RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

On June 13, 2019, the Audit Committee of the Board of Directors of the Company concluded, after review and discussion with management, that the Company's audited consolidated financial statements for the year ended December 31, 2017 should no longer be relied upon. On February 26, 2020, the Audit Committee of the Board of Directors of the Company concluded, after further review and discussion with management following the completion of the Company’s audit for the year ended December 31, 2018, that the Company's consolidated financial statements for the year ended December 31, 2017 should be further restated as a result of additional error corrections identified subsequent to June 13, 2019.

The Company has restated its previously reported consolidated financial statements as of and for the year ended December 31, 2017. The restatements reflect corrections of errors identified in connection with the preparation of the consolidated financial statements for the year ended December 31, 2018, and relate primarily to i) the reclassification of certain investments acquired from Mendota on October 18, 2018 from assets held for sale to equity investments, limited liability investments, limited liability investments, at fair value and other investments in the consolidated balance sheet; and the reclassification of investment income, related to these investments, from loss from discontinued operations, net of taxes to net investment income in the consolidated statement of operations ("Error 1"); ii) the consolidation of certain limited liability investments that had previously been accounted for under the equity method of accounting ("Error 2"); and iii) the reclassification from cash and cash equivalents to restricted cash in the consolidated balance sheets ("Error 3"). For the year ended December 31, 2017, correcting these errors increased the Company’s net loss by $0.3 million. The cumulative effect of correcting these errors increased previously reported shareholders' equity by $4.2 million as a result of recording noncontrolling interests in consolidated subsidiaries.

Along with restating our financial statements as of and for the year ended December 31, 2017 to correct the errors discussed above, the Company has recorded certain immaterial accounting adjustments related to the periods covered by this 2018 Annual Report. For the year ended December 31, 2017, recording these certain immaterial accounting adjustments increased the Company’s net loss by $0.2 million. The cumulative effect of recording these certain immaterial accounting adjustments increased previously reported shareholders' equity by $2.7 million. Refer to the notes under the tables below for descriptions of these immaterial accounting adjustments.

In addition to these items, certain other amounts have been reclassified in the consolidated balance sheet to conform to current year presentation. Such reclassifications had no impact on previously reported total shareholders' equity.

The following table presents the effects of the error corrections, immaterial accounting adjustments and reclassifications on the Company’s consolidated balance sheet at December 31, 2017:



(in thousands)													December 31, 2017
	As Previously Reported in Exhibit 99.2 to the Form 8-K filed November 7, 2018			Correction of Error 1			Correction of Error 2			Correction of Error 3			Immaterial Accounting Adjustments and Reclassifications				As Restated
Assets:
Investments:
Fixed maturities, at fair value	$	14,541		$	—		$	—		$	—		$	—			$	14,541
Equity investments, at fair value	4,476			113			—			—			—				4,589
Limited liability investments	4,922			6,113			(1,091		)	—			(850		)	(a)	9,094
Limited liability investments, at fair value	5,771			4,545			21,895			—			—				32,211
Investments in private companies, at adjusted cost	—			—			4,020			—			850			(a)	4,870
Real estate investments, at fair value	—			—			10,662			—			—				10,662
Other investments, at cost which approximates fair value	2,321			1,400			—			—			—				3,721
Short-term investments, at cost which approximates fair value	151			—			—			—			—				151
Total investments	32,182			12,171			35,486			—			—				79,839
Cash and cash equivalents	20,774			—			310			(14,985		)	(722		)	(b)	5,377
Restricted cash	—			—			—			14,985			—				14,985
Investment in investee	5,230			—			—			—			—				5,230
Accrued investment income	331			—			176			—			—				507
Service fee receivable	4,286			—			—			—			145			(c)	4,431
Other receivables	6,536			—			(48		)	—			759			(b)	7,247
Deferred acquisition costs, net	6,325			—			—			—			—				6,325
Property and equipment	108,008			—			—			—			—				108,008
Goodwill	80,112			—			—			—			731			(d)	80,843
Intangible assets	80,062			—			—			—			(616		)	(d)	79,446
Other assets	4,302			—			—			—			—				4,302
Assets held for sale	136,452			(12,171		)	(14,136		)	—			—				110,145
Total Assets	$	484,600		$	—		$	21,788		$	—		$	297			$	506,685
Liabilities and Shareholders' Equity

Liabilities:
Accrued expenses and other liabilities	$	10,924		$	—		$	432		$	—		$	(997	)	(b), (c), (e), (f)	$	10,359
Income taxes payable	2,644			—			—			—			—				2,644
Deferred service fees	42,257			—			—			—			(1,144		)	(b), (g)	41,113
Unpaid loss and loss adjustment expenses	1,329			—			—			—			—				1,329
Bank loan	4,917			—			—			—			—				4,917
Notes payable	186,469			—			17,179			—			—				203,648
Subordinated debt, at fair value	52,105			—			—			—			—				52,105
Net deferred income tax liabilities	28,745			—			—			—			18			(d)	28,763
Liabilities held for sale	105,900			—			—			—			—				105,900
Total Liabilities	435,290			—			17,611			—			(2,123		)		450,778

Redeemable Class A preferred stock	5,461			—			—			—			(281		)	(e)	5,180

Shareholders' Equity:
Common stock	—			—			—			—			—				—
Additional paid-in capital	356,021			—			—			—			150			(e)	356,171
Accumulated deficit	(313,487		)	—			(51		)	—			2,585			(c), (d), (e), (f), (g)	(310,953		)
Accumulated other comprehensive loss	(3,852		)	—			—			—			—				(3,852		)
Shareholders' equity attributable to common shareholders	38,682			—			(51		)	—			2,735				41,366



Noncontrolling interests in consolidated subsidiaries	5,167		—		4,228		—		(34		)	(c), (g)	9,361
Total Shareholders' Equity	43,849		—		4,177		—		2,701				50,727
Total Liabilities, Class A preferred stock and Shareholders' Equity	$	484,600	$	—	$	21,788	$	—	$	297			$	506,685

The following table presents the effects of the error corrections, immaterial accounting adjustments and reclassifications on the Company’s consolidated statement of operations for the year ended December 31, 2017:



(in thousands)	December 31, 2017
	As Previously Reported in Exhibit 99.2 to the Form 8-K filed November 7, 2018			Correction of Error 1			Correction of Error 2			Correction of Error 3		Immaterial Accounting Adjustments and Reclassifications				As Restated

Revenues:
Service fee and commission income	$	30,807		$	—		$	—		$	—	$	(277	)	(c), (g)	$	30,530
Rental income	13,384			—			—			—		—				13,384
Other income	684			—			—			—		—				684
Total revenues	44,875			—			—			—		(277		)		44,598
Operating expenses:
Claims authorized on vehicle service agreements	5,327			—			—			—		—				5,327
Loss and loss adjustment expenses	404			—			—			—		—				404
Commissions	3,086			—			—			—		—				3,086
Cost of services sold	6,535			—			—			—		—				6,535
General and administrative expenses	27,038			—			305			—		(32		)	(e)	27,311
Leased real estate segment interest expense	6,264			—			—			—		—				6,264
Total operating expenses	48,654			—			305			—		(32		)		48,927
Operating loss	(3,779		)	—			(305		)	—		(245		)		(4,329		)
Other revenues (expenses), net:
Net investment income	968			1,249			4,529			—		341			(a)	7,087
Net realized gains	306			—			—			—		—				306
Gain on change in fair value of limited liability investments, at fair value	—			(45		)	(1,446		)	—		(341		)	(a)	(1,832		)
Net change in unrealized loss on private company investments	—			—			(758		)	—		—				(758		)
Non-operating other income	697			—			(69		)	—		(23		)	(f)	605
Interest expense not allocated to segments	(4,977		)	—			(1,371		)	—		—				(6,348		)
Amortization of intangible assets	(1,152		)	—			—			—		67			(d)	(1,085		)
Contingent consideration benefit	212			—			—			—		—				212
Loss on change in fair value of debt	(8,487		)	—			—			—		—				(8,487		)
Equity in net income of investee	2,115			—			—			—		—				2,115
Total other revenues (expenses), net	(10,318		)	1,204			885			—		44				(8,185		)
(Loss) income from continuing operations before income tax (benefit) expense	(14,097		)	1,204			580			—		(201		)		(12,514		)
Income tax (benefit) expense	(16,694		)	—			—			—		6			(d)	(16,688		)
Income (loss) from continuing operations	2,597			1,204			580			—		(207		)		4,174
Loss on liquidation of subsidiary, net of taxes	(494		)	—			—			—		—				(494		)
Loss from discontinued operations, net of taxes	(14,252		)	(1,204		)	(850		)	—		—				(16,306		)
Gain on disposal of discontinued operations, net of taxes	1,017			—			—			—		—				1,017
Net loss	(11,132		)	—			(270		)	—		(207		)		(11,609		)
Less: net income (loss) attributable to noncontrolling interests in consolidated subsidiaries	4,337			—			(219		)	—		(33		)	(c), (g)	4,085
Less: dividends on preferred stock, net of tax	350			—			—			—		898			(e)	1,248
Net (loss) income attributable to common shareholders	$	(15,819	)	$	—		$	(51	)	—		$	(1,072	)		$	(16,942	)
(Loss) earnings per share - continuing operations:
Basic:	$	(0.10	)	$	0.06		$	0.04		$	—	$	(0.05	)		$	(0.05	)
Diluted:	$	(0.10	)	$	0.06		$	0.04		$	—	$	(0.05	)		$	(0.05	)
Loss per share - discontinued operations:
Basic:	$	(0.64	)	$	(0.09	)	$	(0.04	)	$	—	$	—			$	(0.77	)
Diluted:	$	(0.64	)	$	(0.09	)	$	(0.04	)	$	—	$	—			$	(0.77	)
Loss per share – net loss attributable to common shareholders:
Basic:	$	(0.73	)	$	(0.01	)	$	—		$	—	$	(0.05	)		$	(0.79	)
Diluted:	$	(0.73	)	$	(0.01	)	$	—		$	—	$	(0.05	)		$	(0.79	)



Weighted average shares outstanding (in ‘000s):
Basic:	21,547	—	—	—	—	21,547
Diluted:	21,547	—	—	—	—	21,547

The following table presents the effects of the error corrections, immaterial accounting adjustments and reclassifications on the Company’s consolidated statement of cash flows for the year ended December 31, 2017:



(in thousands)	Year ended December 31, 2017
	As Previously Reported in Exhibit 99.2 to the Form 8-K filed November 7, 2018			Correction of Error 1			Correction of Error 2			Correction of Error 3		Immaterial Accounting Adjustments and Reclassifications				As Restated
Cash provided by (used in):
Operating activities:
Net loss	$	(11,132	)	$	—		$	(270	)	$	—	$	(207	)	(c), (d), (g), (f), (g)	$	(11,609	)
Adjustments to reconcile net loss income to net cash (used in) provided by operating activities:							—			—
Loss from discontinued operations, net of taxes	14,252			1,204			850			—		—				16,306
Gain on disposal of discontinued operations, net of taxes	(1,017		)	—			—			—		—				(1,017		)
Equity in net income of investee	(2,115		)	—			—			—		—				(2,115		)
Equity in net income of limited liability investments	(685		)	(1,249		)	383			—		—				(1,551		)
Loss on change in fair value of limited liability investment	632			45			—			—		(677		)	(a)	—
Depreciation and amortization expense	5,457			—			—			—		(67		)	(d)	5,390
Contingent consideration benefit	(212		)	—			—			—		—				(212		)
Stock-based compensation expense, net of forfeitures	1,186			—			—			—		—				1,186
Net realized gains	(306		)	—			—			—		—				(306		)
Loss on change in fair value of limited liability investments, at fair value	—			—			1,446			—		386			(a)	1,832
Net change in unrealized loss on private company investments	—			—			758			—		—				758
Loss on change in fair value of debt	8,487			—			—			—		—				8,487
Deferred income taxes	(17,322		)	—			—			—		6			(d)	(17,316		)
Amortization of fixed maturities premiums and discounts	95			—			—			—		—				95
Amortization of note payable premium	(960		)	—			—			—		—				(960		)
Loss on liquidation of subsidiary	494			—			—			—		—				494
Changes in operating assets and liabilities:							—			—
Service fee receivable, net	(1,544		)	—			—			—		(145		)	(c)	(1,689		)
Other receivables, net	(3,187		)	—			20			—		68			(b)	(3,099		)
Deferred acquisition costs, net	(498		)	—			—			—		—				(498		)
Unpaid loss and loss adjustment expenses	(873		)	—			—			—		—				(873		)
Deferred service fees	1,754			—			—			—		76			(b), (g)	1,830
Other, net	(2,331		)	—			(3,434		)	—		632			(b), (c), (e), (f), (a)	(5,133		)
Cash (used in) provided by operating activities - continuing operations	(9,825		)	—			(247		)	—		72				(10,000		)
Cash (used in) provided by operating activities - discontinued operations	(9,152		)	4,748			—			—		—				(4,404		)
Net cash (used in) provided by operating activities	(18,977		)	4,748			(247		)	—		72				(14,404		)
Investing activities:
Proceeds from sales and maturities of fixed maturities	1,756			—			—			—		—				1,756
Proceeds from sales of equity investments	3,754			—			—			—		—				3,754
Purchases of fixed maturities	(192		)	—			—			—		—				(192		)
Purchases of equity investments	(338		)	—			—			—		—				(338		)
Net acquisitions of limited liability investments	(8,910		)	—			1,121			—		—				(7,789		)
Purchases of limited liability investments, at fair value	—			—			(664		)	—		—				(664		)
Purchases of investments in private companies	—			—			(171		)	—		—				(171		)
Net proceeds from other investments	2,272			—			—			—		—				2,272
Net proceeds from short-term investments	250			—			—			—		—				250
Net proceeds from sale of discontinued operations	1,017			—			—			—		—				1,017
Acquisition of business, net of cash acquired	(7,929		)	—			—			—		—				(7,929		)
Net disposals of property and equipment and intangible assets	4,743			—			—			—		—				4,743



Cash (used in) provided by investing activities - continuing operations	(3,577		)	—			286			—		—				(3,291		)
Cash provided by (used in) investing activities - discontinued operations	28,140			(4,748		)	—			—		—				23,392
Net cash provided by (used in) investing activities	24,563			(4,748		)	286			—		—				20,101
Financing activities:
Proceeds from issuance of common stock, net	(47		)	—			—			—		—				(47		)
Contributions from noncontrolling interest holders	—			—			339			—		—				339
Principal proceeds from bank loan	4,917			—			—			—		—				4,917
Principal payments on note payable	(2,645		)	—			(392		)	—		—				(3,037		)
Cash provided by (used in) financing activities - continuing operations	2,225			—			(53		)	—		—				2,172
Cash provided by financing activities - discontinued operations	—			—			—			—		—				—
Net cash provided by (used in) financing activities	2,225			—			(53		)	—		—				2,172
Net (decrease) increase in cash and cash equivalents and restricted stock from continuing operations	(11,177		)	—			(14		)	—		72				(11,119		)
Cash and cash equivalents and restricted stock at beginning of period	36,475			—			325			—		(795		)	(b)	36,005
Less: cash and cash equivalents and restricted stock of discontinued operations at beginning of period	4,524			—			—			—		—				4,524
Cash and cash equivalents and restricted stock of continuing operations at beginning of period	31,951			—			325			—		(795		)	(b)	31,481
Cash and cash equivalents and restricted stock of continuing operations at end of period	$	20,774		$	—		$	311		$	—	$	(723	)		$	20,362


(a)	Reclassifications to conform to current presentation. Such reclassifications have no impact on previously reported net loss or total shareholders' equity.


(b)	Reclassifications as a result of misclassifications of amounts in a previous filing. Such reclassifications have no impact on previously reported net loss or total shareholders' equity.


(c)	Adjustments to Extended Warranty segment service fee receivable and accrued expenses and other liabilities, with offsetting adjustments to accrued expenses and other liabilities and service fee and commission income.

(d)

Adjustment to increase goodwill, with offsetting decreases to intangible assets, amortization of intangible assets and accumulated deficit, related to the Company's acquisition of Argo Management in 2016. Also includes the related tax impact of these adjustments, resulting in an increase to net deferred income tax liabilities, with offsetting decreases to income tax benefit and accumulated deficit.

(e)

Adjustment to decrease redeemable Class A preferred stock, with an offsetting increase to additional paid-in capital and an offsetting decrease to general and administrative expenses related to the Company’s issuance of Class A preferred stock and Class C Warrants on February 3, 2014. Also includes the related reclassifications of accrued dividends on equity-classified warrants from accrued expenses and other liabilities to redeemable Class A preferred stock and dividend expense from accumulated deficit to additional paid-in-capital.


(f)	Adjustments to accrued expenses and other liabilities, with offsetting adjustments to non-operating other income and accumulated deficit, related to escheat liability.


(g)	Adjustment to decrease Extended Warranty deferred service fees, with an offsetting increase to service fee and commission income.