ASSURANCEAMERICA CORP

CIK:0000008497|SEC Filings

Discontinued Operations

9 Months Ended

Sep. 30, 2012

(9) Discontinued Operations

On June 30, 2011, the Company sold its Georgia insurance agencies. The Company received $750,000 in cash and a promissory note receivable in the amount of $500,000 related to the sale. The note was fully paid in November 2011 at an interest rate of 8% per annum. The fair value of these assets was $1,693,255 and the Company recognized a pre-tax loss on disposal of $406,297. The pre-tax income on the discontinued operations for the Georgia agencies amounted to $98,599 as of December 31, 2011.

Effective July 2, 2011, the Company sold the stock of TrustWay T.E.A.M, Inc. and TrustWay T.E.A.M. Services, LLC. The Company received $280,000 in cash related to the sale. The fair value of these assets amounted to $461,252, resulting in a pre-tax loss on disposal of $181,452. The pre-tax income on the discontinued operations amounted to $122,942 for TrustWay T.E.A.M. as of December 31, 2011.

Effective July 31, 2011, the Company sold its Alabama insurance agencies. The Company received $75,000 in cash and a promissory note receivable in the amount of $225,000 related to the sale. The fair value of these assets was $560,485 and the Company recognized a pre-tax loss on disposal of $260,485. The pre-tax loss on the discontinued operations for the Alabama agencies amounted to $175,606 as of December 31, 2011. The principal amount payable is due in four consecutive installments of $45,000 on August 1, 2012 and 2013, with the remaining installments of $67,500 due on August 1, 2014 and 2015. The interest rate is 10% per annum and is payable on the unpaid balance on the last day of each quarter (April 30, July 31, October 31, and January 31) commencing with the first date of the note until the maturity date. The outstanding principal balance on the note receivable at September 30, 2012, was $180,000.

On September 30, 2011, the Company sold its Florida insurance agencies and received a total of $2,850,000 in cash and a $250,000 receivable related to a purchase price adjustment for certain expense savings. The fair value of these assets was $3,489,717 and the Company recognized a pre-tax loss on disposal in the amount of $389,717. The pre-tax loss on discontinued operations for the Florida agencies amounted to $1,438,153 as of December 31, 2011.

The assets, liabilities, revenues and operations of the aforementioned TrustWay businesses are classified as assets and liabilities of discontinued operations as summarized below.


	September 30, 2012		December 31, 2011
Assets
Cash and cash equivalents	$	8,736	$	95,563
Other		18,296		108,496

Assets of discontinued operations	$	27,032	$	204,059

Liabilities
Accounts payable and accrued expenses	$	50,056	$	595,014

Liabilities of discontinued operations	$	50,056	$	595,014

The operations of the aforementioned TrustWay businesses are classified as discontinued operations as summarized below:


	Nine Months Ended September 30,
	2012		2011
Revenues	$	0	$	4,632,321

Operations
Income (loss) from discontinued operations before income taxes	$	103,000	$	(1,075,974	)
Income tax benefit		0		403,491

Income (loss) from discontinued operations, net of taxes	$	103,000	$	(672,483	)

Disposal
Loss on disposal before income taxes	$	0	$	(1,237,951	)
Income tax expense		0		(568,901	)

Loss on disposal, net of taxes		0	$	(1,806,852	)

Income (loss) from discontinued operations, net of taxes	$	103,000	$	(2,479,335	)

On March 22, 2012, the Company entered into an agreement with an investment banker to assist in identifying strategic alternatives for the Company, including the potential sale of its wholly owned subsidiaries AAIC and MGA. The assets have been evaluated for impairment and none has been recorded as of September 30, 2012. AAIC and MGA represent substantially all of the operating assets of the Company and as such, are currently reflected as continuing operations in the consolidated financial statements ending September 30, 2012 and 2011. As of September 30, 2012, the total assets and liabilities of AAIC and MGA, eliminating intercompany balances, are $95.6 million and $89.3 million, respectively.

Supplemental Cash Flow Information

9 Months Ended

Sep. 30, 2012

Supplemental Cash Flow Information [Abstract]

Supplemental Cash Flow Information

(17) Supplemental Cash Flow Information


	Nine Months ended September 30,
	2012		2011
Cash paid
Interest	$	385,746	$	7,494
Income taxes	$	0	$	2,338

	2012		2011
Non-cash investing activities:
Change in unrealized gains and losses on investment securities, net of tax	$	141,438	$	(191,368	)
Note receivable from sale of TrustWay Georgia division	$	0	$	425,000

Consolidated Balance Sheets (USD $)	Sep. 30, 2012	Dec. 31, 2011
Assets
Cash and cash equivalents	$ 8,118,773	$ 7,733,287
Cash restricted	172,963	254,222
Short-term investments	125,346	125,008
Long-term investments, at fair value (amortized cost $7,326,035 and $7,831,560)	7,608,530	7,886,617
Other long-term investments	488,537	600,435
Investment income due and accrued	68,008	63,533
Real estate mortgage loans due from a related party	4,000,000	4,000,000
Receivable from insureds	22,792,383	25,132,462
Reinsurance recoverable (including $7,988,199 and $9,114,187 on paid losses)	28,716,629	36,664,396
Prepaid reinsurance premiums	19,145,185	19,466,923
Deferred acquisition costs	1,183,587	1,928,401
Property and equipment (net of accumulated depreciation of $4,040,401 and $3,847,396)	1,979,146	1,904,368
Other receivables	915,958	1,240,464
Prepaid expenses	388,725	450,080
Security deposits	36,333	33,833
Assets of discontinued operations	27,032	204,059
Total assets	95,767,135	107,688,088
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses	5,364,835	6,376,418
Unearned premium	26,252,145	28,101,244
Unpaid losses and loss adjustment expenses	34,466,484	42,098,263
Reinsurance payable	20,492,374	20,538,203
Provisional commission reserve	2,643,119	2,453,125
Funds withheld from reinsurers	243,618	325,000
Liabilities of discontinued operations	50,056	595,014
Notes payable due to a related party	1,819,563	1,557,911
Other notes and interest payable	43,999	116,956
Total liabilities	91,376,193	102,162,134
Commitments and Contingencies
Common stock, $.01 par value (authorized 120,000,000 and outstanding 66,110,531 and 65,810,531)	661,105	658,105
Paid in capital	20,847,032	20,618,146
Accumulated deficit	(17,293,044)	(15,784,708)
Accumulated other comprehensive income	175,849	34,411
Total stockholders' equity	4,390,942	5,525,954
Total liabilities and stockholders' equity	$ 95,767,135	$ 107,688,088