EX-99.3 10 slgdd-ex99_3.htm UNAUDITED PRO FORMA FS EX-99.3

EXHIBIT 99.3

HORIZON KINETICS HOLDING CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma financial information presents the unaudited pro forma condensed combined balance sheet and unaudited pro forma condensed combined statements of income based upon the combined historical financial statements of Scott's Liquid Gold-Inc. (the “Company”) and Horizon Kinetics LLC (“Horizon Kinetics”), after giving effect to the August 1, 2024 Merger of Merger Sub, a wholly-owned subsidiary of the Company, with and into Horizon Kinetics, the internal reorganization in which Horizon Kinetics merged with two of its member corporations, Kinetics Common Inc. and Kinetics Holdings, which hold additional investment securities, and the adjustments described in the accompanying notes. The Merger will be accounted for as a reverse acquisition under the acquisition method of accounting, which requires determination of the accounting acquirer. This merger is also reflected in the accompanying pro forma financial information. The accounting guidance for business combinations provides that in identifying the acquiring entity in a combination effected through an exchange of equity interests, all pertinent facts and circumstances must be considered, including but not limited to, the relative voting rights of the shareholders of the constituent companies in the combined company, the composition of the board of directors and senior management of the combined company, the relative size of each company and the terms of the exchange of equity securities in the business combination, including payment of any premium.

Because the Horizon Kinetics security holders will be entitled to designate the majority of the Board of Directors of the Company will receive a majority of the equity securities and voting rights of the Company upon closing of the Merger, and will comprise a majority of the senior management of the combined entity, Horizon Kinetics is considered to be the acquirer of the Company for accounting purposes. This means that Horizon Kinetics will allocate the purchase price to the fair value of the Company’s assets acquired and liabilities assumed on the acquisition date, with any excess purchase price being recorded as goodwill.

The unaudited pro forma condensed combined balance sheet as of March 31, 2024 reflects the transaction as if it occurred on March 31, 2024. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2023 and the quarter ended March 31, 2024 reflect the transaction as if it occurred on January 1, 2023, the beginning of the earliest period presented.

The unaudited pro forma condensed combined financial information is for informational purposes only and does not purport to present what our results would actually have been had these transactions actually occurred on the dates presented or to project our results of operations or financial position for any future period. You should read the information set forth below together with the notes to the pro forma condensed combined financial statements, the audited financial statements of the Company for the years ended December 31, 2023 and 2022 included in the Annual Report of the Company on Form 10-K for the fiscal year ended December 31, 2023, the Quarterly Report of the Company on Form 10-Q for the quarter ended March 31, 2024, which are incorporated by reference in this current report, the financial statements of Horizon Kinetics for the years ended December 31, 2023 and 2022, included as Exhibit 99.1, and the financial statements for the quarter ended March 31, 2024 included in this current report included as Exhibit 99.2.

 

1

 

HORIZON KINETICS HOLDING CORPORATION

Unaudited Pro Forma Condensed Combined Balance Sheet

March 31, 2024

(in thousands)

 

 

 

 

 

 

 

 

 

 

Contributed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

assets of Kinetics

 

 

 

 

 

 

Pro forma

 

 

 

Scott's Liquid

 

 

Horizon

 

 

Common Inc. and

 

 

Pro forma

 

 

 

condensed

 

 

 

Gold-Inc.

 

 

Kinetics, LLC

 

 

Kinetics Holdings

 

 

adjustments

 

 

 

combined

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents, and restricted cash

 

$

3,277

 

 

$

10,408

 

 

$

2,453

 

 

$

-

 

 

 

$

16,138

 

Accounts receivable, net

 

 

357

 

 

 

6,102

 

 

 

-

 

 

 

-

 

 

 

 

6,459

 

Investments, at fair value

 

 

-

 

 

 

42,413

 

 

 

11,489

 

 

 

(15

)

(a)

 

 

53,887

 

Investments in proprietary funds

 

 

-

 

 

 

134,924

 

 

 

15,793

 

 

 

-

 

 

 

 

150,717

 

Digital assets

 

 

-

 

 

 

10,342

 

 

 

-

 

 

 

-

 

 

 

 

10,342

 

Other current assets

 

 

716

 

 

 

1,190

 

 

 

95

 

 

 

112

 

(b)

 

 

2,113

 

Total current assets

 

 

4,350

 

 

 

205,379

 

 

 

29,830

 

 

 

97

 

 

 

 

239,656

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

-

 

 

 

168

 

 

 

-

 

 

 

-

 

 

 

 

168

 

Assets of discontinued operations

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

Intangible assets, net

 

 

-

 

 

 

43,449

 

 

 

-

 

 

 

1,020

 

(c)

 

 

44,469

 

Goodwill

 

 

-

 

 

 

19,273

 

 

 

-

 

 

 

9,882

 

(c)

 

 

29,155

 

Operating lease right-of-use assets

 

 

1,326

 

 

 

5,228

 

 

 

-

 

 

 

-

 

 

 

 

6,554

 

Other assets

 

 

36

 

 

 

2,293

 

 

 

-

 

 

 

-

 

 

 

 

2,329

 

Total assets

 

$

5,712

 

 

$

275,790

 

 

$

29,830

 

 

$

10,999

 

 

 

$

322,331

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities

 

$

420

 

 

$

14,590

 

 

$

127

 

 

$

-

 

 

 

$

15,137

 

Deferred tax liability

 

 

-

 

 

 

1,841

 

 

 

-

 

 

 

-

 

 

 

 

1,841

 

Current portion of long-term debt and lease liabilities

 

 

296

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

296

 

Total current liabilities

 

 

716

 

 

 

16,431

 

 

 

127

 

 

 

-

 

 

 

 

17,274

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease liabilities, net of current

 

 

2,144

 

 

 

6,761

 

 

 

-

 

 

 

-

 

 

 

 

8,905

 

Other liabilities

 

 

74

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

74

 

Total liabilities

 

 

2,934

 

 

 

23,192

 

 

 

127

 

 

 

-

 

 

 

 

26,253

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Scott's Liquid Gold-Inc. shareholders' equity

 

 

2,778

 

 

 

-

 

 

 

-

 

 

 

(2,778

)

(d)

 

 

-

 

Total Horizon Kinetics, LLC members' equity

 

 

-

 

 

 

252,598

 

 

 

29,703

 

 

 

13,777

 

(a)(d)

 

 

296,078

 

Total shareholders’ equity

 

 

2,778

 

 

 

252,598

 

 

 

29,703

 

 

 

10,999

 

 

 

 

296,078

 

Total liabilities and shareholders’ equity

 

$

5,712

 

 

$

275,790

 

 

$

29,830

 

 

$

10,999

 

 

 

$

322,331

 

 

See notes to pro forma condensed combined financial statements.

 

 

2

 

HORIZON KINETICS HOLDING CORPORATION

Unaudited Pro Forma Condensed Combined Statement of Income for the

Three Months Ended March 31, 2024

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma

 

 

 

Scott's Liquid

 

 

Horizon

 

 

Pro forma

 

 

 

condensed

 

 

 

Gold-Inc.

 

 

Kinetics, LLC

 

 

adjustments

 

 

 

combined

 

Total revenues

 

$

859

 

 

$

14,063

 

 

$

-

 

 

 

$

14,922

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of products

 

 

501

 

 

 

-

 

 

 

-

 

 

 

 

501

 

Selling, general, and administrative expenses

 

 

879

 

 

 

11,199

 

 

 

38

 

(e)

 

 

12,116

 

Depreciation, amortization, and impairments

 

 

-

 

 

 

460

 

 

 

26

 

(f)

 

 

486

 

Total operating expenses

 

 

1,380

 

 

 

11,659

 

 

 

64

 

 

 

 

13,103

 

Income (loss) from operations

 

 

(521

)

 

 

2,404

 

 

 

(64

)

 

 

 

1,819

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (expense), net

 

 

29

 

 

 

196

 

 

 

-

 

 

 

 

225

 

Other income (expense), net

 

 

-

 

 

 

39,485

 

 

 

-

 

 

 

 

39,485

 

Total other income (expense):

 

 

29

 

 

 

39,681

 

 

 

-

 

 

 

 

39,710

 

Loss before income taxes and discontinued
   operations

 

 

(492

)

 

 

42,085

 

 

 

(176

)

 

 

 

41,529

 

Income tax expense

 

 

-

 

 

 

(1,244

)

 

 

(8,801

)

(g)

 

 

(10,045

)

Income (loss) from continuing operations

 

 

(492

)

 

 

40,841

 

 

 

(8,977

)

 

 

 

31,484

 

Income (loss) from discontinued operations, net of taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

Net income (loss)

 

$

(492

)

 

$

40,841

 

 

$

(8,977

)

 

 

$

31,484

 

Basic and diluted net income (loss) per common
   shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

(0.76

)

 

 

 

 

 

 

 

 

$

1.69

 

Income (loss) from discontinued operations

 

$

-

 

 

 

 

 

 

 

 

 

$

-

 

Net income (loss)

 

$

(0.76

)

 

 

 

 

 

 

 

 

$

1.69

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

650

 

 

 

 

 

 

17,984

 

(h)

 

 

18,634

 

 

See notes to pro forma condensed combined financial statements.

 

3

 

HORIZON KINETICS HOLDING CORPORATION

Unaudited Pro Forma Condensed Combined Statement of Income for the

Fiscal Year Ended December 31, 2023

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma

 

 

 

Scott's Liquid

 

 

Horizon

 

 

Pro forma

 

 

 

condensed

 

 

 

Gold-Inc.

 

 

Kinetics, LLC

 

 

adjustments

 

 

 

combined

 

Total revenues

 

$

3,403

 

 

$

50,981

 

 

$

-

 

 

 

$

54,384

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of products

 

 

1,956

 

 

 

-

 

 

 

112

 

(i)

 

 

2,068

 

Selling, general, and administrative expenses

 

 

4,911

 

 

 

45,641

 

 

 

300

 

(e)

 

 

50,852

 

Depreciation, amortization, and impairments

 

 

1,651

 

 

 

1,828

 

 

 

102

 

(f)

 

 

3,581

 

Total operating expenses

 

 

8,518

 

 

 

47,469

 

 

 

514

 

 

 

 

56,501

 

Income (loss) from operations

 

 

(5,115

)

 

 

3,512

 

 

 

(514

)

 

 

 

(2,117

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (expense), net

 

 

(77

)

 

 

826

 

 

 

-

 

 

 

 

749

 

Other income (expense), net

 

 

-

 

 

 

(8,952

)

 

 

-

 

 

 

 

(8,952

)

Total other income (expense):

 

 

(77

)

 

 

(8,126

)

 

 

-

 

 

 

 

(8,203

)

Loss before income taxes and discontinued
   operations

 

 

(5,192

)

 

 

(4,614

)

 

 

(514

)

 

 

 

(10,320

)

Income tax expense

 

 

(9

)

 

 

122

 

 

 

969

 

(g)

 

 

1,082

 

Income (loss) from continuing operations

 

 

(5,201

)

 

 

(4,492

)

 

 

455

 

 

 

 

(9,238

)

Income (loss) from discontinued operations, net of taxes

 

 

5,581

 

 

 

-

 

 

 

-

 

 

 

 

5,581

 

Net income (loss)

 

$

380

 

 

$

(4,492

)

 

$

455

 

 

 

$

(3,657

)

Basic and diluted net income (loss) per common
   shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

(8.05

)

 

 

 

 

 

 

 

 

$

(0.50

)

Income (loss) from discontinued operations

 

$

8.64

 

 

 

 

 

 

 

 

 

$

0.30

 

Net income (loss)

 

$

0.59

 

 

 

 

 

 

 

 

 

$

(0.20

)

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

646

 

 

 

 

 

 

17,984

 

(h)

 

 

18,630

 

 

See notes to pro forma condensed combined financial statements.

 

4

 

HORIZON KINETICS HOLDING CORPORATION

Notes to Pro Forma Condensed Combined Financial Statements

(in thousands, except per share data)

Note 1 – Basis of Presentation

The historical financial information has been adjusted to give pro forma effect to events that are directly attributable to the Merger and expected to have a continuing impact on the combined results. The pro forma adjustments are preliminary and based on estimates. They have been prepared to illustrate the estimated effect of the Merger and certain other adjustments. The final determination of the purchase price allocation will be based on the fair values of assets acquired and liabilities assumed of the Company as of the closing date of Merger and could result in a significant change to the unaudited pro forma condensed combined financial information, including goodwill.

Note 2 – Preliminary Purchase Price Allocation

Because the Merger is considered a reverse acquisition for accounting purposes, the fair value of the purchase consideration is calculated based on the Company’s stock price as it is considered to be a more reliable determination than the fair value of Horizon Kinetics’ private stock. Consideration is estimated based on the Company’s closing stock price on August 1, 2024. The purchase price was finalized based on the stock price on the closing date.

 

Shares of Scott's Liquid Gold-Inc.

 

 

13,012

 

Share price on August 1, 2024

 

$

1.06

 

Fair value of consideration

 

$

13,792

 

 

The preliminary purchase price as shown in the table above is allocated to the tangible and intangible assets acquired and liabilities assumed by the Company based on their preliminary estimated fair values. The fair value assessments are preliminary and are based upon available information and certain assumptions which the Company believes are reasonable. Actual results may differ materially from the unaudited pro forma condensed combined financial statements.

 

Description

 

Amount

 

Current assets

 

$

3,634

 

Other current assets(1)

 

 

828

 

Other non-current assets

 

 

1,362

 

Intangible assets, net(2)

 

 

1,020

 

Goodwill

 

 

9,882

 

Current liabilities

 

 

(716

)

Non-current liabilities

 

 

(2,218

)

Preliminary purchase price

 

$

13,792

 

 

1)
Preliminary fair value assessments are still in process. However, based on the information received to date, management does not believe the fair value will be materially different from the historical carrying value. As such, the historical carrying value has been used in the preliminary purchase price allocation except for inventory, which was included at its estimated fair value.
2)
Preliminary fair value adjustments were identified related to customer relationships, trademarks, and formulas. The useful life of all intangible assets was estimated to be ten years. Preliminary adjustments are under review and are subject to change.

Note 3 – Description of Pro Forma Adjustments

Adjustments included in the column under the heading “Pro forma adjustments” relate to the following:

(a)
To eliminate Horizon Kinetics investments in Scott’s Liquid Gold-Inc.
(b)
To record estimated fair value of inventory and related cost of products sold.
(c)
To record the estimated fair value of intangible assets and residual goodwill.
(d)
To eliminate Scott’s Liquid Gold’s historical shareholders’ equity and record fair value of consideration transferred to Horizon Kinetics.
(e)
To estimate professional expenses directly related to the Merger that have not yet been incurred.
(f)
To record additional amortization expense from acquired intangible assets.

 

5

 

(g)
To reflect income tax impact of acquired business results and pro forma adjustments.
(h)
The pro forma basic and diluted earnings per share calculations are based on the basic and diluted weighted average shares of the Company, reflective of the reverse stock split of our outstanding shares of Common Stock at a ratio of 1-for-20 (the “Reverse Stock Split”) that was completed on August 5, 2024. The pro forma basic and diluted weighted average shares outstanding are a combination of historical weighted average Scott’s Liquid Gold-Inc. shares and the share impact related to the Merger as follows:

 

 

 

Quarter Ended March 31, 2024

 

 

Year Ended December 31, 2023

 

Historic weighted average number of common shares outstanding

 

 

 

 

 

 

Basic and diluted (reported)

 

 

13,006

 

 

 

12,927

 

Impact of Reverse Stock Split (1-for-20)

 

 

(12,356

)

 

 

(12,281

)

Basic and diluted (pro forma)

 

 

650

 

 

 

646

 

 

 

 

 

 

 

 

Impact of the Merger on the weighted average number of common shares outstanding

 

 

 

 

 

 

Estimated net tangible assets of Horizon Kinetics, LLC

 

$

249,606

 

 

$

249,606

 

Value of operating business based on AUM

 

$

200,000

 

 

$

200,000

 

Total value of Horizon Kinetics

 

$

449,606

 

 

$

449,606

 

 

 

 

 

 

 

 

Merger Consideration (total value of Horizon Kinetics divided by 25)

 

 

17,984

 

 

 

17,984

 

 

 

 

 

 

 

 

Pro forma weighted average number of common shares outstanding

 

 

 

 

 

 

Basic and diluted

 

 

18,634

 

 

 

18,630

 

 

(i)
To record estimated fair value of cost of products sold.

 

 

 

 

6