uses estimated future undiscounted cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value. ~~Long-lived assets~~Property and equipment to be disposed are reported at the lower of carrying amount or fair value of the asset less cost to sell.

Goodwill and Other Intangible Assets

Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations accounted for under the acquisition method of accounting. The Company tests its goodwill annually as of December 31st or ~~when~~more often if events and circumstances indicate that those assets might not be recoverable.

No impairment adjustments were recorded during the quarterly periods ended March 31, 2020 and 2019.

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. The Company estimates the fair value of its reporting units using discounted expected future cash flows.

~~During the year ended~~ ~~December 31, 2018~~, an impairment adjustment of $754,958 was recorded to goodwill held through the home services segment. As noted above, various qualitative factors were considered before preparing a quantitative analysis. Qualitatively, a general underperformance of previously acquired home services businesses triggered the quantitative analysis. As part of the quantitative analysis, management estimated the fair value of the home services segment at the enterprise level using a discounted cash flow approach. The results were then tested for reasonableness using a market approach by analyzing comparable firms’ growth rates, margins, capital expenditures, and working capital requirements. During the period ended June 30, 2019, an additional impairment of the remaining home services segment goodwill of $1,024,592 was recognized and reported as a component of the loss on the sale of Specialty Contracting Group, LLC’s assets.

Intangible assets (other than goodwill) consist of domain names attributed to the internet ~~segmen~~t.operations segment. The Company owns 228 domain names, of which 106 are available for sale. Th~~ese~~These domains are valued at historical cost. 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. Intangible assets determined to have definite lives are amortized over their estimated useful lives.

~~Table~~ The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment. If there are indications of ~~Contents~~

impairment, then the Company uses estimated future undiscounted cash flows of the related intangible asset or asset grouping over the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value.

Real Estate

Real estate properties held for resale are carried at the lower of cost or fair ~~market~~ value. All costs directly related to the improvement and carrying of real estate are capitalized, including renovations and property taxes, to the extent the capitalized costs of the property do not exceed the estimated fair value of the property. If the cost of the real estate exceeds the estimated fair value, then the excess is charged to expense. Fair value is estimated based on comparable sales in the geographic area in which the real estate is located. Fair value is evaluated annually by management or when events or changes in circumstances indicate the carrying value of the real estate may not be recoverable.

~~During the year ended~~ ~~December 31, 2018, an~~No impairment ~~adjustment of $964,743 was~~adjustments were recorded to real estate held for resale through Mt Melrose, LLC in order to properly reflect market value for those properties held at the end of the year. This adjustment was the result of 62 properties being transitioned to “held for resale” from “held for investment” as part of a portfolio redirection. ~~See Note 5 for more information. Recent~~ ~~tax assessments, valuations, and local real estate agents were used to value this portfolio of held-for-sale properties.~~

~~During the year ended~~ ~~December 31, 2018, an impairment adjustment of $64,038 was recorded to real estate held for resale through EDI Real Estate, LLC in order to properly reflect market value for those properties held~~ during the ~~year. This adjustment was the result of a deteriorating building that was purchased by prior management in 1998. During the period~~quarterly periods ended ~~September 30, 2019~~, impairment adjustments of $42,407 were recorded on real estate held for resale through EDI Real Estate, LLC in order to properly reflect pending sales activity as of the period ended September 30,March 31, 2020 and 2019.

Real estate properties held for investment are carried at the cost basis plus additional costs where the cost extended the life of or added value to the property. Otherwise, the cost is expensed as incurred. Properties categorized as real estate held for investment are not expected by management to be sold in the next 12 months. This determination is periodically reviewed by management.

During the quarterly period ended ~~September 30, 2019, two residential rental properties within the EDI Real Estate, LLC portfolio were~~March 31, 2020, $43,917 of real estate held for investment was transferred ~~from “held~~to real estate held for ~~investment” to “held for resale” based on management’s intents.~~resale.

Accrued ~~Bonus~~Compensation

Accrued ~~bonuses represent~~compensation represents performance-based incentives that have not yet been paid. ~~The bonus~~Additional compensation can be paid in the form of cash or via the issuance of Company stock. Compensation structures for employees are a ~~preapproved~~pre-approved part of a formal employment ~~agreement.~~agreement or arrangement. Stock based compensation, issued as part of the Company’s 2020 Equity Incentive Plan, is reserved for board members and members of senior management. The compensation accrual amount is based on the final value of Company stock that has been approved to be issued by the Governance, Compensation and Nomination Committee of the Board of Directors. These ~~bonus~~compensation amounts are accrued when earned and able to be estimated and are paid or issued annually after financial records are finalized.

Other Accrued Expenses

Other accrued expenses represent incurred but not-yet-paid expenses from payroll accruals, ~~vacation accruals,~~ professional fees, and other accrued taxes.

Leases

On January 1, 2019, the Company adopted ASU No. 2016-02, “Leases” (Topic 842)~~, which~~. The guidance in ASU No. 2016-02 supersedes the lease recognition requirements in ASC Topic 840 and established ASC Topic 842. ASU No. 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ~~Accordingly, at~~ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company adopted this guidance using the inception of a contract we determine if the arrangement is, or contains, a lease. Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term; and lease liabilities represent our obligation to make lease payments arising from the lease. Lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Rent expense is recognized on a straight-line basis over the lease term; for finance leases, a portion of rent expense is classified as interest expense.following practical expedients:

	●	the Company did not reassess if any expired or existing contracts are leases or contain leases;

	●	the Company did not reassess the classification of any expired or existing leases; and

	●	the Company did not reassess whether the classification of existing costs associated with expired or existing leases should be classified as initial direct costs.

~~The~~

Additionally, the Company ~~has~~ made ~~certain~~ongoing accounting policy elections whereby it (i) does not recognize ~~ROU~~right-of-use (ROU) assets or lease liabilities for short-term leases (those with original terms of 12 months or less) and (ii) combines lease and non-lease elements of ~~their~~our leases. In

Upon adoption of the ~~unaudited condensed consolidated balance sheets:~~new guidance on January 1, 2019, the Company recorded an ROU asset of approximately $184,000 (net of existing deferred rent liability) and recognized a lease ~~ROU assets are included in other long-term assets; financed lease assets are included in property and equipment; and lease liabilities are included in other current and long-term liabilities.~~liability of approximately $186,000, with no resulting cumulative effect adjustment to retained earnings.

Revenue Recognition

Asset Management Operations and Other Investment Revenue

The Company earns revenue from investments through various fee share and consulting agreements, as well as through realized and unrealized gains and losses, which may result in negative period or quarterly revenues. Management fees earned are recorded ~~and paid out~~ monthly and are included in revenue on the accompanying unaudited condensed consolidated statements of operations. Performance fees earned are accrued monthly, paid out annually, and are also included in revenue on the accompanying unaudited condensed consolidated statements of operations. Consulting fees are billed, ~~out~~paid, and recorded on a monthly ~~after services have been performed. As long-term investments do not qualify as available-for-sale securities, long-term~~basis. Long-term investments are marked to market at the end of each reporting period. Realized and unrealized gains and losses are recognized as revenue in the period of adjustment.

Management notes that the structure of these arrangements leaves a very low possibility for nonperformance. While the amount of revenue varies from month to month, collectability is very high. No contract assets or liabilities are recognized or incurred.

Additionally, the Company earns revenue from direct ~~investments~~participation in various private investment funds, primarily the Alluvial Fund. ~~Due to the nature of the investment, the asset management segment recognizes revenue using specialized accounting guidance for investment companies.~~ This results in the realized and unrealized gains and losses within a fund such as the ~~fund~~Alluvial Fund being recognized as revenue, or a decrease in revenue, on the accompanying unaudited condensed consolidated statements of operations.

~~Table~~

A summary of ~~Contents~~

revenue earned through asset management operations for the quarterly periods ended March 31, 2020 and 2019 is included below:

Asset Management Operations Revenue	Quarter Ended March 31, 2020			Quarter Ended March 31, 2019
Realized and unrealized gains (losses) on investment activity	$	(1,784,406	)	$	655,716
Management and performance fee revenue		15,252			15,009
Fund management services revenue		24,000			26,255
Total revenue	$	(1,745,154	)	$	696,980

Real Estate Revenue

The Company earns real estate revenue through rental agreements on real estate held for investment, as well as through the sale of real estate held for resale.

Rental revenue from real estate held for investment is recognized when it is earned, generally on the last day of each month or at another regular period agreed upon by the Company and the tenant. Tenants generally provide a security deposit at the time of possession. This deposit is held separately from revenue and only applied to revenue when rental payment comparable to the security deposit amount is not provided in a timely manner and considered unlikely to be recovered. Otherwise, the security deposit is returned in a timely manner after the property is surrendered back to the Company. Management has concluded that the nature of the performance obligation is cyclical and predictable with a very low possibility for nonperformance. No contract assets or liabilities are recognized or incurred.

Revenue from real estate held for resale is recognized upon closing of the sale (transfer of control), as all conditions for full revenue recognition have been met at that time. All costs associated with the property sold are removed from the consolidated balance sheets and charged to cost of revenue at that time.

Internet Revenue

The Company sells internet services under annual and monthly contracts. Under the annual contracts, the subscriber pays a one-time annual fee, which is recognized as revenue ratably over the life of the contract. Under the monthly contracts, the subscriber is billed monthly and revenue is recognized for the period to which the service relates. Domain name registration revenue is recognized at the point of registration. Sales of computer hardware are recognized as revenue upon delivery and acceptance of the product by the customer. Sales are adjusted for any returns or allowances. Management has concluded that the nature of the performance obligation is cyclical with a very low possibility for nonperformance. Contract liabilities (deferred revenue) were recognized in the amount of collections received in advance of services to be performed. No contract assets ~~or liabilities are~~were recognized or incurred.

The Company generates revenue in its internet operations segment from consumer and business-grade internet access, wholesale managed modem services for downstream ISPs, web hosting, third-party software as a reseller, and various ancillary services in the United States and Canada. Services include narrow-band (dial-up and ISDN) and broadband services (DSL, fiber-optic, and wireless), web hosting, and additional related services to consumers and businesses. Customers may also subscribe to web hosting plans to include email access and storage. Internet revenue is affected by the changing composition of revenue sources. In some years, this shift can be significant.

Discontinued Revenue - Home Services Revenue

Prior to the ~~sale~~divestiture transaction on May 24, 2019, the Company performed HVAC and plumbing service repairs and installed HVAC units for its customers through its home services operations segment. Revenue was recognized upon completion of the installation or service call. Sales were adjusted for any returns or allowances. A return or allowance situation would arise based on the two-year workmanship warranty that typically conveyed with the installation of a new unit. There was also a two-year assurance warranty on newly installed parts and equipment that was honored by the manufacturer. If an installation was performed over multiple days, then it was accounted for using work-in-process (WIP) ~~accounting in accordance with GAAP.~~accounting. Contract progress was measured by comparing materials and labor hours incurred to materials and labor hours expected per the contract. These types of contracts were typically completed within one month’s time. A small portion of revenue was from the sale of annual service agreements. Revenue attributable to these agreements was ~~appropriately~~ recognized over the life of the agreement.

If payment was received prior to contract completion, then the amount of revenue attributable to the unperformed work was designated as unearned revenue. If payment was not provided in advance or at the time of service or installation completion, then the amount due was recognized as revenue and as an account receivable.

Management has acknowledged that these performance obligations were recognized at designated points in time during the contract, including the completion of ~~each contract, whether it be at a point in time or over a period of time.~~the contract. As the customer controlled the asset and had the right to use it during the contract, the Company had the right to payment for performance completed to date. Contract liabilities (deferred revenue) were recognized in the amount of collections received in advance of services to be performed. No contract assets ~~or liabilities~~ were recognized or incurred.

Deferred Revenue

Deferred revenue represents collections from customers in advance of internet or ~~real estate rental~~home services to be performed. Revenue is recognized ~~when performance obligations have been met.~~in the period service is provided. Total deferred revenue from continuing operations decreased from $204,960 at December 31, 2019 to $201,430 at March 31, 2020. During the quarterly periods ended March 31, 2020 and 2019, $127,957 and $126,393, respectively, of revenue from continuing operations was recognized from prior-year contract liabilities (deferred revenue).

Income Taxes

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. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. 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. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment, inclusive of the recent tax reform act. The most recent three tax years, fiscal years ended December 31, 2019, December 31, 2018,~~, December 31, 2017,~~ and December 31, ~~2016,~~2017, are open to potential IRS examination.

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Income (Loss) Per Share

~~The basic~~Basic income (loss) per ~~common~~ share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period.

In periods of net loss, diluted loss per share is calculated similarly to basic loss per share because the impact of all potentially dilutive common shares is anti-dilutive. In periods of net income, diluted earnings per share is computed using the more dilutive of the “two class method” or the “treasury method.” Dilutive earnings per share under the “two class method” is calculated by dividing net income available to common stockholders as adjusted for the participating securities, by the weighted-average number of shares outstanding plus the dilutive impact of all other potentially dilutive common shares, consisting primarily of common shares underlying common stock equity incentives. Dilutive earnings per share under the “treasury method” are calculated by dividing net income available to common stockholders by the ~~weighted average~~weighted-average number of shares outstanding plus the dilutive impact of all potentially dilutive common shares, consisting primarily of common shares ~~outstanding. Diluted income per~~underlying common ~~share is computed similarly to basic income per common share except that~~stock equity incentives.

None of the ~~denominator is increased to include~~potentially dilutive securities had a dilutive impact during the quarterly period ended March 31, 2020. No potentially dilutive securities existed for the quarterly period ended March 31, 2019.

The number of ~~additional~~anti-dilutive shares for the quarterly period ended March 31, 2020, consisting of common shares ~~that would~~underlying common stock equity incentives, which have been ~~outstanding if~~excluded from the ~~potential common shares had been issued and if the additional common shares were dilutive. The Company has no potentially dilutive securities.~~

~~Other Comprehensive Income~~

~~Other comprehensive~~computation of diluted income ~~is the result of the previous impact of foreign currency translations related to the Company’s operations in Canada.~~(loss) per share, was 668.

Recently Issued Accounting Pronouncements

In ~~February 2016,~~August 2018, the FASB issued ASU No. ~~2016-02, “Leases”~~2018-13, “Fair Value Measurement” (Topic ~~842)~~820). The guidance ~~in ASU No. 2016-02 supersedes~~intends to improve the ~~lease recognition requirements in ASC Topic 842, Leases. ASU No. 2016-02 requires an entity~~effectiveness of the disclosures relating to ~~recognize assets~~recurring and ~~liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ASU No. 2016-02~~nonrecurring fair value measurements. The guidance is effective for fiscal years beginning after December 15, ~~2018, with early~~2019. Portions of the guidance are to be adopted prospectively while other portions are to be adopted retroactively. Early adoption is permitted. The ~~Company adopted~~adoption of this guidance ~~effective January 1, 2019, using the following practical expedients:~~

	●	~~the Company did not reassess if any expired or existing contracts are leases or contain leases;~~

	●	~~the Company did not reassess the classification of any expired or existing leases; and~~

	●	~~the Company did not reassess whether the classification of existing costs associated with expired or existing leases should be classified as initial direct costs.~~

~~Additionally, the Company made ongoing accounting policy elections whereby it (i) does~~is not ~~recognize right-of-use (ROU) assets or lease liabilities for short-term leases (those with original terms of 12 months or less) and (ii) combines lease and non-lease elements of~~expected to have a material impact on our ~~leases.~~

Upon adoption of the new guidance on January 1, 2019, the Company recorded an ROU asset of approximately $184,000 (net of existing deferred rent liability) and recognized a lease liability of approximately $186,000, with no resulting cumulative effect adjustment to retained earnings. consolidated financial statements.

In ~~January~~June 2016, the FASB issued ASU No. ~~2016-01~~2016-13, “Financial Instruments - ~~Overall (Subtopic 825-10): Recognition~~Credit Losses” (Topic 326). The guidance eliminates the probable initial recognition threshold that was previously required prior to recognizing a credit loss on financial instruments. The credit loss estimate can now reflect an entity’s current estimate of all future expected credit losses. Under the previous guidance, an entity only considered past events and ~~Measurement of Financial Assets and Financial Liabilities.” Although~~current conditions. In April 2019, the ~~ASU retains many~~FASB further clarified the scope of the ~~current requirements for financial instruments, it significantly revises an entity’s accounting~~credit losses standard and addressed issues related to ~~(1)~~accrued interest receivable balances, recoveries, variable interest rates, and prepayments. In May 2019, the classification and measurement of investments in equity securities, and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associatedFASB issued further guidance to provide entities with an option to irrevocably elect the fair value ofoption applied on an instrument-by-instrument basis for eligible financial instruments. In November 2019, the FASB issued further guidance on expected recoveries for purchased financial assets with credit deterioration, and transition refiled for troubled debt restructurings, disclosures related to accrued interest receivables, and financial assets secured by collateral maintenance provisions. The ~~ASU~~guidance is effective for ~~annual periods, and~~fiscal years beginning after December 15, 2022, including interim periods within those ~~annual periods,~~fiscal years. Early adoption is permitted for fiscal years beginning after December 15, ~~2017; earlier~~2018, including interim periods within those fiscal years. The adoption ~~was permitted under~~of certain ~~criteria.~~amendments of this guidance must be applied on a modified retrospective basis and the adoption of the remaining amendments must be applied on a prospective basis. The Company ~~adopted this standard in the first quarter of 2018. Subsequent to~~currently expects that the adoption of this ~~standard,~~guidance may change the ~~Company's investments in equity securities are~~way we assess the collectability of our receivables and recoverability of other financial instruments. The Company will adopt this guidance as of January 1, 2023. The adoption of this guidance is not ~~carried at fair value with change in fair value being reflected in income.~~expected to have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01 “Clarifying the Definition of a Business” (Topic 805). The amendments in the update provide a screen to determine when a set is not a business. If the screen is not met, the amendments in the update (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output, and (2) remove the evaluation of whether a market participant could replace missing elements. The amendments provide a framework to assist entities in evaluating whether both an input and a substantive process are present. Lastly, the amendments in the update narrow the definition of the term output so that the term is consistent with how outputs are described in Topic 606. The ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017; earlier adoption was permitted under certain criteria. The Company does not believe that any other recently issued effective standards, or standards issued but not yet effective, if adopted, ~~this ASU on January 1, 2018. While this ASU did not~~would have a material effect on the ~~Company’s~~accompanying unaudited consolidated financial ~~statements on the date of adoption, the Company did follow the new guidance in determining that its acquisition of properties from Old Mt. Melrose in January 2018 was an asset acquisition. See Note 5 for additional information.~~statements.

NOTE 3. HOME SERVICES SUBSIDIARY ASSET SALE

On May 24, 2019, as ~~per~~reported in the Current Report on Form 8-K filed with the SEC on May 28, 2019, the Company completed ~~an asset sale transaction~~a divestiture of its Home Services Operations, via its subsidiary, Specialty Contracting Group, LLC (formerly known as HVAC Value Fund, LLC), to an unaffiliated third-party purchaser, Rooter Hero Plumbing, Inc. (“Rooter Hero”). In the transaction, the Company sold and conveyed all of the subsidiary’s personal property and customer lists and records, excluding stock inventory and other current assets. As part of the transaction, Rooter Hero assumed the subsidiary’s obligations under lease and/or loan agreements for all outstanding vehicles and equipment, as well as the obligations to service all of the subsidiary’s remaining customer accounts going forward. No cash consideration was exchanged in the transaction. AsRather, as consideration for the transaction, Rooter Hero ~~will~~agreed to pay monthly royalties for the ~~next~~ sixty (60) months following the closing, calculated on the basis of any revenue received from the customer accounts ~~sold.~~transferred. Under such royalty arrangements, the Company will receive 7.5% of any monthly revenue generated from qualified sales during the first year, and 5% of any monthly revenue during years two through five. Royalties received will be reduced by pre-approved warranty-related costs for select customers.

As reported in prior periods, the home services subsidiary had failed to meet approved budgets and had underperformed since its inception in 2016. Management noted that the largely decentralized management approach was not a good fit for this industry, and the extensive operating requirements were not conducive to smaller company capacities. The cyclical nature of the business also resulted in unpredictable cash flows, which created immediate and significant needs for additional Company resources. Due to the past performance of the company, management determined that additional resources should not be allocated to this subsidiary.

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The decision was made to exit the business during the quarter ended June 30, 2019. The operations of Specialty Contracting Group, LLC ~~are~~were considered a component of, and the ~~sale reflects~~divestiture reflected a strategic shift in, the Company’s business. As such, Specialty Contracting Group, ~~LLC's~~LLC’s historical operations ~~are now~~have been classified as discontinued operations in the Company’s financial statements. The asset sale of the home services subsidiary resulted in an initial pre-tax loss of $1,158,733, which has been included on the accompanying unaudited condensed consolidated statements of operations in discontinued operations and under the home services segment for the nine-month period ended September 30, 2019. The loss from discontinued operations has been determined using a loss recovery approach, as the ~~“Loss Recovery Approach.”~~collection of future royalties is uncertain and a reasonable estimate could not be made. This approach requires that the contingent consideration, the future royalties to be received, be valued at the lesser of the amount of the “probable,” defined as a greater than 50% likelihood, future proceeds or the carrying value of the disposed assets. Due to the unpredictability of the contingent consideration, and management’s inherent lack of control over the buyer’s operations, management determined it would not be ~~most prudent not~~reasonable to attempt to value the contingent consideration. This resulted in assigning the contingent consideration a current valuation of zero. As and to the extent any royalties are deemed probable, they will be subsequently recognized as a ~~“gain~~“recovery from discontinued operations” on the statements of operations and will offset, or recover, the initial loss recorded. Accordingly, during the ~~period~~quarter ended ~~September 30, 2019,~~March 31, 2020, an offsetting ~~$12,183 gain~~$11,019 recovery on discontinued operations ~~is included~~was recognized within the ~~$31,151 reported loss on~~ reported $10,756 of net income from discontinued operations.

A breakdown of discontinued assets and liabilities as reported on the face of the accompanying ~~unaudited~~ condensed ~~financial statements~~consolidated balance sheets for the periods ended ~~September 30, 2019,~~March 31, 2020 and December 31, ~~2018,~~2019, is as follows:

September 30, 2019 December 31, 2018
Cash and cash equivalents $ 39,222 $ 23,954
Accounts receivable 18,693 136,785
Other current assets 77,674 71,624
Total current assets - held for resale 135,589 232,363

Property and equipment, net — 270,603
Goodwill — 1,024,591
Other long-term assets — 5,375
Total long-term assets - held for resale — 1,300,569

Accounts payable 104,475 75,208
Accrued expenses — 81,213
Other current liabilities 57,556 2,368
Notes payable, current 100,000 158,698
Total current liabilities - held for resale 262,031 317,487

Notes payable, long term - held for resale — 50,738
Total long-term liabilities - held for resale $ — $ 50,738

A breakdown of the initial recorded pre-tax loss as reported on the accompanying unaudited condensed consolidated statements of operations as of the nine-month period ended September 30, 2019 is presented below. Asset and liability values used in the calculation represent the company's carrying value as of the date of sale, May 24, 2019.

~~Sale of vehicles, equipment, and furniture, net of depreciation~~	$	~~230,578~~
~~Impairment of remaining goodwill~~		~~1,024,592~~
~~Total carrying value of assets sold~~		~~1,255,170~~

~~Vehicle and equipment notes payable assumed by the buyer~~		~~76,791~~
~~Service agreements assumed by the buyer~~		~~19,646~~
~~Total carrying value of liabilities assumed~~		~~96,437~~

~~Net loss on sale of subsidiary, pre-tax~~	$	~~1,158,733~~

	March 31, 2020		December 31, 2019
Cash and cash equivalents	$	321	$	428
Total current assets - held for resale		321		428

Accounts payable		97,003		96,848
Lease liabilities		50,110		50,110
Total current liabilities - held for resale	$	147,113	$	146,958

A reconciliation of discontinued operations as reported on the accompanying unaudited condensed consolidated statements of operations for the ~~three- and nine-month~~quarterly periods ended ~~September 30,~~March 31, 2020, and March 31, 2019, ~~and September 30, 2018,~~ is as follows:

	For the three months ended September 30						For the nine months ended September 30						For the quarter ended
	2019			2018			2019			2018			March 31, 2020		March 31, 2019
Revenues	$	—		$	995,867		$	675,963		$	2,641,373		$	—	$	357,077
Cost of revenues		—			608,767			427,215			1,731,750			—		221,488
Gross profit		—			387,100			248,748			909,623			—		135,589
Selling, general, and administrative expenses		25,342			302,233			515,156			972,118			263		274,434
Recovery (loss) on sale of subsidiary		12,183			—			(1,134,810	)		—
Recoveries of loss on sale of subsidiary														11,019		—
Other income (expense), net		(17,992	)		(1,613	)		(39,938	)		(12	)		—		(790	)
Net income (loss) reported as discontinued operations	$	(31,151	)	$	83,254		$	(1,441,156	)	$	(62,507	)	$	10,756	$	(139,635	)

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Land	$	800,328
Buildings		3,201,311
Total Value	$	4,001,639

Land	$	1,036,423
Buildings		4,145,692
Total Value	$	5,182,115

~~The Company analyzes the carrying value of property and equipment and lease right-of-use assets on an annual basis or whenever events or changes in circumstances indicate potential impairments.~~

Depreciation expense from continuing operations was ~~$619 for the three months ended~~ ~~September 30, 2019, and $39,130~~ $1,012 for the quarterly period ended ~~September 30, 2018.~~March 31, 2020, and $14,884 for the quarterly period ended March 31, 2019. Included in these amounts are $0$0 and ~~$7,807~~ $6,388 for the quarterly periods ended ~~September 30,~~March 31, 2020 and 2019, ~~and~~ ~~2018~~, respectively, of depreciation expense related to personal property used in real estate segment rental operations. The depreciation expense related to personal property is included in the real estate segment cost-of-goods-sold amount on the accompanying unaudited condensed consolidated statements of ~~income.~~ The decrease in depreciation expense is due to the sale of the home services vehicles and equipment during the period ended June 30, 2019, as well as the deconsolidation of Mt Melrose, LLC financial activity as of June 30, 2019.operations.

As of ~~the period ended September 30, 2019,~~March 31, 2020, management has identified ~~the commercial warehouse, along with two other~~one residential real estate ~~properties,~~property and several vacant lots as real estate held for resale. These properties are carried at ~~$971,633~~$43,992 on the accompanying ~~unaudited condensed~~ consolidated balance sheets as of ~~the period ended September 30, 2019.~~March 31, 2020. This compares to the year ended December 31, ~~2018,~~2019, when management reported ~~$73,212 of vehicles and equipment as held for resale and $2,318,912~~$98,910 of real estate as held for resale.

The building owned by the Company is a multipurpose warehouse space located in Lexington, Kentucky. This building was previously owned by Mt Melrose, LLC, but was excluded from the June 27, 2019, sale and remains with the Company. During the period ended June 30, 2019, management reclassified the building as “held for resale” based on management's intentions given the Mt Melrose equity sale that occurred on June 27, 2019. In the quarterly period ended ~~December 31, 2018~~, management concluded it would adopt an outsourced property management model for New Mt Melrose. Management, therefore, determined that the warehouse was no longer needed for operations and should be divested.

~~A summary of total assets held for resale as of September 30, 2019, and December 31, 2018, is as follows:~~

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For the quarterly period ended ~~September 30, 2019~~,March 31, 2020, depreciation expense on the EDI Real Estate portfolio of properties was ~~$6,116.~~$4,091. This compares to depreciation expense for the quarterly period ended ~~September 30, 2018,~~March 31, 2019, when depreciation expense on the EDI Real Estate portfolio of properties was $5,304.

During the quarterly period ended March 31, 2020, two properties held for resale were sold for gross proceeds of $172,000. Net proceeds totaled $34,749. This compares to their carrying value of $98,835, which resulted in a total gain of $73,165 for the quarter. This compares to the quarterly period ended March 31, 2019, when no properties were sold. No properties were purchased during the quarterly periods ended March 31, 2020 and 2019 for the EDI Real Estate ~~did not purchase or sell any properties during the periods ending September 30, 2019 and 2018.~~portfolio.

During the quarterly period ended ~~September 30, 2019, two~~March 31, 2020, one residential rental ~~properties were~~property was transferred from “held for investment” to “held for resale”. The carrying value of ~~these two properties totaled $121,558.~~this property was $43,917. EDI Real Estate did not transfer any properties during the quarterly period ended ~~September 30, 2018.~~March 31, 2019.

~~During the period ended~~ ~~September 30, 2019~~,There were no impairment adjustments ~~of $42,407 were~~ recorded during the quarterly periods ended March 31, 2020 and 2019 on ~~real estate held for resale through~~the EDI Real Estate ~~LLC in order to properly reflect pending sales activity as of the period ended September 30, 2019. During the year ended~~ ~~December 31, 2018~~, an impairment adjustment of $64,038 was recorded to real estate held for resale through EDI Real Estate, LLC in order to properly reflect market value for those properties held during the year. This adjustment was the result of a deteriorating building that was purchased by prior management.portfolio.

As described in Note 4, management determined that the Company no longer has a controlling financial interest in Mt Melrose. All activity prior to the deconsolidation event has been included on ~~the accompanying~~our unaudited condensed consolidated statements of operations for ~~the period ended September 30, 2019,~~given prior reporting periods under the real estate segment. ~~Simultaneously, as~~No Mt Melrose activity is included for the quarterly period ended March 31, 2020. As of June ~~30,~~27, 2019, all previously consolidated assets and liabilities of Mt Melrose, LLC have been removed from ~~the accompanying unaudited~~our condensed consolidated balance sheets. ~~As of December 31, 2018, however, the Company did have a controlling financial interest in Mt Melrose. The~~Accordingly, there are no consolidated Mt Melrose assets as of the periods ended March 31, 2020 and December 31, ~~2018,~~2019 included ~~the following units:~~

The future anticipated minimum rental revenues based on leases in place as of ~~September 30, 2019~~,March 31, 2020, for EDI Real Estate, LLC are as follows:

~~As of~~ ~~September 30, 2019~~, one line of credit remains open through the home services segment. This line of credit is held with Steven L. Kiel, an ENDI director, and our principal executive officer. Additional debt held through the home services segment as of December 31, 2018, includes loans for various vehicles and equipment. Two vehicle loans were entered into during the quarter ended March 31, 2018. These loans required monthly payments through May 2023 and hold annual interest rates of 5.99%. As of the period ended September 30, 2019, all of these loans have been assumed by Rooter Hero, the purchaser of the home services ass~~ets. See Note 3 for more information.~~

During the ~~quarter~~quarterly period ended September 30, 2017, EDI Real Estate, LLC, as a borrower, issued two promissory notes, each secured by a property held for investment. These notes carry annual interest rates of 6%, pay interest quarterly, and are due September 15, 2022, with early payoff permitted. ~~Additionally, during~~During the ~~quarter~~quarterly period ended March 31, 2020, one note totaling $41,600 has been paid in full as the secured property has been sold.

During the quarterly period ended September 30, 2018, EDI Real Estate, LLC, as a borrower, issued a promissory note secured by additional properties held for investment. This note carries an annual interest rate of 5.6% and fully matures on September 1, 2033, with early payoff permitted. The interest rate on this note is subject to change once each ~~five year~~five-year period based on an index rate plus a margin of 2.750 percentage points. The index rate is calculated as a monthly average yield on U.S. Treasury Securities, adjusted to a constant maturity of five years.

During the ~~quarter~~quarterly period ended March 31, ~~2019,~~2020, one property from the ~~Company issued a promissory note secured by~~original loan package has been sold and the ~~commercial warehouse held for resale. The note carries an annual interest rate~~corresponding principal balance of ~~8%, pays interest quarterly, and is due upon successful sale of the warehouse with early payoff permitted.~~$83,296 has been paid down.

With respect to the outstanding debt secured by the real properties acquired by Mt Melrose, LLC, these notes began to mature during the previous quarter, with the last note extending until January 2042. Some of these loans are interest only while others accrue interest that is due in full with a final balloon payment. As of December 31, 2018, the debt secured by the real properties has varying annual interest rates from 4.375% to 13%. As menti~~oned in Note 4, all as~~sets and liabilities of Mt Melrose, LLC have been removed from the accompanying unaudited condensed consolidated balance sheets as of June 27, 2019. This results in zero notes payable reported under Mt Melrose, LLC for the period ended September 30, 2019.

NOTE ~~12.~~10. SEGMENT INFORMATION

During the quarterly period ended ~~September 30, 2019~~,March 31, 2020, the Company ~~had five~~operated through four business ~~units~~segments with separate management and reporting infrastructures that offer different products and services. The ~~five~~four business ~~units have been aggregated into the following reportable segments:~~segments are as follows: Asset Management Operations, Real Estate Operations, Internet Operations, and Other Operations. During periods prior to the quarter ended March 31, 2020, the Company also operated through a fifth reportable segment, Home Services ~~and Other. As~~Operations. However, as of the ~~period~~quarter ended ~~September 30, 2019,~~March 31, 2020, and for all prior periods presented, ~~home services operations~~Home Services Operations are reported as discontinued operations.

In previous periods, the Company reported under the following six business segments: Asset Management, Mt Melrose, HVAC, Internet, Real Estate, and Corporate. In an effort to highlight the direction of the Company and increase segment transparency, these historical segments were reorganized during the quarter ended June 30, 2018. Additional reorganizations were made as of January 1, 2019, in order to appropriately reflect the similarities in the Company’s real estate operations. The “Mt Melrose” and legacy “Real Estate” segments are now referred to collectively as “Real Estate,” and the “HVAC” segment is now referred to as “Home Services.” “Corporate” and other additional investments now are combined under “Other Operations.” The “Asset Management” and “Internet” segments remain unchanged. See below for additional information on the activity included in each respective segment report.

As mentioned in Note 3, on May 24, 2019, the Company completed ~~an asset sale transaction~~a divestiture of its Home Services Operations, via its subsidiary, Specialty Contracting Group, LLC, to an unaffiliated third-party purchaser, Rooter Hero Plumbing, Inc. (“Rooter Hero”). ~~In the transactio~~n, the Company sold and conveyed all of the subsidiary’s personal property and customer lists and records, excluding stock inventory and other current assets. As part of the transaction, Rooter Hero assumed the subsidiary’s obligations under lease and/or loan agreements for all outstanding vehicles and equipment, as well as the obligations to service all of the subsidiary’s customer accounts going forward. The current and comparative results of the home services segment have been reported as discontinued on the accompanying unaudited condensed consolidated financial statements for the quarterly period ended ~~September 30, 2019.~~March 31, 2020.

As ~~mention~~edmentioned in Note 4, onon June 27, 2019, the Company sold 65% of its membership interest in Mt Melrose, LLC to an unaffiliated third-party purchaser, Woodmont Lexington, LLC.

Management determined that as of June ~~30,~~27, 2019, the Company no longer has a “controlling financial interest” in Mt Melrose; therefore, the Company ~~will~~ no longer ~~consolidate~~consolidates Mt Melrose. All activity prior to the deconsolidation event has been included on ~~the accompanying unaudited condensed~~our consolidated statements of operations for ~~the period ended September 30, 2019,~~given prior reporting periods under the real estate segment. As of June ~~30,~~27, 2019, all previously consolidated assets and liabilities of Mt Melrose, LLC have been removed from ~~the accompanying unaudited condensed~~our consolidated balance sheets.

The asset management operations segment includes revenues and expenses derived from various ~~investment opportunities~~joint ventures, service offerings, and ~~partnerships and services.~~initiatives undertaken in the asset management industry. The real estate operations segment includes revenue and expenses related to the management of properties held for investment and held for resale through Mt Melrose (prior to the sale of 65% of our equity in Mt Melrose on June 27, 2019) located in Lexington, Kentucky, and 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. The internet operations segment includes revenue and expenses related to ~~the~~our sale of internet access, hosting, storage, and other ancillary services. The home services operations segment includes discontinued revenue and expenses derived from our former ~~management~~operation of HVAC and plumbing companies in Arizona. The other operations segment includes revenue and expenses from nonrecurring ~~investment opportunities such as Triad Guaranty, Inc. Additionally, the other segment includes~~or one-time strategic funding or similar activity 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.

~~Table of Contents~~

The internet operations segment includes revenue generated by operations in both the United States and Canada. InDuring the quarterly period ended ~~September 30, 2019~~,March 31, 2020, the internet operations segment generated revenue of ~~$251,809~~$240,622 in the United States and revenue of ~~$13,362~~$12,937 in Canada. This compares to the quarterly period ended ~~September 30, 2018, where~~March 31, 2019, when the internet operations segment generated revenue of ~~$273,219~~$260,258 in the United States and revenue of ~~$15,093~~$14,644 in Canada. All assets reported under the internet operations segment for the periods ended March 31, 2020 and December 31, 2019, are located within the United States.

Summarized financial information concerning the Company’s reportable segments is shown in the following tables for the ~~three~~quarterly periods ended March 31, 2020 and ~~nine months ended~~ ~~September 30, 2019~~ ~~and~~ ~~2018~~.2019.

Three months ended September 30, 2019

Asset Management

Real Estate

Internet

Other
Discontinued Operations - Home Services
Consolidated

Revenues
$ (159,085 ) $ 19,359 $ 265,171 $ — $ — $ 125,445
Cost of revenue
— 30,753 83,517 — — 114,270
Operating expenses
81,906 11,827 43,168 141,270 — 278,171
Other income (expense)
4,983 (13,709 ) 384 20,249 — 11,907
Comprehensive income (loss) from continuing operations
(236,008 ) (36,930 ) 138,870 (121,021 ) — (255,089 )
Comprehensive income (loss) from discontinued operations — — — — (31,151 ) (31,151 )
Goodwill
— — 212,445 — — 212,445
Identifiable assets
9,571,808 638,298 392,131 1,107,117 135,589 11,844,943

Quarter Ended March 31, 2020	Asset Management			Real Estate			Internet		Other			Discontinued Operations - Home Services		Consolidated

Revenues	$	(1,745,154	)	$	187,149		$	253,559	$	—		$	—	$	(1,304,446	)
Cost of revenue		—			132,209			87,188		—			—		219,397
Operating expenses		109,241			16,636			47,848		289,433			—		463,158
Other income (expense)		2,283			(1,268	)		370		3,692			—		5,077
Income (loss) from continuing operations		(1,852,112	)		37,036			118,893		(285,741	)		—		(1,981,924	)
Income (loss) from discontinued operations		—			—			—		—			10,756		10,756
Goodwill		—			—			212,445		—			—		212,445
Identifiable assets	$	8,399,068		$	457,145		$	468,024	$	543,702		$	321	$	9,868,260

Three months ended September 30, 2018

Asset Management

Real Estate

Internet

Other
Discontinued Operations - Home Services
Consolidated

Revenues
$ 330,112 $ 220,600 $ 288,312 $ 20,934 $ — $ 859,958
Cost of revenue
— 107,527 86,658 31,800 — 225,985
Operating expenses
107,538 275,414 58,475 130,874 — 572,301
Other income (expense)
11,075 (137,406 ) 479 1,908 — (123,944 )
Comprehensive income (loss) from continuing operations
233,649 (299,747 ) 143,658 (139,832 ) — (62,272 )
Comprehensive income (loss) from discontinued operations — — — — 83,254 83,254
Goodwill
— — 212,445 — — 212,445
Identifiable assets
9,806,271 14,707,356 381,262 1,738,533 2,577,014 29,210,436

Nine months ended September 30, 2019

Asset Management

Real Estate

Internet

Other
Discontinued Operations - Home Services
Consolidated

Revenues
$ 1,127,075 $ 420,464 $ 805,990 $ 212,631 $ — $ 2,566,160
Cost of revenue
— 358,126 254,373 — — 612,499
Operating expenses
309,896 327,671 165,457 641,483 — 1,444,507
Other income (expense)
19,074 (494,311 ) 4,317 (3,502,378 ) — (3,973,298 )
Comprehensive income (loss) from continuing operations
836,253 (759,644 ) 390,477 (3,931,230 ) — (3,464,144 )
Comprehensive income (loss) from discontinued operations — — — — (1,441,156 ) (1,441,156 )
Goodwill
— — 212,445 — — 212,445
Identifiable assets
9,571,808 638,298 392,131 1,107,117 135,589 11,844,943

Nine months ended September 30, 2018	Asset Management		Real Estate			Internet		Other			Discontinued Operations - Home Services			Consolidated
Quarter Ended March 31, 2019																	Asset Management		Real Estate			Internet		Other		Discontinued Operations - Home Services			Consolidated

Revenues	$	522,044	$	592,583		$	887,635	$	121,031		$	—		$	2,123,293		$	696,980	$	182,506		$	274,902	$	212,631	$	—		$	1,367,019
Cost of revenue		—		342,449			238,385		156,731			—			737,565			—		163,143			87,613		—		—			250,756
Operating expenses		170,979		762,074			191,443		651,540			—			1,776,036			123,464		104,408			63,269		194,920		—			486,061
Other income (expense)		33,225		(368,800	)		32,898		7,091			—			(295,586	)		7,039		(128,126	)		392		3,897		—			(116,798	)
Comprehensive income (loss) from continuing operations		384,290		(880,740	)		490,705		(680,149	)		—			(685,894	)
Comprehensive income (loss) from discontinued operations		—		—			—		—			(62,518	)		(62,518	)
Income (loss) from continuing operations																		580,555		(213,171	)		124,412		21,608		—			513,404
Income (loss) from discontinued operations																		—		—			—		—		(139,635	)		(139,635	)
Goodwill		—		—			212,445		—			—			212,445			—		—			212,445		—		—			212,445
Identifiable assets		9,806,271		14,707,356			381,262		1,738,533			2,577,014			29,210,436		$	9,288,203	$	13,056,773		$	405,593	$	1,184,962	$	1,515,344		$	25,450,875

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With respect to the former leased facilities for Specialty Contracting Group, LLC, possession of the premises was surrendered to the landlord, in connection with the dissolution and winding up of Specialty Contracting Group, in default of that lease. The outstanding lease liability amount remains on the Company's balance sheet under other liabilities - held for resale as of the quarterly period ended March 31, 2020.

A maturity analysis of our operating ~~leases~~lease, including the lease related to discontinued operations, is as follows:

On September 19, 2016, the Company, through Willow Oak, announced that it had entered into a letter of intent agreement with Alluvial Capital Management, LLC (“Alluvial Capital”) to make a seed investment through Willow Oak Asset Management in Alluvial Fund, LP, a private investment partnership that was launched by Alluvial Capital on January 1, 2017 (“Alluvial Fund”). Alluvial Capital acts as the general partner and the Company, through Willow Oak Asset Management, has invested in Alluvial Fund as a limited partner.

The Company agreed to make capital contributions to Alluvial Fund in the aggregate amount of $10 million to be provided over four equal tranches on January 1, 2017, April 1, 2017, July 1, 2017, and October 1, 2017. As of September 30, 2017, the Company satisfied its obligation to provide $10 million in accordance with the contribution schedule. On January 1, 2018, pursuant to an amendment to the Alluvial Side Letter Agreement, dated December 15, 2017, Willow Oak Asset Management, LLC withdrew $3,000,000 from its $10,000,000 investment in Alluvial Fund, LP in order to partially fund the first close of the Mt Melrose Transaction. Arquitos Capital Partners, LP, which is managed by our director and principal executive officer Steven L. Kiel, simultaneously invested $3,000,000 in Alluvial to temporarily replace the amount withdrawn by Willow Oak. The Arquitos investment into Alluvial counts toward Willow Oak’s seed investment total for purposes of Willow Oak’s agreement with Alluvial.

ENDI created a wholly owned subsidiary named Mt Melrose, LLC (“New Mt Melrose”) on January 10, 2018, which has acquired 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 on December 10, 2017, with a like-named seller, Mt. Melrose, LLC (“Old Mt. Melrose”), a Kentucky limited liability company owned by Jeff Moore, a former ENDI director.

On January 10, 2018, New Mt Melrose, consistent with the terms of the purchase agreement, completed a first acquisition from Old Mt. Melrose of 44 residential and other income-producing real properties located in Lexington, Kentucky, pursuant to the purchase agreement. This first tranche of real properties was acquired for total consideration of $3,956,389, which was payable as follows:

On June 29, 2018, New Mt Melrose, consistent with the terms of the purchase agreement, completed a second acquisition from Old Mt. Melrose of an additional 69 residential and other income-producing real properties located in Lexington, Kentucky, pursuant to the purchase agreement. This second tranche of real properties was acquired for total consideration of $5,174,722, which was payable as follows:

On January 10, 2018, New Mt Melrose and Old Mt. Melrose entered into the Cash Flow Agreement, pursuant to which, in connection with the parties’ anticipated consummation of all of the real property purchase transactions under the purchase agreement described above, the parties agreed that as of and from and after January 10, 2018, until such time as the parties consummated the relevant closing as to each real property under the purchase agreement, Old Mt. Melrose would assign to New Mt Melrose all of the income, rents, receivables, and revenues arising from or issuing out of such real property, and New Mt Melrose would assume Old Mt. Melrose’s responsibility for payment of certain of the costs and expenses attributable to such real property.

Under the Cash Flow Agreement, New Mt Melrose was responsible for: Old Mt. Melrose’s monthly payments of interest and/or principal under the outstanding debt secured by the real properties; Old Mt. Melrose’s real property taxes with respect to the real properties due and attributable to the periods from and after the effective date; and Old Mt. Melrose’s ordinary expenses of operating the real properties, actually incurred, to the extent attributable to ~~de minimis~~ ~~repairs, recurring maintenance services, and/or water, electricity, sewer, gas, telephone, or other similar utility charges.~~

Based on the number of properties then outstanding for purchase under the purchase agreement at September 30, 2018, New Mt Melrose was obligated under the Cash Flow Agreement as of September 30, 2018, for (i) monthly payments of interest and/or principal under the outstanding debt secured by such real properties in the aggregate amount of $10,568 per month, (ii) insurance of $1,073 per month, (iii) estimated annualized obligations for real property taxes with respect to such real properties in the aggregate amount of approximately $7,461 per year, and (iv) ordinary recurring expenses of operating such real properties that are expected to be immaterial in aggregate. However, as previously reported in our Current Report on Form 8-K filed with the SEC on November 5, 2018, pursuant to that certain Termination of Cash Flow Agreement entered into effective November 1, 2018, between New Mt Melrose and Old Mt. Melrose, the parties mutually agreed to terminate the above-discussed Cash Flow Agreement as of November 1, 2018. Accordingly, neither the Company nor New Mt Melrose has any further rights or obligations under the Cash Flow Agreement.

As mentioned in Note 4, onon June 27, 2019, the Company sold 65% of its membership interest in Mt Melrose, LLC to an unaffiliated third-party purchaser, Woodmont Lexington, LLC. As consideration for the transaction, Woodmont paid the Company $100,000 and agreed to assume full responsibility for the management and operation of Mt Melrose and its real estate portfolio. ~~The Company has retained a 35% membership interest in Mt Melrose, with Woodmont owning the other 65% membership interest.~~ Under the terms of the parties’ membership interest purchase agreement, the Company agreed to indemnify Woodmont against any losses actually incurred as a result of breaches of the Company’s representations and warranties made under the agreement. To date, Woodmont has made ~~three~~four claims for indemnification under the agreement, all of which have been rejected and disputed by the Company.

Enterprise Diversified, Inc. (f/k/a Sitestar Corporation) v. Frank Erhartic, Jr.

On April 12, 2016, the Company filed a civil action complaint against Frank Erhartic, Jr. (the “Former Erhartic CEO”), the Company’s former CEO and director (prior to December 14, 2015) and currently an owner of record or beneficially of more than 5% of the Company’s Common Stock, alleging, among other things, that the Former Erhartic CEO engaged in, and caused the Company to engage in to its detriment, a series of unauthorized and wrongful ~~related-party~~related party transactions, including causing the Company to borrow certain amounts from the Former Erhartic CEO’s mother unnecessarily and at a commercially unreasonable rate of interest, converting certain funds of the Company for personal rent payments to the Former Erhartic CEO, commingling in land trusts certain real properties owned by the Company and real properties owned by the Former Erhartic CEO, causing the Company to pay certain amounts to the Former Erhartic CEO for lease payments under an unauthorized lease as to a storage facility owned by the Former Erhartic CEO, causing the Company to pay rent on its corporate headquarters owned by the Former Erhartic CEO’s ex-wife in amounts commercially unreasonable and excessive, and to make real estate tax payments thereon for the personal benefit of the Former Erhartic CEO, converting to the Former Erhartic CEO and/or absconding with five motor vehicles owned by the Company, causing the Company to pay real property and personal property taxes on numerous properties owned personally by the Former Erhartic CEO, causing the Company to pay personal credit card debt of the Former Erhartic CEO, causing the Company to significantly overpay the Former Erhartic CEO’s health and dental insurance for the benefit of the Former Erhartic CEO, and causing the Company to pay the Former Erhartic CEO’s personal automobile insurance. The Company is seeking, among other relief available, monetary damages in excess of $350,000. This litigation matter is currently pending in the Circuit Court for the City of Lynchburg (Lynchburg, Virginia).

~~NOTE 14. SHARE ADJUSTMENT, CANCELLATION AND SALE OF TREASURY SHARES, AND REVERSE STOCK SPLIT~~Other: Mt Melrose-related Proceedings

~~Cancellation~~Various disputes have arisen and ~~Sale~~are continuing between the Company and Woodmont Lexington, LLC (“Woodmont”), the entity to whom the Company sold, on June 27, 2019, 65% of ~~Treasury Shares~~the Company’s membership interest in Mt Melrose, LLC (“Mt Melrose”).

In undertaking a sale of its membership interests in Mt Melrose, the Company had sought to partner with an operator who, in exchange for being granted a substantial equity interest at a significant discount to the amounts the Company had invested in Mt Melrose, would assume full responsibility for the management and operation of Mt Melrose and its real estate portfolio and endeavor in good faith to generate favorable returns inuring to the long-term best interests of the Company and its shareholders.

Shortly following the closing of the Mt Melrose transaction, however, the relationship between the Company and Woodmont soured. Woodmont, by its representative, Tice Brown, unexpectedly proceeded to make numerous claims and demands upon the Company, which the Company determined to be unfounded and frivolous, if not disingenuous to the parties’ understandings. Woodmont also has submitted four formal claims for indemnification under the parties’ purchase agreement, each of which were considered by the Company and then rejected and disputed in short order as unfounded.

In addition, Woodmont, acting as the sole manager of Mt Melrose, purported to unilaterally amend and restate as of August 29, 2019 the Mt Melrose limited liability company agreement among the parties, purporting to change the terms of the distribution waterfall the parties had expressly agreed to and purporting to reallocate the parties’ respective interests in Mt Melrose – unilaterally reducing the Company’s percentage membership interest from 35% to 20.8% while increasing Woodmont’s percentage membership interest from 65% to 79.2%. The Company has rejected and disputed these purported changes and Woodmont’s conduct.

In connection with the primary disputes between the Company and Woodmont and following the Company’s Delaware Action (as defined below), on December 5, 2019, Woodmont also filed a verified complaint in the Fayette County, Kentucky Circuit Court against the Company and a third party who was then-under contract with the Company for such party’s purchase of the Company’s warehouse and associated real property located in Lexington, Kentucky – seeWoodmont Lexington, LLC, et al. v. Enterprise Diversified, et al., Fayette Circuit Court, Civil Action No. 19-CI-04304 (the “Kentucky Action”). The Court in the Kentucky Action enjoined the Company and the warehouse purchaser from removing or cleaning out the various items of building materials and salvage owned by Mt Melrose that had been placed in the warehouse premises, and required the Company and the warehouse purchaser to provide rent-free access so that Woodmont and Mt Melrose could realize “full value” on their liquidation of the stored personal property until February 1, 2020. The Company believes that Woodmont’s attempt to hold up the sale of an $850,000 warehouse and property because it wanted to store spare toilets, doors, floor tiles and other residential building materials there, rent free, for more than six months, was disingenuous and intentionally injurious to the Company. On December 27, 2019, the Company filed verified counter-claims in the Kentucky Action against Woodmont, alleging, among other things, Woodmont’s tortious interference with the Company’s business and Woodmont’s unjust enrichment. The Company is seeking, among other relief available against Woodmont, declaratory relief; trial by jury on all issues; money damages, including all special and consequential damages, in amounts to be determined at trial; and the Company’s costs and expenses, including attorneys’ fees; together with pre- and post-judgement interest.The parties to the Kentucky Action have recently engaged in settlement negotiations, although they have not been successful. This action remains pending in the Fayette County, Kentucky Circuit Court.

All the while, since the closing of the Mt Melrose transaction, Woodmont, by its representative, Tice Brown, has made repeated “low ball” offers to buy out the Company’s remaining interest in Mt Melrose, insisting that the Company relinquish its Mt Melrose interest in order to avoid further claims and demands and in order to avoid threatened public disparagement (including by way of statements made on various social media by Woodmont’s representative, Tice Brown). All such offers have been rejected or not responded to by the Company, as being unfavorable, undesirable and not in the long-term best interests of the Company and its shareholders.

On ~~May 26, 2018,~~January 7, 2020, Woodmont, acting as the sole manager of Mt Melrose, also caused Mt Melrose to distribute a $600,000 cash dividend directly to Woodmont. Woodmont expressly excluded the Company ~~signed a stock purchase agreement with an unaffiliated third party~~from receiving any portion of this distribution. The Company has rejected and disputed the propriety of this distribution and Woodmont’s conduct.

The Company believes that Woodmont, directly and by its representative, Tice Brown, has engaged, and continues to ~~sell 1,633,500 shares of~~engage, in intentionally injurious and harassing conduct concerning Mt Melrose that runs counter to the Company’s common stock held as treasury shares to such party for $0.11036586 per share. The settlement date for the sale was July 31, 2018. The number of shares transferred on the settlement date was adjusted for the Company’s reverse stock split to 13,068 shares. To the extent that this sale of previously registered shares held as treasury shares required an exemption from registration, this sale of shares of common stocklong-term best interests of the Company ~~was exempt from registration under the Securities Act of 1933 (“Securities Act”), in reliance upon Section 4(2) of the Securities Act~~ and ~~Regulation D Rule 506,~~its shareholders. Accordingly, as ~~a transaction by an issuer not involving a public offering.~~

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~~Reverse Stock Split~~

As previously reported in ~~our~~the Company’s Current Report on Form 8-K filed with the SEC on ~~June 7, 2018, the Board of Directors of~~November 20, 2019, the Company ~~previously approved, on March 29, 2018,~~filed a ~~reverse stock split~~verified complaint in the Court of all of the Company’s Common Stock, pursuant to which every 125 shares of Common Stock of the Company were reverse split, reconstituted, and converted into one (1) share of Common Stock of the Company (the “Reverse Stock Split”). To effectuate the aforesaid Reverse Stock Split, the Company previously filed on May 23, 2018, a Certificate of Change Pursuant to Nevada Revised Statutes (“NRS”) Section 78.209 (the “Certificate of Change”) with the Secretary of StateChancery of the State of ~~Nevada,~~Delaware on November 20, 2019, commencing a civil action against Woodmont – seeCivil Action No. 2019-0928-JTL (the “Delaware Action”). The Delaware Action was filed by the Company in response to the repeated claims and demands and injurious conduct by Woodmont and its representative, Tice Brown. On March 9, 2020, the Company filed further an amended verified complaint against Woodmont in the Delaware Action, expanding its claims against Woodmont. On April 6, 2020, Woodmont filed an answer to the complaint in the Delaware Action, along with ~~a specified effective filing date~~verified counter-claims against the Company for Woodmont’s previously-asserted claims for indemnification under the parties’ purchase agreement. The Company is seeking, among other relief available against Woodmont, injunctive, declaratory and equitable relief, and relief for, among other things, Woodmont’s breaches of ~~June 1, 2018.~~contract and unjust enrichment, along with attorneys’ fees and expenses. This action remains pending in the Delaware Court of Chancery.

~~The Company submitted an Issuer Company Related Action Notification regarding~~Management intends to vigorously prosecute the ~~Reverse Stock Split to~~Company’s claims, and defend the ~~Financial Industry Regulatory Authority (“FINRA”) on May 22, 2018. FINRA declared the Reverse Stock Split effective~~Company’s rights, against Woodmont and its representative, Tice Brown, in ~~the marketplace July 23, 2018 (the “FINRA Effective Date”). Accordingly, while the Certificate~~all of ~~Change became effective under Nevada state corporate law on June 1, 2018, the Reverse Stock Split did not become effective as to shareholders or the marketplace until the FINRA Effective Date.~~ these Mt Melrose-related proceedings.

~~Table of Contents~~

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 unaudited condensed consolidated financial statements and related footnotes for the ~~quarter~~quarterly period ended ~~September 30, 2019~~.March 31, 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.

During the quarterly period ended ~~September 30, 2019,~~March 31, 2020, Enterprise Diversified, Inc. (“ENDI,” the “Company,” or “we”) operated under ~~five~~four reportable segments:

During periods prior to the quarter ended March 31, 2020, the Company also operated through a fifth reportable segment, Home Services ~~Operations,~~Operations. This segment now includes discontinued revenue and ~~Other Operations. Other Operations include corporate~~expenses derived from our former operation of HVAC and ~~investment activity that is not considered to be one of our primary lines of business.~~plumbing companies in Arizona. As of the quarterly period ended ~~September 30, 2019,~~March 31, 2020, and for all prior periods presented, ~~home services operations~~Home Services Operations are reported as discontinued operations. ~~The management~~

Management of the Company also continually reviews various ~~investment~~business opportunities for the Company, including those in other lines of business.

In previous periods, the Company reported under the following six business segments: Asset Management, Mt Melrose, HVAC, Internet, Real Estate, and Corporate. In an effort to highlight the direction of the Company and increase segment transparency, these historical segments were reorganized during the quarter ended June 30, 2018. Additional reorganizations were made as of January 1, 2019, in order to appropriately reflect the similarities in the Company’s real estate operations. The “Mt Melrose” and legacy “Real Estate” segments are now referred to collectively as “Real Estate,” with the “HVAC” segment being referred to as “Home Services.” “Corporate” and other additional investments now are combined under “Other Operations.” The “Asset Management” and “Internet” segments remain unchanged. See below for additional information on the activity included in each respective segment report.

The asset management segment includes revenues and expenses derived from various investment opportunities and partnerships and services. The real estate segment includes revenue and expenses related to the management of properties held for investment and held for resale through Mt Melrose (prior to the sale of 65% of our equity in Mt Melrose on June 27, 2019) located in Lexington, Kentucky, and 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. The internet segment includes revenue and expenses related to the sale of internet access, hosting, storage, and other ancillary services. The home services segment includes discontinued revenue and expenses derived from our former management of HVAC and plumbing companies in Arizona. The other segment includes revenue and expenses from nonrecurring investment opportunities, such as Triad Guaranty, Inc. Additionally, the other segment includes 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.

~~ENDI created a wholly owned~~The Company operates its asset management ~~subsidiary on October 10, 2016, named~~operations business through its wholly-owned subsidiaries, Willow Oak Asset Management, LLC (“Willow Oak”). and Willow Oak Capital Management, LLC.

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. As of March 31, 2020, Willow Oak continues to hold its remaining direct investment in Alluvial Fund. Investment gains and losses are reported as revenue on the accompanying unaudited condensed consolidated statements of operations.

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 ~~an asset management platform oriented~~the sole member of Bonhoeffer Capital Management, LLC, the general partner to ~~the value-investing community. Value investing and knowledge of the global value-investing community are core competencies of the Company.~~Bonhoeffer Fund, LP, a private investment partnership managed by Coolidge. Under their agreement concerning Bonhoeffer Fund, LP, Willow Oak ~~intends to apply its core competencies to become a hub~~paid all start-up expenses and pays agreed-upon operating expenses that are not partnership expenses, Coolidge is responsible for ~~the value-investing community, offering various forms of affiliations with respected value~~all investment ~~managers. Such affiliations to date include fund seeding and reinvestments, fund launching, portfolio~~ management, and ~~fund management. The Company intends to actively expand its~~ Willow Oak ~~platform with additional affiliations~~receives 50% of all performance and ~~services that enhance the value of the Willow Oak platform to all affiliated funds.~~ management fees earned.

~~Willow Oak launched its fund management services (“FMS”) offering to external funds on~~On November 1, 2018, ~~when it signed~~Willow Oak entered into a ~~consulting~~fund management services agreement with Arquitos ~~Capital,~~Investment Manager, LP, which is 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: investor relations, marketing, administration, legal, accounting and bookkeeping, annual audit coordination, and liaison to third-party service providers. As consideration for the services, Arquitos pays Willow Oak a ~~domestic~~monthly fixed fee and an ~~offshore~~annual performance-based fee.

On October 1, 2019, Willow Oak partnered with Geoff Gannon and Andrew Kuhn to form Focused Compounding Capital Management, LLC (“Focused Compounding”). This new joint venture, of which Willow Oak Capital Management is a 10% owner, manages capital through separately managed accounts and a private investment fund ~~controlled by Steven Kiel,~~launched January 1, 2020. As a ~~Company director and our principal executive officer.~~member of the general partner, Willow Oak ~~also~~Capital Management provides ongoing FMS and operational support in addition to having covered all one-time expenses associated with the ~~Bonhoeffer Fund. FMS consists~~launch of ~~services not typically provided by traditional third-party providers to~~Focused Compounding Fund, LP. As consideration for the ~~hedge fund industry, including: access to the~~arrangement, Willow Oak ~~network, investor relations~~Capital Management is entitled to 10% of gross management and ~~marketing, administration~~performance fees earned by Focused Compounding. In addition to hosting a popular investing podcast, the individual principals of Focused Compounding share investment news and ~~compliance, interface to traditional service providers, standard tools and best practices repository, and access to Willow-Oak-vetted third-party service providers.~~advice through a subscription-based service.

~~The Company operates its real estate operations through EDI Real Estate, LLC and, indirectly, Mt Melrose, LLC.~~In December 2017, ENDI created a wholly-owned subsidiary named Mt Melrose, LLC, is a ~~partially owned subsidiary that currently owns and operates~~Delaware limited liability company (“New Mt Melrose”), to acquire a portfolio of residential and other income-producing real estate in Lexington, Kentucky, ~~that was acquired~~ pursuant to a certain Master Real Estate Asset Purchase Agreement entered into onin December ~~10,~~ 2017 with a like-named seller, MtMt. Melrose, LLC (“Old Mt. Melrose”), a Kentucky limited liability company ~~(“Old Mt. Melrose”). On~~owned by Jeff Moore, then an ENDI director. During January ~~10,~~and June 2018, Mt Melrose, LLC (“New Mt Melrose”) completed its first acquisition of 44 real properties under the agreement, and on June 29, 2018, Mt Melrose, LLC completed its second acquisition of 69 additional real properties under the agreement. However, during the quarterly period then ended ~~December 31, 2018~~, the parties mutually agreed to terminate the Master Real Estate Asset Purchase Agreement and no further acquisitions were consummated. A third-party property manager was engaged as of November 1, 2018, to manage certain of the real properties previously acquired. Management determined that it was necessary to right-size New Mt Melrose, ~~operations to reduce its level of high-interest debt. In an effort to expedite~~consistent with the ~~optimization~~terms of the Mtpurchase agreement, completed two bundled acquisitions from Old Mt. Melrose ~~portfolio, management further determined that a dedicated operator was necessary to manage the subsidiary. Accordingly,~~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 ~~LLC~~ to ~~an unaffiliated third-party purchaser, Woodmont Lexington, LLC (“Woodmont”).~~Woodmont. As ~~consideration for the transaction, Woodmont paid~~a result of no longer having a controlling financial interest, the Company ~~$100,000 and agreed to assume full responsibility for~~deconsolidated the ~~management and operation~~operations of New Mt Melrose ~~and its real estate portfolio. The Company has retained a 35% membership interest in Mt Melrose, with Woodmont owning the other 65% membership interest.~~as of June 27, 2019. See Note 4 for more information.

~~Our other~~In July 2017, ENDI created a wholly-owned real estate ~~operations include activity from~~subsidiary named EDI Real Estate, LLC, to hold ENDI’s legacy portfolio of real estate. As of March 31, 2020, through EDI Real Estate, LLC, ENDI owns a legacy real estate investment portfolio ~~held through EDI Real Estate, LLC. The portfolio, primarily located in the Roanoke area of Virginia,~~that includes six residential properties and vacant land. Our real estate portfolio under EDI Real Estate, LLC is primarily located in Roanoke, Virginia. The portfolio includes single-family homes, both rented and vacant, that are ~~currently rented and~~ managed ~~through~~by a third-party property ~~manager,~~management company. The leases in effect as ~~well as additional~~of March 31, 2020, are based on annual time periods and include month-to-month provisions after the completion of the initial term.

State and municipal laws and regulations govern the real estate industry and do not vary significantly from one community to another. State laws, including the Virginia Residential Landlord and Tenant Act, in addition to local ordinances, govern rental properties ~~currently listed for sale.~~and also do not vary significantly throughout our real estate holding areas.

The Company operates its internet operations segment through Sitestar.net, a ~~wholly owned subsidiary~~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. ~~Sitestar.net provides~~We provide services ~~and support~~ to customers in the United States and Canada. This segment markets and sells narrow-band (dial-up and ISDN) and broadband services (DSL and fiber-optic). Additionally, we market and sell web hosting and related services to consumers and businesses.

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 March 31, 2020, 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 current quarter.

Management is currently identifying 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.

~~The~~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)~~, a wholly owned~~. 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 ~~of December 31, 2017, the subsidiary had closed~~has been previously reported, on six acquisitions for an aggregate purchase price of approximately $2.02 million, which included earn-outs of approximately $325,000. For all six acquisitions, all asset allocations made by management are final and all earn-outs have been paid in full as of ~~December 31, 2018. On~~ May 24, 2019, the Company completed ~~an asset sale transaction~~its divestiture of ~~its~~the home services operations to ~~an unaffiliated third-party purchaser,~~ Rooter Hero Plumbing, Inc. (“Rooter Hero”). In the transaction, the Company sold and conveyed all of the subsidiary’s personal property and customer lists and records, excluding stock inventory and other current assets. No cash consideration was exchanged in the transaction. As part of the transaction, Rooter Hero assumed the subsidiary’s obligations under lease and/or loan agreements for all outstanding vehicles and equipment, as well as the obligations to service all of the subsidiary’s customer accounts going forward. As of the period ended September 30, 2019, and for all prior periods presented, all revenue and expenses related to home services operations have been reported as discontinued operations on the accompanying unaudited condensed consolidated statements of operations.Hero.

Other operations include ~~investment~~nonrecurring or one-time strategic funding or similar activity and other corporate ~~activity~~operations that isare not considered to be one of the Company’s primary lines of business.~~Investment activity includes activity from various nonrecurring investment opportunities, such as~~ Below are the ~~Company’s investment in~~main activities that comprise other operations.

In January 2017, the Company, through Willow Oak, committed to make a capital contribution to Huckleberry Real Estate Fund II, LLC, a private investment fund, in the aggregate amount of $750,000. In May 2018, Willow Oak transferred the Huckleberry investment to EDI Real Estate, LLC, another wholly-owned subsidiary of the Company. During the quarter ended March 31, 2019, all contributed capital was returned in full and ~~its~~a gain of $212,631 was recognized as revenue through the other operations segment on our unaudited condensed consolidated statements of operations for the quarterly period ended March 31, 2019.

In August 2017, the Company entered into an agreement with several independent third parties to provide debtor-in-possession financing ~~arrangement with~~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 November 12, 2019, the Company exercised its warrants and purchased 450,000 shares of Triad Guaranty, Inc. Subsequently, on December 30, 2019, the Company monetized all 450,000 shares. The promissory note had an original repayment date of April 29, 2020, but as of the quarterly period ended March 31, 2020, the Company is evaluating a renegotiation of terms.

Common stockholders’ equity decreased from ~~$15,915,651~~$10,633,958 at December 31, ~~2018~~,2019, to ~~$10,371,595~~ $8,792,839 at ~~September 30, 2019~~.March 31, 2020. This change was attributable to ~~$836,253~~$1,852,112 of net ~~income~~loss in the asset management operations segment and ~~$390,477~~$285,741 of net loss in other segments, and was partially offset by $118,893 of net income in the internet operations segment, ~~and was offset by a~~ net ~~loss~~income of ~~$3,931,230 in the other segments, $759,644 of net loss~~$37,036 in the real estate operations segment, and ~~$1,441,156~~$10,756 of ~~loss~~net income resulting from discontinued operations under the home services operations segment. Corporate expenses for the ~~nine months~~quarterly period ended ~~September 30,~~ ~~2019~~March 31, 2020, included in the net loss from other operations, totaled ~~$641,474.~~$289,433. Total comprehensive net loss (all attributable to Enterprise Diversified, Inc. stockholders) for the quarterly period ended March 31, 2020 equaled $1,981,924.

This section provides an overview of changes in our assets, liabilities, and equity and should be read together with our accompanying unaudited ~~condensed~~ 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.

The Company operates its asset management operations business through ~~a wholly owned subsidiary,~~its wholly-owned subsidiaries, Willow Oak Asset Management, LLC (“Willow Oak”) and Willow Oak Capital Management, LLC. ~~This subsidiary was~~These subsidiaries were formed on October 10, ~~2016. As of December 31,~~ 2016 ~~this subsidiary did not have material operations. Effective January 1, 2017, Willow Oak Asset Management made its first investment.~~and May 24, 2018, 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 owner.

As of ~~the quarter ended September 30, 2019,~~March 31, 2020, Willow Oak holds a direct investment in the Alluvial Fund, LP. ~~In accordance with GAAP, for financial reporting purposes, these~~The realized and unrealized investment gains and losses are reported as revenue on the accompanying unaudited condensed consolidated statements of operations. This treatment can result in reporting negative revenue figures for a given period. Willow Oak continues to earn revenue through the remaining fee share arrangements, as well as through fund management services.

During the ~~quarter~~quarterly period ended ~~September 30, 2019~~,March 31, 2020, the asset management operations segment ~~produc~~edproduced negative ~~$159,085~~$1,745,154 of revenue. Cost of revenue was $0 and operating expenses totaled ~~$81,906.~~$109,241. Other income attributable to the asset management operations segment totaled ~~$4,983. The~~$2,283. Total net loss for the ~~quarter~~quarterly period ended ~~September 30, 2019~~,March 31, 2020, totaled ~~$236,008.~~$1,852,112. This compares to the ~~quarter~~quarterly period ended ~~September 30, 2018,~~March 31, 2019, when the asset management operations segment produced ~~$330,112~~$696,980 of revenue, cost of revenue was $0, and operating expenses totaled ~~$107,538.~~$123,464. Additionally, other income for the ~~quarter~~quarterly period ended ~~September 30, 2018,~~March 31, 2019, was ~~$11,075,~~$7,039, and total net income ~~for the quarter ended September 30, 2018,~~ was ~~$233,649.~~$580,555. The decrease in revenue for the quarterly period ended March 31, 2020 is due to market volatility and the application of specific GAAP revenue recognition rules as noted above. The decrease in operating expenses is primarily due to lower payroll expenses. Other income for the segment iswas primarily due to sub-lease rental income earned through the ~~Company's~~Company’s New York office space.

As of ~~the quarter ended~~ ~~September 30, 2019~~,March 31, 2020, the fair value of long-term investments held through the asset management operations segment totaled ~~$9,468,390.~~ $8,300,424. This compares to the fair value of long-term investments held at ~~December~~March 31, ~~2018~~,2019, which totaled ~~$8,446,488.~~$9,139,673. This ~~increase~~decrease in investments is attributable to ~~positive~~negative Alluvial Fund ~~performance during~~performance. Management notes that, while short-term market volatility can have a significant effect on reported revenue for a given period, the ~~nine-month period ended~~ ~~September 30, 2019~~. Company’s overall investment strategy is ultra-long-term focused.

The table below provide a summary of revenue statement amounts over time. These figures are specific to the asset management operations segment and are presented for the quarterly periods designated below.

~~Table of Contents~~

For the quarterly period ended March 31, 2020, the real estate operations segment generated revenue of $187,149, which includes $15,149 of rental revenue. The cost of revenue totaled $132,209, which includes $16,347 of cost of rental revenue. Operating expenses for the quarterly period ended March 31, 2020, were $16,636. Other expenses totaled $1,268 and net income for the quarterly period ended March 31, 2020, totaled $37,036. This compares to the quarterly period ended March 31, 2019, when the real estate operations segment generated revenue of $182,506 and cost of revenue totaled $163,143. All revenue and cost of revenue for the quarterly period ended March 31, 2019 was related to rental activities. Operating expenses for the quarterly period ended March 31, 2019 were $104,408, other expenses totaled $128,126, and total loss reported was $213,171. Other expenses incurred during the quarterly periods ended March 31, 2020 and 2019, were primarily interest-related expenses. The current period decreases in rental revenue, cost of rental revenue, operating expenses and interest expense are largely due to the deconsolidation of activity from the Mt Melrose rental portfolio, which is no longer consolidated as previously described in Note 4.

~~Through~~As of March 31, 2020 and December 31, 2019, the EDI Real Estate asportfolio of ~~September 30, 2019~~,properties included the ~~Company owns a total of 12 units consisting of nine units held for investment and three vacant lots held for resale as noted below:~~following units:

The leases in effect, as of ~~the period ended~~ ~~September 30, 2019~~,March 31, 2020, are based on ~~either~~ annual ~~or multi-year~~ time periods and typically include month-to-month provisions after the completion of the initial term. An outside property management company manages these rental properties on behalf of the Company. The property management company has introduced updated and renewed leases for existing rental properties.

During the quarterly period ended ~~September 30, 2019, two~~March 31, 2020, one residential rental ~~properties were~~property was transferred from “held for investment” to “held for ~~resale.”~~resale”. The carrying value of ~~these two properties totaled $121,558.~~this property was $43,917. EDI Real Estate did not transfer any properties during the quarterly period ended ~~September 30, 2018.~~March 31, 2019.

~~During the period ended September 30, 2019,~~There were no impairment adjustments ~~of $42,407 were~~ recorded during the quarterly periods ended March 31, 2020 and 2019 on ~~real estate held for resale through~~the EDI Real Estate ~~LLC in order to properly reflect pending sales activity as of the period ended September 30, 2019. During the year ended~~ ~~December 31, 2018~~, an impairment adjustment of $64,038 was recorded to real estate held for resale through EDI Real Estate, LLC in order to properly reflect market value for those properties held during the year. This adjustment was the result of a deteriorating building that was purchased by prior management in 1998.

~~For the period ended~~ ~~September 30, 2019, the real estate segment generated rental revenue of $19,359. The cost of rental revenue totaled $30,753. Operating expenses for the period ended~~ ~~September 30, 2019, were $11,827. Other expenses totaled $13,709 and the net loss for the period ended~~ ~~September 30, 2019~~, totaled $36,930. This compares to the period ended September 30, 2018, when revenue was $220,600, and cost of revenue totaled $107,527. Operating expenses were $275,414, other expenses totaled $137,406, and total net loss was $299,747. Other expenses incurred during the periods ended September 30, 2019 and 2018, were primarily interest-related expenses.portfolio.

~~Management has~~As described in Note 4, management determined that the Company no longer has a controlling financial interest in Mt ~~Melrose and is no longer the primary beneficiary as of June 30, 2019.~~Melrose. All activity prior to the deconsolidation event has been included on ~~the accompanying~~our unaudited condensed consolidated statements of operations for ~~the period ended September 30, 2019,~~given prior reporting periods under the real estate segment. ~~Simultaneously, as~~No Mt Melrose activity is included for the quarterly period ended March 31, 2020. As of June ~~30,~~27, 2019, all previously consolidated assets and liabilities of Mt Melrose, LLC have been removed from ~~the accompanying unaudited~~our condensed consolidated balance sheets. Note that this deconsolidation event is separate from the deconsolidation event that took place on November 1, 2018. As of December 31, 2018, however, Mt Melrose did have a controlling financial interest and was the primary beneficiary. TheAccordingly, there are no consolidated Mt Melrose assets as of the periods ended March 31, 2020 and December 31, ~~2018,~~2019 included ~~the following units:~~

As of December 31, 2018, units held for investment consist of single-family and multi-family residential rental units. The leases in effect for the occupied Mt Melrose units as of the year ended December 31, 2018, are based on either annual or multi-year time periods. Month-to-month leases are reserved for special circumstances. Units held for resale consist of single-family units, multi-family units, commercial properties, and undeveloped lots of land.

~~As of the year ended~~ ~~December 31, 2018, the Mt Melrose portfolio of properties was carried at the following amounts~~ on the accompanying ~~unaudited~~ condensed consolidated balance ~~sheets:~~sheets.

For the periods ended March 31, 2020 and December 31, 2019, the Company’s remaining investment in Mt Melrose is carried on our condensed consolidated balance sheets for $53,846. This carrying value is reflective of the mechanics of the June 27th transaction, rather than management’s perceived value of the Company’s remaining interest. 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 have allowed the portfolio to continue its redirection, which management believes will provide long-term returns greater than its current carrying value.

For the quarterly period ended ~~September 30,~~March 31, 2019,, depreciation expense on the Mt Melrose portfolio of properties was ~~$64,908.~~$51,627.

During the quarterly period ended March 31, 2019, Mt Melrose sold five residential properties and four vacant lots for gross proceeds of $121,850. This compares to their carrying value of $85,938, which resulted in a net gain of $35,912. Mt Melrose did not purchase ~~or sell~~ any properties induring the quarterly period ended ~~September 30, 2018.~~March 31, 2019.

During the quarterly period ended ~~September 30, 2018,~~March 31, 2019, Mt Melrose transferred ~~one property~~land with a carrying value of ~~$145,406~~$145,000 from “held for investment” to “held for ~~resale.”~~resale”.

~~During~~There were no impairment adjustments recorded during the ~~year~~quarterly period ended ~~December~~March 31, ~~2018, an impairment adjustment of $964,743 was recorded to real estate held for resale through~~2019 on the Mt Melrose LLC in order to properly reflect market value for those properties held at the end of the year. This adjustment was the result of 62 properties being transitioned to “held for resale” from “held for investment” as part of a portfolio redirection intended to reduce high-interest debt.portfolio.

Effective on June 27, 2019, the Company recognized a loss on the partial sale of Mt Melrose in the amount of $3,519,053, which has been reported separately on the accompanying unaudited condensed consolidated statements of operations under the other segment for the nine-month period ended September 30, 2019. The amount of the loss is based upon the value of the Company’s remaining interest in the subsidiary, less the Company’s previous carrying value of the subsidiary.

As of September 30, 2019, the focus of our internet segment remains 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 segment during 2018 or during the period ended September 30, 2019.

Revenue attributed to the internet operations segment during the quarterly period ended ~~September 30, 2019, totaled $265,171~~March 31, 2020, totaled $253,559 and cost of revenue totaled ~~$83,517.~~$87,188. Operating expenses for the segment totaled ~~$43,168~~$47,848 for the quarterly period ended ~~September 30, 2019~~,March 31, 2020, and other income totaled ~~$384.~~$370. Total net income for the internet operations segment was ~~$138,870~~$118,893 for the quarterly period ended ~~September 30, 2019~~.March 31, 2020. This compares to the quarterly period ended ~~September 30, 2018,~~March 31, 2019, when revenue totaled ~~$288,312,~~$274,902, cost of revenues totaled ~~$86,658,~~$87,613, operating expenses were ~~$58,475,~~$63,269, other income was ~~$479,~~$392, and net income was ~~$143,658.~~$124,412. Other income for the segment is the result of ~~the sale of credit card reward programs.~~

~~Management is currently identifying 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~~refundable sales ~~potential, as well as for other marketing opportunities that could generate new revenue from current customers who utilize the domains.~~tax credits.

As of ~~September 30, 2019~~,March 31, 2020, we have a total of ~~7,622 custom~~er7,401 customer accounts across the U.S. and Canada. This compares to the quarterly period ended ~~September 30, 2018,~~March 31, 2019, when we had a total of ~~8,997~~7,919 customer accounts. As of ~~September 30, 2019~~,March 31, 2020, approximately 63% of our revenue is driven by internet access services, with the remaining 37% being earned though web hosting and other web-based storage services.

~~Approximatel~~yApproximately 92% of our customer accounts are ~~U.S. based,~~U.S.-based, while 8% are ~~Canada based.~~ Canada-based. Revenue generated by our U.S. customers ~~totaled $251,809~~totaled $240,622 and revenue generated by our Canadian customers totaled ~~$13,362 duri~~ng$12,937 during the quarterly period ended ~~September 30, 2019~~.March 31, 2020. This compares to revenue generated by our U.S. customers of ~~$273,219~~$260,258 and revenue generated by our Canadian customers of ~~$15,093~~$14,644 during the quarterly period ended ~~September 30, 2018.~~March 31, 2019.

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 ~~reclassed~~reclassified to discontinued operations for comparability. ~~The net loss~~Net income reported from discontinued operations related to the home services operations segment ~~as of~~for the quarterly period ended ~~September 30, 2019,~~March 31, 2020 was ~~$31,151~~. $10,756. Included in this amount is an ~~offsetting $12,183~~$11,019 loss recovery on discontinued operations that represents royalties earned in accordance with the Rooter Hero royalty arrangement mentioned previously. This compares to the net ~~income~~loss of ~~$83,254~~$139,635 reported from discontinued operations related to the home services operations segment for the quarterly period ended ~~September 30, 2018.~~March 31, 2019.

InFor the quarterly period ended ~~September 30, 2019~~, ~~the~~March 31, 2020, our other ~~segments~~operations segment did not produce any revenue or cost of goods ~~sold, but the segment earned $20,249 of~~sold. Operating expenses totaled $289,433 and other income ~~primarily related to~~was $3,692 for the ~~reversal of a legal expense. Additionally, corporate~~quarterly period ended March 31, 2020. Corporate operating expenses ~~totaled $141,270.~~accounted for the full $289,433 of reported operating expenses for our other operations. This resulted in a net loss of ~~$121,021~~$285,741 for the quarterly period ended ~~September 30, 2019~~.March 31, 2020. This compares to revenue of ~~$20,934,~~$212,631, cost of revenue of ~~$31,800,~~$0, operating expenses of ~~$130,874,~~$194,920, and other income produced of ~~$1,908~~$3,897 for the quarterly period ended ~~September 30, 2018.~~March 31, 2019. Corporate expenses totaled ~~$126,828,~~$194,920, and the other operations segment recorded atotal net ~~loss~~income of ~~$139,832~~$21,608 for the quarterly period ended March 31, 2019. Other income for the quarters primarily relates to interest income earned on the outstanding loan to Triad Guaranty, Inc. As mentioned previously, revenue earned during the quarterly period ended ~~September~~ ~~30, 2018. Revenue and cost~~March 31, 2019 is related to a gain of ~~goods sold were higher due to~~$212,631 recognized on the ~~legacy EDI~~Huckleberry Real Estate ~~LLC activity being reported, as noted previously, under the other segment~~Fund investment. Corporate expenses are higher for the quarterly period ended ~~September 30, 2018. Corporate expenses were slightly higher during the period ended September 30, 2019~~March 31, 2020 primarily due to additional legal fees related to ongoing litigation and increased accounting ~~fees.~~fees, but were also offset by a decrease in payroll expenses and consulting expenses.

During the quarterly period ended ~~September 30, 2019, ENDI~~March 31, 2020, Enterprise Diversified carried out its business strategy in ~~five~~four operating segments: Asset Management Operations, Real Estate Operations, Internet Operations, ~~Home Services Operations,~~ and Other Operations. AsDuring periods prior to the quarter ended March 31, 2020, the Company also operated through a fifth reportable segment, Home Services Operations. However, as of the quarterly period ended ~~September 30, 2019,~~March 31, 2020, and for all prior periods presented, home services operations are reported as discontinued operations. Our primary focus is on generating cash flow so that we have the flexibility to ~~make reinvestments~~pursue opportunities as ~~opportunities~~they present themselves. We will only ~~reinvest~~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~~equivalents totaled ~~$161,275~~$553,468 at the quarter ended ~~September 30, 2019~~,March 31, 2020, compared to ~~$435,726~~$666,810 at year-end December 31, ~~2018. The Company intends to continue to build up cash reserves moving forward.~~2019. Real estate held for investment decreased to ~~$440,575~~$332,507 at the quarter ended ~~September 30, 2019~~,March 31, 2020, compared to ~~$9,492,877~~$380,515 at year-end December 31, ~~2018~~,2019, and real estate held for resale decreased to ~~$971,633~~$43,992 at the quarter ended ~~September 30, 2019~~,March 31, 2020, compared to ~~$2,318,912~~$98,910 at year-end December 31, ~~2018. Property and equipment also decreased to $10,522 at the quarter ended~~ ~~September 30, 2019, from $1,019,742 at year-end~~ ~~December 31, 2018~~.2019. The decreases in real estate ~~and property and equipment~~ are primarily due to the ~~recent asset sale under the home services segment and the equity sale and subsequent deconsolidation under the real estate segment.~~opportunistic sales of certain EDI Real Estate rental properties. The Company does not expect to make significant reinvestments into property and equipment used in operating activities at this time. ~~Total~~Also, our total notes payable decreased to ~~$813,817~~$382,676 from ~~$7,521,819~~$511,025 during the same time period. This decrease was ~~also primarily~~ related to the ~~equity~~ sale ~~and deconsolidation under~~of the previously mentioned real estate ~~segment.~~properties and the subsequent payoff of the attached notes.

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 and the foreseeable future.~~months.

~~Table of Contents~~

~~As previously reported in our Current Reports on Form 8-K filed with the SEC on September 19, 2016, and December 30, 2016, respectively, on September 19,~~In 2016, the Company ~~announced that it had entered into~~made a ~~letter of intent agreement with Alluvial Capital Management, LLC (“Alluvial Capital”)~~strategic determination to ~~make~~fund a seed investment, through Willow Oak, ~~Asset Management~~to assist in the launch of Alluvial Fund, LP, a private investment ~~partnership~~fund that was launched ~~by Alluvial Capital~~ on January 1, 2017 ~~(“Alluvial Fund”).~~by an unaffiliated sponsor and general partner, Alluvial Capital ~~acts as the general partner and the Company, through Willow Oak Asset~~ Management, ~~has invested in Alluvial Fund as a limited partner.~~

LLC. The Company ~~through~~had determined that Willow ~~Oak, agreed to make capital contributions to~~Oak’s support of Alluvial Fund in the aggregate amount of $10 million to be provided over four equal tranches on January 1, 2017, April 1, 2017, July 1, 2017, and October 1, 2017. As of September 30, 2017, the Company satisfied its obligation to provide $10 million in accordance with the contribution schedule. On January 1, 2018, pursuant to an amendment to the Alluvial Side Letter Agreement, dated December 15, 2017, Willow Oak AssetCapital Management, LLC ~~withdrew $3,000,000 from~~and its ~~$10,000,000~~direct investment in Alluvial Fund LPwere both beneficial and necessary undertakings in ~~order~~conjunction with establishing an asset management operations business and gaining credibility within that industry. As of March 31, 2020, Willow Oak continues to partially fund the first close of the Mt Melrose Transaction. Arquitos Capital Partners, LP, which is managed by our director and principal executive officer Steven L. Kiel, simultaneously invested $3,000,000hold its remaining direct investment in Alluvial ~~to temporarily replace~~Fund. Investment gains and losses are reported as revenue on the ~~amount withdrawn by Willow Oak. The Arquitos investment into Alluvial counts toward Willow Oak’s seed investment total for purposes~~accompanying unaudited condensed consolidated statements of ~~Willow Oak’s agreement with Alluvial.~~operations.

Also through the asset management operations segment, an operating lease on office space in New York City commenced on October 1, 2017. This lease extends through September 30, 2020.

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 ~~extends~~would have extended through May 31, 2021. This lease was not conveyed with the ~~asset sale~~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.

On June 27, 2019, as ~~per~~reported in the Current Report on Form 8-K filed with the SEC on July 3, 2019, the Company sold 65% of its membership interest in Mt Melrose, LLC to an unaffiliated third-party purchaser, Woodmont Lexington, LLC (“Woodmont”). Under the terms of the parties’ membership interest purchase agreement, the Company agreed to indemnify Woodmont against any losses actually incurred as a result of breaches of the Company’s representations and warranties made under the agreement. To date, Woodmont has made ~~three~~four claims for indemnification under the agreement, all of which have been rejected and disputed by the Company. Also, in connection with the transaction, the Company and Woodmont entered into a certain Amended and Restated Limited Liability Company Agreement of Mt Melrose, LLC ~~dated June 27, 2019~~ (the “A&R LLC Agreement”). The A&R LLC Agreement sets forth the general terms and conditions governing the arrangements between the two members. The A&R LLC Agreement provides that the business and affairs of Mt Melrose will be managed exclusively by one or more managers; and Woodmont is designated as the sole manager. In addition, the Company ~~has~~ expressly agreed to a three-year “standstill” arrangement, during which time the Company will not in any way participate, directly or indirectly, in the management or control of Mt Melrose; and with respect to any matters requiring a vote of the members, the Company will vote with (i.e., the same as) Woodmont.

~~We have no other meaningful long-term debt obligations, purchase obligations, or other long-term liabilities as of~~ ~~September 30, 2019, other than those previously mentioned related~~ Subsequent to the ~~asset management, home services,~~transaction, Woodmont, as the manager of Mt Melrose, has purported that the Company’s membership interest in Mt Melrose has been diluted to 20.8%. The Company disputes this assertion and ~~real estate segments.~~maintains that it has retained its 35% membership interest.

We are not a party to any material off-balance sheet arrangements as of ~~September 30, 2019~~.March 31, 2020.

Due to the uncertainty surrounding the COVID-19 pandemic, the Company has experienced, and continues to expect, market volatility as it relates to its investment in the Alluvial Fund. As reported during the quarterly period ended March 31, 2020, this volatility can create periods when the asset management operations segment produces negative revenue amounts. Due to the size of the investment, these negative revenue amounts can also have a sizable impact on the Company’s balance sheets at a given point-in-time. The nature of this investment has inherent market risks, and while short-term results can be unpredictable, the Company’s overall investment strategy continues to be ultra-long-term focused. These periods of volatility do not have significant short-term cash flow impacts on the Company.

Management continues to monitor and assess all Company operations for additional potential impacts of the COVID-19 pandemic. As of the quarterly period ended March 31, 2020, 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 COVID-19 pandemic ultimately may impact our business, financial condition, liquidity and results of operations likely will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic, the direct and indirect impact of the pandemic on 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 pandemic.

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 ~~September 30, 2019~~.March 31, 2020. 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. Because of inherent limitations, any controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance of achieving the desired control objective. 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 ~~September 30, 2019~~.March 31, 2020.

No change in the Company’s internal control over financial reporting occurred during the fiscal quarter ended ~~September 30, 2019~~,March 31, 2020, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting subsequent to the date of our most recent evaluation of the Company’s internal control over financial reporting.

~~Table of Contents~~

Enterprise Diversified, Inc. (f/k/a Sitestar Corporation) v. Frank Erhartic, Jr.

Various disputes have arisen and are continuing between the Company and Woodmont Lexington, LLC (“Woodmont”), the entity to whom the Company sold, on June 27, 2019, 65% of the Company’s membership interest in Mt Melrose, LLC (“Mt Melrose”).

All the while, since the closing of the Mt Melrose transaction, Woodmont, by its representative, Tice Brown, has made repeated “low ball” offers to buy out the Company’s remaining interest in Mt Melrose, insisting that the Company relinquish its Mt Melrose interest in order to avoid further claims and demands and in order to avoid threatened public disparagement (including by way of statements made on various social media by Woodmont’s representative, Tice Brown). All such offers have been rejected or not responded to by the Company, as being unfavorable, undesirable, and not in the long-term best interests of the Company and its shareholders.

On January 7, 2020, Woodmont, acting as the sole manager of Mt Melrose, also caused Mt Melrose to distribute a $600,000 cash dividend directly to Woodmont. Woodmont expressly excluded the Company from receiving any portion of this distribution. The Company has rejected and disputed the propriety of this distribution and Woodmont’s conduct.

The Company believes that Woodmont, directly and by its representative, Tice Brown, has engaged, and continues to engage, in intentionally injurious and harassing conduct concerning Mt Melrose that runs counter to the long-term best interests of the Company and its shareholders. Accordingly, as previously reported in the Company’s Current Report on Form 8-K filed with the SEC on November 20, 2019, the Company filed a verified complaint in the Court of Chancery of the State of Delaware on November 20, 2019, commencing a civil action against Woodmont – seeCivil Action No. 2019-0928-JTL (the “Delaware Action”). The Delaware Action was filed by the Company in response to the repeated claims and demands and injurious conduct by Woodmont and its representative, Tice Brown. On March 9, 2020, the Company filed further an amended verified complaint against Woodmont in the Delaware Action, expanding its claims against Woodmont. On April 6, 2020, Woodmont filed an answer to the complaint in the Delaware Action, along with verified counter-claims against the Company for Woodmont’s previously-asserted claims for indemnification under the parties’ purchase agreement. The Company is seeking, among other relief available against Woodmont, injunctive, declaratory and equitable relief, and relief for, among other things, Woodmont’s breaches of contract and unjust enrichment, along with attorneys’ fees and expenses. This action remains pending in the Delaware Court of Chancery.

Management intends to vigorously prosecute the Company’s claims, and defend the Company’s rights, against Woodmont and its representative, Tice Brown, in all of these Mt Melrose-related proceedings.

~~None.~~On February 14, 2020, the Company issued a total of 35,594 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, pursuant to and in line with our previously-reported Enterprise Diversified, Inc. 2020 Equity Incentive Plan. 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, 2020, which equaled $3.6537. 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.

On October 1, 2019 the Company, through its asset management subsidiary, formed Focused Compounding Capital Management, LLC. This new partnership, of which Willow Oak Capital Management, LLC will be a 10% owner, expects to launch a new private investment fund, Focused Compounding Fund, LP, set to begin investing January 1, 2020, in addition to advising managed accounts. Presently, this initiative is in its preparatory, “pre-launch” phase.

On October 22, 2019, the Company, as and being the sole and managing member of Specialty Contracting Group, LLC, resolved to dissolve and wind up Specialty Contracting Group and proceed with distributing its assets in accordance with §18-804 of the Delaware Limited Liability Company Act. Management believes that Specialty Contracting Group’s continued existence is not reasonably practicable or financially feasible. Management expects that all of Specialty Contracting Group’s cash on hand will be paid out ratably to its creditors and claimants.None.

~~Table of Contents~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Nevada	88-0397234
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

1518 Willow Lawn Drive, Richmond, VA	23230
(Address of Principal Executive Offices)	(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	Not applicable	Not applicable

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	~~[X]~~☒	Smaller reporting company	~~[X]~~☒

Emerging growth company	☐

~~Title of each class~~	~~Trading Symbol(s)~~	~~Name of each exchange on which registered~~
~~None~~	~~Not applicable~~	~~Not applicable~~

	Page No.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

PART I
Item 1. Financial Statements	43
~~Unaudited~~ Condensed Consolidated Balance Sheets as of ~~September 30, 2019~~March 31, 2020 (Unaudited) and December 31, ~~2018~~2019	43
Unaudited Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2020 and 2019	4
Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2020 and ~~2018~~2019	5
Unaudited Condensed ~~Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2019 and 2018~~	6
~~Unaudited~~ Consolidated Statement of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2020 and ~~Nine Months ended September 30,~~ 2019 ~~and 2018~~	76
Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	87
Notes to Unaudited Condensed Consolidated Financial Statements	109
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2925
Item 3. Quantitative and Qualitative Disclosures About Market Risk	3430
Item 4. Controls and Procedures	3430

PART II
Item 1. Legal Proceedings	3531
Item 1A. Risk Factors	3532
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3532
Item 3. Defaults Upon Senior Securities	3532
Item 4. Mine Safety Disclosures	32
Item 5. Other Information	3532
Item 6. Exhibits	3633

Signatures	3734


	September 30, 2019			December 31, 2018 (audited)			March 31, 2020 (unaudited)			December 31, 2019
Assets
Current Assets
Cash and cash equivalents	$	161,275		$	435,726		$	553,468		$	666,810
Accounts receivable, net		35,646			58,263			35,298			52,889
Inventory		—			120,940
Other current assets		30,164			95,095			16,100			29,555
Current assets - held for sale		135,589			232,363
Other current assets - held for resale								321			428
Total current assets		362,674			942,387			605,187			749,682
Long-term Assets
Real estate - held for investment, net		440,575			9,492,877			332,507			380,515
Real estate - held for resale		971,633			2,318,912
Real estate - held for resale, net								43,992			98,910
Property and equipment, net		10,522			1,019,742			16,742			17,753
Property and equipment - held for resale		—			73,212
Goodwill, net		212,445			212,445			212,445			212,445
Note receivable		191,160			169,406			199,039			195,121
Long-term investments, at fair value or net asset value		9,522,236			8,915,238
Long-term investments								8,354,270			10,126,204
Lease right-of-use assets		59,563			—			30,296			45,056
Other assets		74,135			74,664			73,782			73,958
Long-term assets - held for sale		—			1,300,569
Total long-term assets		11,482,269			23,577,065			9,263,073			11,149,962
Total assets	$	11,844,943		$	24,519,452		$	9,868,260		$	11,899,644
Liabilities and Stockholders' Equity
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	66,584		$	165,495		$	188,732		$	157,934
Accrued bonus		33,966			90,444
Accrued compensation								93,573			175,259
Accrued expenses		17,737			112,983			30,682			23,115
Accrued interest		—			134,623
Deferred revenue		217,811			210,212			201,430			204,960
Lease liability, current		61,402			—			31,215			46,435
Notes payable, current		311,292			1,002,965			12,281			11,453
Other current liabilities - held for sale		262,031			317,487
Other current liabilities - held for resale								147,113			146,958
Total current liabilities		970,823			2,034,209			705,026			766,114
Long-term Liabilities
Notes payable, net of current portion		502,525			6,518,854			370,395			499,572
Other long-term liabilities - held for sale		—			50,738
Total long-term liabilities		502,525			6,569,592			370,395			499,572
Total liabilities		1,473,348			8,603,801			1,075,421			1,265,686
Stockholders' Equity
Stockholders’ Equity
Preferred stock, $0.001 par value, 30,000,000 shares authorized; none issued		—			—			—			—
Common stock, $0.125 par value, 2,800,000 shares authorized; 2,625,282 shares issued; 2,544,776 shares outstanding		328,160			328,160
Additional paid-in-capital		27,718,308			27,718,308
Treasury stock, at cost, 80,506 common shares		(511,901	)		(511,901	)
Common stock, $0.125 par value, 2,800,000 shares authorized; 2,602,240 and 2,566,646 shares issued and outstanding								325,280			320,831
Additional paid-in capital								27,439,334			27,313,734
Accumulated other comprehensive income		3,054			3,054			—			—
Accumulated deficit		(17,166,026	)		(11,621,970	)		(18,971,775	)		(17,000,607	)
Total stockholders' equity		10,371,595			15,915,651
Total liabilities and stockholders' equity	$	11,844,943		$	24,519,452
Total stockholders’ equity								8,792,839			10,633,958
Total liabilities and stockholders’ equity							$	9,868,260		$	11,899,644

													For the three months ended
	For the three months ended September 30						For the nine months ended September 30						March 31
	2019			2018			2019			2018			2020			2019
Revenues - asset management	$	(159,085	)	$	330,112		$	1,127,075		$	522,044		$	(1,745,154	)	$	696,980
Revenues - real estate		19,359			220,600			420,464			592,583			187,149			182,506
Revenues - internet operations		265,171			288,312			805,990			887,635			253,559			274,902
Revenues - other		—			20,934			212,631			121,031			—			212,631
Total revenues		125,445			859,958			2,566,160			2,123,293			(1,304,446	)		1,367,019

Cost of revenues - real estate		30,753			107,527			358,126			342,449			132,209			163,143
Cost of revenues - internet operations		83,517			86,658			254,373			238,385			87,188			87,613
Cost of revenues - other		—			31,800			—			156,731			—			—
Total cost of revenues		114,270			225,985			612,499			737,565			219,397			250,756

Gross profit (loss) - asset management		(159,085	)		330,112			1,127,075			522,044			(1,745,154	)		696,980
Gross profit - real estate		(11,394	)		113,073			62,338			250,134			54,940			19,363
Gross profit - internet operations		181,654			201,654			551,617			649,250			166,371			187,289
Gross profit - other		—			(10,866	)		212,631			(35,700	)		—			212,631
Total gross profit		11,175			633,973			1,953,661			1,385,728
Total gross profit (loss)														(1,523,843	)		1,116,263

Selling, general and administrative expenses		278,171			572,301			1,444,507			1,776,036
Selling, general, and administrative expenses:
Insurance														24,133			28,832
Professional fees														210,134			99,291
Salaries and wages														161,349			238,268
Travel and meals														3,135			6,956
Other operating expenses														64,407			112,714
Total selling, general and administrative expenses														463,158			486,061
Income (loss) from operations		(266,996	)		61,672			509,154			(390,308	)		(1,987,001	)		630,202

Loss on sale of subsidiary		—			—			(3,519,053	)		—
Impairment expense		(3,040	)		—			(228,405	)		—
Interest expense		(13,473	)		(147,412	)		(293,202	)		(390,526	)		(7,082	)		(159,423	)
Other income, net		28,420			23,468			67,362			94,940
Other income (loss), net														12,159			42,625
Total other income (loss)		11,907			(123,944	)		(3,973,298	)		(295,586	)		5,077			(116,798	)

Income (loss) from continuing operations before income taxes		(255,089	)		(62,272	)		(3,464,144	)		(685,894	)		(1,981,924	)		513,404
Income tax benefit		—			—			—			—
Income tax benefit (expense)														—			—
Income (loss) from continuing operations		(255,089	)		(62,272	)		(3,464,144	)		(685,894	)		(1,981,924	)		513,404

Income (loss) from discontinued operations, net of taxes		(31,151	)		83,254			(1,441,156	)		(62,518	)		10,756			(139,635	)
Net income (loss)		(286,240	)		20,982			(4,905,300	)		(748,412	)	$	(1,971,168	)	$	373,769

Less: net income (loss) attributable to the noncontrolling interest		—			(8,601	)		—			(380,437	)
Net income (loss) attributable to Enterprise Diversified, Inc. stockholders	$	(286,240	)	$	29,583		$	(4,905,300	)	$	(367,975	)
Earnings (loss) per share from continuing operations, basic and diluted		(0.11	)		0.00			(1.93	)		(0.15	)
Earnings (loss) per share from discontinued operations, basic and diluted		(0.01	)		0.03			(0.57	)		0.00
Net income (loss) per share, basic and diluted														(0.76	)		0.15
Net income (loss) per share from continuing operations, basic and diluted														(0.77	)		0.20
Net income (loss) per share from discontinued operations, basic and diluted														0.00			(0.05	)
Weighted average number of shares, basic		2,544,776			2,540,416			2,544,776			2,433,340			2,585,081			2,544,776
Weighted average number of shares, diluted		2,544,776			2,540,416			2,544,776			2,433,340			2,585,529			2,544,776

					Additional				Accumulated Other					Total
	Common				Paid-in		Treasury		Comprehensive		Accumulated			Stockholders’
	Stock		Amount		Capital		Stock		Income		Deficit			Equity
Balance December 31, 2019		2,566,646	$	320,831	$	27,313,734	$	—	$	—	$	(17,000,607	)	$	10,633,958
Net income (loss)		—		—		—		—		—		(1,971,168	)		(1,971,168	)
Stock issuance		35,594		4,449		125,600		—		—		—			130,049
Balance March 31, 2020		2,602,240	$	325,280	$	27,439,334	$	—	$	—	$	(18,971,775	)	$	8,792,839

					Additional					Accumulated Other							Total
	Common				Paid In		Treasury			Comprehensive		Accumulated			Noncontrolling		Stockholders'
	Stock		Amount		Capital		Stock			Income		Deficit			Interest		Equity
Balance December 31, 2018		2,544,776	$	328,160	$	27,718,308	$	(511,901	)	$	3,054	$	(11,621,970	)	$	—	$	15,915,651
Net income (loss)		—		—		—		—			—		373,769			—		373,769
Balance March 31, 2019		2,544,776		328,160		27,718,308		(511,901	)		3,054		(11,248,201	)		—		16,289,420
Net income (loss)		—		—		—		—			—		(4,992,836	)		—		(4,992,836	)
Effects of deconsolidation		—		—		—		—			—		(638,749	)		—		(638,749	)
Balance June 30, 2019		2,544,776		328,160		27,718,308		(511,901	)		3,054		(16,879,786	)		—		10,657,835
Net income (loss)													(286,240	)				(286,240	)
Balance September 30, 2019		2,544,776	$	328,160	$	27,718,308	$	(511,901	)	$	3,054	$	(17,166,026	)	$	—	$	10,371,595

	2020			2019
Cash flows (used in) from operating activities:
Net income (loss) from continuing operations		(1,981,924	)		513,404
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization		5,278			71,992
Loss (gain) on long-term investments		1,784,406			(868,347	)
Bad debt expense		405			5,863
(Gain) loss on sale of real estate		(73,165	)		(35,912	)
(Increase) decrease in:
Accounts receivable, net		17,186			(15,892	)
Inventory		—			1,470
Other current assets		13,455			2,438
Notes receivable		(3,918	)		(3,875	)
Increase (decrease) in:
Accounts payable		30,798			2,652
Accrued expenses		55,470			70,321
Deferred revenue		(3,530	)		4,986
Accrued interest		—			45,286
Net cash flows (used in) from continuing operations		(155,539	)		(205,614	)
Net cash flows (used in) from discontinued operations		11,018			(2,191	)
Net cash flows (used in) operating activities		(144,521	)		(207,805	)
Cash flows from (used in) investing activities:
Purchases of investments		(12,472	)		(37,469	)
Proceeds from sale of real estate		172,000			121,850
Improvements to real estate		—			(22,156	)
Net cash flows from (used in) continuing operations		159,528			62,225
Net cash flows from (used in) discontinued operations		—			—
Net cash flows from (used in) investing activities		159,528			62,225
Cash flows from financing activities:
Principal payments on note payable		(128,349	)		(75,408	)
Proceeds from notes payable		—			300,000
Net cash flows (used in) from continuing operations		(128,349	)		224,592
Net cash flows (used in) from discontinued operations		—			(12,757	)
Net cash flows (used in) from financing activities		(128,349	)		211,835
Net (decrease) increase in cash		(113,342	)		66,255
Cash and cash equivalents at beginning of the period		666,810			459,680
Cash and cash equivalents at end of the period	$	553,468		$	525,935

	September 30, 2019		December 31, 2018
Cash and cash equivalents	$	39,222	$	23,954
Accounts receivable		18,693		136,785
Other current assets		77,674		71,624
Total current assets - held for resale		135,589		232,363

Property and equipment, net		—		270,603
Goodwill		—		1,024,591
Other long-term assets		—		5,375
Total long-term assets - held for resale		—		1,300,569

Accounts payable		104,475		75,208
Accrued expenses		—		81,213
Other current liabilities		57,556		2,368
Notes payable, current		100,000		158,698
Total current liabilities - held for resale		262,031		317,487

Notes payable, long term - held for resale		—		50,738
Total long-term liabilities - held for resale	$	—	$	50,738

	Cost Basis		Unrealized Gain		Fair Value
September 30, 2019
Alluvial Fund, LP	$	7,037,798	$	2,428,589	$	9,466,387
Willow Oak Select Fund, LP		1,313		690		2,003
Mt Melrose, LLC		53,846		—		53,846
Total	$	7,092,957	$	2,429,279	$	9,522,236

	Cost Basis		Unrealized Gain		Carrying Value
March 31, 2020
Alluvial Fund, LP (at fair value)	$	7,051,058	$	1,249,366	$	8,300,424
Mt Melrose, LLC (at cost)		53,846		—		53,846
Total	$	7,104,904	$	1,249,366	$	8,354,270

	●	Level ~~1: Inputs~~1 - inputs are quoted prices in active markets as of the measurement date for identical assets and liabilities that the Company has the ability to ~~access. This~~access; this category includes exchange-traded mutual funds and equity ~~securities.~~securities;

	●	Level ~~2: Inputs~~2 - inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or ~~indirectly.~~indirectly; Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates or yield curves, that are observable at commonly quoted ~~intervals. This~~intervals; this category includes mortgage-backed securities, asset-backed securities, corporate debt securities, certificates of deposit, commercial paper, U.S. agency and municipal debt securities, U.S. Treasury securities, and derivative ~~contracts.~~contracts; and

	●	Level ~~3: Inputs~~3 - inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or ~~liability. The~~liability; the measurements are highly subjective.

	(Level 1)		(Level 2)		(Level 3)		(Excluded) (a)		Total at Fair Value
September 30, 2019
Alluvial Fund, LP	$	—	$	—	$	—	$	9,466,387	$	9,466,387
Willow Oak Select Fund, LP		—		—		—		2,003		2,003
Total	$	—	$	—	$	—	$	9,468,390	$	9,468,390

	September 30, 2019		December 31, 2018
Real estate held for resale	$	971,633	$	2,318,912
Equipment and vehicles held for resale		—		73,212
Total assets held for resale	$	971,633	$	2,392,124

EDI Real Estate	March 31, 2020		December 31, 2019
Units occupied or available for rent		5		6
Vacant units being prepared for rent		—		—
Total units held for investment		5		6

Units held for resale		1		2
Vacant lots held for resale		3		3
Total units held for resale		4		5

~~Mt Melrose~~	~~December 31, 2018~~
~~Units occupied or available for rent~~		98
~~Vacant units being prepared for rent~~		15
~~Total units held for investment~~		~~113~~

~~Residential and commercial units~~		48
~~Vacant lots~~		9
~~Total units held for resale~~		57

Mt Melrose	December 31, 2018
Total real estate held for investment	$	9,049,945
Accumulated depreciation		(159,514	)
Real estate held for investment, net	$	8,890,431

Real estate held for resale	$	2,278,865

	Interest Rates	Average Term	2019		2018
Interest-bearing amounts due on traditional mortgages on real estate held through Mt Melrose, LLC	4.38% - 5.75%	14 years	$	—	$	4,505,139
Interest-bearing amounts due on hard money loans on real estate held through Mt Melrose, LLC	10.00% - 13.00%	2 years		—		2,379,851
Interest-bearing amount due on promissory note on warehouse	8.00%	1 year		300,000		—
Interest-bearing amounts due on promissory notes	10.00%	1 year		—		131,279
Non-interest-bearing amount due on promissory notes	0.00%	1 year		100,000		218,270
Equipment and vehicle capital leases and loans acquired by HVAC Value Fund, LLC	0.00% - 4.90%	5 years		—		55,797
Vehicle loans through HVAC Value Fund, LLC	5.99%	5 years		—		53,638
Interest-bearing amount due on promissory note through EDI Real Estate, LLC	5.60%	15 years		376,217		384,304
Interest-bearing amount due on real estate held for investment through EDI Real Estate, LLC	6.00%	5 years		137,600		137,600
Less notes related to discontinued operations				(100,000)		(209,436)
Less accrued interest				—		(134,623)
Less current portion				(311,292)		(1,002,965)
Long-term portion			$	502,525	$	6,518,854

0.00%	$	100,000
5.00% - 5.99%		376,217
6.00 - 6.99%		137,600
8.00 - 8.99%		300,000
10.00% - 13.00%		—
Total	$	913,817

2019	$	402,792
2020		11,453	$	12,281
2021		12,181		17,285
2022		150,491		114,293
2023 and thereafter		336,900
2023				19,359
2024 and thereafter				219,458
Total	$	913,817	$	382,676

	2019			2018
Gross accounts receivable	$	35,977		$	85,093
Less allowance for doubtful accounts		(331	)		(26,830	)
Accounts receivable, net	$	35,646		$	58,263

Finance lease costs:
Amortization of ROU assets	$	14,264		$	—
Interest on lease liabilities		—			—
Operating lease cost		15,455			28,888
Sublease income		(7,053	)		—
Total lease costs from continuing operations	$	22,666			28,888
Total lease costs from discontinued operations					—
Total lease costs				$	28,888

2020	$	70,465
2021		16,309
2022		—
Total		86,774

Discount factor		(5,449	)
Lease liability		81,325
Less lease liability from discontinuing operations		(50,110	)
Amounts due within 12 months		(31,215	)
Long-term lease liability	$	—

2019	$	25,384
2020		86,380
2021		13,005
Total		124,769

Discount factor		(5,572	)
Lease liability		119,197
Less lease liability from discontinuing operations		(57,795	)
Amounts due within 12 months		(61,402	)
Long-term lease liability	$	—

	●	~~by payment of $500,000 to Old Mt. Melrose in cash;~~

	●	~~by New Mt Melrose’s assumption of $1,798,119 of outstanding indebtedness secured by the acquired real properties; and~~

	●	~~the balance by issuance to Old Mt. Melrose of 120,602 shares of the Company’s common stock.~~

	●	~~by New Mt Melrose’s assumption of $2,767,158 of outstanding indebtedness secured by the acquired real properties; and~~

	●	~~the balance by issuance to Old Mt. Melrose of 148,158 shares of the Company’s common stock.~~

	September 30, 2019		June 30, 2019		March 31, 2019		December 31, 2018		March 31, 2020		December 31, 2019		September 30, 2019		June 30, 2019		March 31, 2019
ASSETS
Cash and equivalents	$	161,275	$	542,856	$	519,525	$	435,726	$	553,468	$	666,810	$	161,275	$	542,856	$	519,525
Accounts receivables, net		35,646		20,212		65,614		58,263		35,298		52,889		35,646		20,212		65,614
Investments, at fair value		9,522,236		9,735,274		9,821,054		8,915,238		8,354,270		10,126,204		9,522,236		9,735,274		9,821,054
Real estate, total		1,412,208		1,421,364		11,691,075		11,811,789		376,499		479,425		1,412,208		1,421,364		11,691,075
Goodwill and other assets		713,578		769,570		3,353,607		3,298,436		548,725		574,316		713,578		769,570		3,353,607
Total assets	$	11,844,943	$	12,489,276	$	25,450,875	$	24,519,452	$	9,868,260	$	11,899,644	$	11,844,943	$	12,489,276	$	25,450,875
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	66,584	$	161,357	$	168,147	$	165,495	$	188,732	$	157,934	$	66,584	$	161,357	$	168,147
Accrued expenses		51,703		80,761		453,657		338,050		124,255		198,374		51,703		80,761		453,657
Deferred revenue		217,811		217,020		213,288		210,212		201,430		204,960		217,811		217,020		213,288
Notes payable and other liabilities		1,137,250		1,372,303		8,326,363		7,890,044		561,004		704,418		1,137,250		1,372,303		8,326,363
Total liabilities		1,473,348		1,831,441		9,161,455		8,603,801		1,075,421		1,265,686		1,473,348		1,831,441		9,161,455
Total stockholders’ equity		10,371,595		10,657,835		16,289,420		15,915,651		8,792,839		10,633,958		10,371,595		10,657,835		16,289,420
Total liabilities and stockholders’ equity	$	11,844,943	$	12,489,276	$	25,450,875	$	24,519,452	$	9,868,260	$	11,899,644	$	11,844,943	$	12,489,276	$	25,450,875

Exhibit		Description
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)
32		Certification Pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101		Pursuant to Rule 405 of Regulation S-T, the following materials from Enterprise Diversified, Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2019~~,March 31, 2020, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets ~~(unaudited)~~ as of ~~September 30, 2019~~March 31, 2020 (unaudited) and December 31, ~~2018~~;2019; (ii) Unaudited Condensed Consolidated Statements of Operations ~~(unaudited)~~ for the Three ~~and Nine~~ Months Ended ~~September 30,~~ ~~2019~~March 31, 2020 and ~~2018~~;2019; (iii) Unaudited Condensed Consolidated Statements of Comprehensive Income ~~(unaudited)~~ for the Three ~~and Nine~~ Months Ended ~~September 30,~~ ~~2019~~March 31, 2020 and ~~2018~~;2019; (iv) Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity ~~(unaudited)~~ for the Three ~~and Nine~~ Months Ended ~~September 30, 2019~~March 31, 2020 and ~~2018;~~2019; (v) Unaudited Condensed Consolidated Statements of Cash Flows ~~(unaudited)~~ for the ~~Nine~~Three Months Ended ~~September 30,2019~~March 31, 2020 and ~~2018~~;2019; (vi) Notes to Unaudited Condensed Consolidated Financial Statements

		ENTERPRISE DIVERSIFIED, INC.

Date: ~~November~~May 8,~~, 2019~~ 2020		/s/Steven L. Kiel
		Steven L. Kiel
		Executive Chairman
		(Principal Executive Officer)

Date: ~~November~~May 8,~~, 2019~~ 2020		/s/ Alea A. Kleinhammer
		Alea A. Kleinhammer
		Chief Financial Officer
		(Principal Financial Officer)