BUSINESS COMBINATIONS

6 Months Ended

Jun. 30, 2011

BUSINESS COMBINATIONS [Abstract]

BUSINESS COMBINATIONS

NOTE 4 - BUSINESS COMBINATIONS

On February 18, 2011, Cosmed, a newly-formed subsidiary of Signature, acquired certain assets and assumed certain of the liabilities of Costru Company, LLC (“Costru”) for consideration totaling $2.7 million.  Cosmed, which does business under the trade name CosmedicineTM, manufactures a line of skin care products for women, which is available in retail stores across the country.  Signature currently owns 92% of the outstanding common stock of Cosmed, with the remaining 8% held by the former owners of Costru.

Under purchase accounting, the total purchase price was allocated to Costru's assets, identifiable intangible assets and liabilities based on their estimated fair values at the acquisition date. The estimated fair value of the noncontrolling interest was determined using a market value approach considering the fair values of the assets acquired and liabilities assumed, adjusted to account for the lack of control.

During the first quarter of 2011, the Company recorded acquisition-related costs of approximately $72 thousand, which are included in selling, general and administrative expenses in the Company's consolidated statement of operations for the six months ended June 30, 2011.

The following table presents the components of the purchase consideration and allocation of the purchase consideration to the estimated fair value of the assets acquired and liabilities assumed:

(Dollars in thousands)
Cash consideration	$	1,000
Assumption of debt		1,569
Noncontrolling interest		100
Total purchase consideration		2,669
Purchase price allocation:
Trade receivables		572
Inventories		1,350
Property and equipment		5
Identifiable intangible assets		1,225
Trade payables		(90	)
Deferred tax liabilities		(112	)
Net assets acquired		2,950
Gain on acquisition	$	281

The Company recorded a gain on acquisition of $0.3 million during the first quarter of 2011, based on the difference between the fair value of assets acquired and liabilities assumed and the total purchase consideration.  The gain recognized at the time of the acquisition resulted from depressed market conditions within the consumer products industry and Signature's ability to negotiate a purchase price below the estimated fair value of the net assets acquired.

In addition to the initial cash consideration, the Company is obligated to make an additional earn-out payment of up to $5.0 million, subject to a revenue target of $60.0 million in annualized revenues being achieved over any three month period within 36 months of the acquisition date, or if the Company sells Cosmed for at least $60.0 million during a specified time period, not to exceed 39 months from the acquisition date. At the acquisition date, management determined the fair value of this contingent consideration to be zero, based upon current and projected revenues over the requisite earn-out period.

The following table presents the estimated fair value of identifiable intangible assets and related estimated useful lives:

	Estimated		Useful Life
(Dollars in thousands)	Fair Value		(Years)
Identifiable intangible assets:
Product formulas	$	800		10.0
Trademarks		190		10.0
Customer lists		125		3.0
Domain names		100		3.0
Non-compete agreements		10		10.0
Identifiable intangible assets	$	1,225

Total amortization of intangible assets was $78 thousand and zero for the three months ended June 30, 2011 and 2010, respectively.  Total amortization of intangible assets was $0.1 million and zero for the six months ended June 30, 2011 and 2010, respectively.

At June 30, 2011, aggregate future amortization of identifiable intangible assets is estimated to be:

(Dollars in thousands)
2011	$	155
2012		193
2013		164
2014		109
2015		101
Thereafter		399
Total	$	1,121

The operating results of Cosmed are included in the Company's consolidated financial statements since the acquisition date.  For the period from the acquisition date through June 30, 2011, Cosmed's total revenues and net loss were $0.8 million and $0.5 million, respectively.

The following unaudited pro forma results of operations of the Company for the three and six months ended June 30, 2011 and 2010, give effect to this business combination as though the transaction occurred on January 1, 2010:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands)	2011			2010			2011			2010
Revenues:
As reported	$	568		$	80		$	1,269		$	175
Pro forma		568			1,236			1,817			1,673
Net loss attributable to Signature Group Holdings, Inc.:
As reported	$	(6,155	)	$	(11,621	)	$	(10,368	)	$	(21,977	)
Pro forma		(6,125	)		(11,559	)		(10,229	)		(22,285	)