ACQUISITION AND DISCONTINUED OPERATIONS

(a) Acquisition

Geminus Holdings Company, Inc.:

On March 1, 2019, the Company acquired 100% of the outstanding shares of Geminus Holding Company, Inc. ("Geminus") for total consideration of $8.4 million, comprised of $7.7 million of cash and an installment payable to the seller of $0.7 million due February 15, 2020. The payable to seller was paid in full by February 15, 2020. At June 30, 2019, the balance of the payable to seller was $0.2 million. As further discussed in Note 20, "Segmented Information," Geminus is included in the Extended Warranty segment. Geminus is a specialty, full-service provider of vehicle service agreements and other finance and insurance products to used car buyers around the country. Geminus, headquartered in Wilkes-Barre, Pennsylvania, has been creating, marketing and administering these products on high-mileage used cars through its subsidiaries, The Penn Warranty Corporation ("Penn") and Prime Auto Care, Inc. ("Prime"), since 1988. Penn and Prime distribute these products via independent used car dealerships and franchised car dealerships, respectively. This acquisition allows the Company to grow its portfolio of warranty companies and further expand into the vehicle service agreement business.

This acquisition was accounted for as a business combination using the acquisition method of accounting. The purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. Goodwill of $7.4 million was recognized, and $5.7 million of separately identifiable intangible assets were recognized resulting from the valuations of acquired customer relationships and trade names. Refer to Note 9, "Intangible Assets," for further disclosure of the intangible assets related to this acquisition. The goodwill represents the premium paid over the fair value of the net tangible and intangible assets acquired, which the Company paid to grow its portfolio of warranty companies and acquire an assembled workforce. The goodwill is not deductible for tax purposes. During the three months ended June 30, 2019 and June 30, 2018, the Company incurred acquisition-related expenses of zero and $0.0 million, respectively, ($0.0 million year to date compared to $0.0 million prior year to date), which are included in general and administrative expenses in the consolidated statements of operations.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:



(in thousands)
	March 1, 2019
Investments	$	4,405
Cash and cash equivalents	755
Restricted cash	2,650
Accrued investment income	32
Service fee receivable	513
Other receivables	12
Property and equipment, net	79
Goodwill	7,445
Intangible assets not subject to amortization - trade names	1,974
Intangible asset subject to amortization - customer relationships	3,732
Other assets	620
Total assets	$	22,217

Accrued expenses and other liabilities	$	2,018
Income taxes payable	1
Deferred service fees	10,564
Net deferred income tax liabilities	1,263
Total liabilities	$	13,846

Purchase price	$	8,371

The consolidated statements of operations include the earnings of Geminus from the date of acquisition. From the date of acquisition through June 30, 2019, Geminus earned revenue of $3.7 million and net income of $0.6 million. The following unaudited pro forma summary presents the Company's consolidated financial statements for the three and six months ended June 30, 2019 and June 30, 2018 as if Geminus had been acquired on January 1, 2018. The pro forma summary is presented for illustrative purposes only and does not purport to represent the results of our operations that would have actually occurred had the acquisition occurred on January 1, 2018 or project our results of operations as of any future date or for any future period, as applicable.



(in thousands, except per share data)	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019		2018
Revenues	$	15,226		$	15,218		$	30,491	$	30,982
(Loss) income from continuing operations attributable to common shareholders	$	(906	)	$	(5,357	)	$	676	$	(8,874	)
Basic (loss) earnings per share - continuing operations	$	(0.04	)	$	(0.25	)	$	0.03	$	(0.41	)
Diluted (loss) earnings per share - continuing operations	$	(0.04	)	$	(0.25	)	$	0.03	$	(0.41	)

(b) Discontinued Operations

Mendota Insurance Company, Mendakota Insurance Company and Mendakota Casualty Company:

On July 16, 2018, the Company announced it had entered into a definitive agreement to sell its non-standard automobile insurance companies Mendota Insurance Company, Mendakota Insurance Company and Mendakota Casualty Company (collectively "Mendota"). On October 18, 2018, the Company completed the previously announced sale of Mendota. As a result of this announcement, Mendota, which was previously disclosed as part of the Insurance Underwriting segment, has been classified as a discontinued operation, and the results of their operations are reported separately for all periods presented. The Company recognized a loss on disposal of Mendota of $8.0 million in the second quarter of 2018 as a result of adjusting the net carrying value of Mendota to be equal to the estimated purchase price. For the year ended December 31, 2018, the Company recognized a loss on disposal of Mendota of $8.5 million.

The final aggregate purchase price of $28.6 million was redeployed primarily to acquire equity investments, limited liability investments, limited liability investment, at fair value and other investments, which were owned by Mendota at the time of the closing, and to fund $5.0 million into an escrow account to be used to satisfy potential indemnity obligations under the definitive stock purchase agreement. As part of the transaction, the Company will indemnify the buyer for any loss and loss adjustment expenses with respect to open claims and certain specified claims in excess of Mendota's carried unpaid loss and loss adjustment expenses at June 30, 2018. The maximum obligation to the Company with respect to the open claims is $2.5 million. There is no maximum obligation to the Company with respect to the specified claims. During the first quarter of 2019, Mendota settled one of the two specified claims for $0.5 million, resulting in no loss to the Company. During the fourth quarter of 2019, Mendota notified the Company that Mendota had entered into an agreement to settle the remaining specified claim. The Company estimates it will incur a net loss of approximately $1.6 million related to the settlement of the remaining specified claim, which the Company will report in its consolidated statement of operations for the year ended December 31, 2019. The $1.6 million settlement was funded from the $5.0 million escrow account, and the $3.4 million remaining in the escrow account was released to the Company during the first quarter of 2020 consistent with the terms of the escrow agreement.

Assigned Risk Solutions Ltd:

On April 1, 2015, the Company closed on the sale of its subsidiary, Assigned Risk Solutions Ltd. ("ARS"). The terms of the sale provided for receipt by the Company of future earnout payments equal to 1.25% of ARS' written premium and fee income during the earnout periods. The earnout payments were payable in three annual installments beginning in April 2016 through April 2018. During the second quarter of 2018, the Company received cash consideration, before expenses, of $1.7 million for the third annual installment earnout payment. Net of expenses, the Company recorded an additional gain on disposal of ARS of $1.3 million for the three and six months ended June 30, 2018, respectively. As a result of the sale, ARS, previously disclosed as part of the Extended Warranty segment, has been classified as a discontinued operation.

Summary financial information for Mendota and ARS included in income from discontinued operations, net of taxes in the statements of operations for the three and six months ended June 30, 2018 is presented below:



(in thousands)	Three months ended June 30,			Six months ended June 30,
	2018			2018
Income (loss) from discontinued operations, net of taxes:
Revenues:
Net premiums earned	$	22,956		$	51,592
Total revenues	22,956			51,592
Other revenues (expenses), net:
Loss and loss adjustment expenses	(18,927		)	(41,728		)
Commissions and premium taxes	(2,225		)	(6,388		)
General and administrative expenses	(3,825		)	(7,778		)
Net investment income	208			434
Net realized losses	(134		)	(134		)
Gain on change in fair value of equity investments	96			106
Other income	2,445			4,876
Total other revenue (expenses), net	(22,362		)	(50,612		)
Income from discontinued operations before income tax benefit	594			980
Income tax benefit	—			—
Income from discontinued operations, net of taxes	594			980
Loss on disposal of discontinued operations before income tax expense	(6,628		)	(6,628		)
Income tax expense	—			—
Loss on disposal of discontinued operations, net of taxes	(6,628		)	(6,628		)
Total loss from discontinued operations, net of taxes	$	(6,034	)	$	(5,648	)