The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes that appear elsewhere in this report. In this discussion and analysis, the term "common share" refers to the summation of ordinary voting common shares, restricted voting common shares and participative restricted stock units when used to describe earnings (loss) or book value per common share. All amounts are inU.S. dollars, except for amounts preceded by "C" as Canadian dollars, share and per share amounts. Forward-Looking Statements In addition to the historical consolidated financial information, this report contains "forward-looking statements," within the meaning of the Private Securities Litigation Reform Act of 1995, which may include, but are not limited to, statements with respect to estimates of future expenses, revenue and profitability; trends affecting financial condition, cash flows and results of operations; the availability and terms of additional capital; dependence on key suppliers and other strategic partners; industry trends; the competitive and regulatory environment; the successful integration of acquisitions; the impact of losing one or more senior executives or failing to attract additional key personnel; and other factors referenced in this report. Factors that could cause or contribute to these differences include those discussed below and elsewhere, particularly in the "Risk Factors" section of our Annual Report on Form 10-K for the year endedDecember 31, 2020 . Often, but not always, forward-looking statements can be identified by the use of words such as "plans," "expects," "is expected," "budget," "scheduled," "estimates," "forecasts," "intends," "anticipates," "believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may," "could," "would," "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Atlas to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, general business, economic, competitive, political, regulatory and social uncertainties. Although Atlas has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward-looking statements contained herein are made as of the date of this report, and Atlas disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results, or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements due to the inherent uncertainty in them. I. Company Overview We are a technology and analytics driven financial services holding company incorporated under the laws of theCayman Islands . Our primary business is generating, underwriting and servicing commercial automobile insurance policies inthe United States , with a niche market orientation and focus on insurance for the "light" commercial automobile sector. Our business currently focuses on a managing general agency strategy. Primarily through our wholly owned subsidiary,Anchor Group Management, Inc. ("AGMI"), we are focused on maintaining and recapturing business we have historically written in the taxi, livery/limo, paratransit and transportation network company sectors as well as generating new business that fits our current underwriting parameters. We are also actively pursuing additional programs in the "light" commercial auto space where we believe our expertise, infrastructure and insurance technology will enable us to increase scale and profitability, but there can be no assurance that these programs will materialize. We believe that the specialized infrastructure and technology platforms we have developed over the years to support our traditional business will enable us to provide comparative advantages as a managing general agency in other commercial auto segments. In particular, we believe our ability to efficiently manage large numbers of small or highly transactional accounts through our technology platform and workflows is a differentiator. We are also evaluating opportunities to leverage our optOnTM insuretech platform, which was developed to provide micro-duration commercial automobile insurance for gig-economy drivers via a proprietary mobile app based ecosystem. 22
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Table of Contents The sector on which we traditionally focused included taxi cabs, non-emergency para-transit, limousine, livery, including certain full-time transportation network company ("TNC") drivers/operators, and business auto. Our goal is to always be the preferred specialty insurance business in any markets where our value proposition delivers benefit to all stakeholders. AGMI distributes our products through a network of independent retail agents and actively wrote insurance in 41 states and theDistrict of Columbia during 2020. We embrace continuous improvement, analytics and technology as a means of building on the strong heritage our subsidiary companies cultivated in the niche markets we serve. Factors Affecting Our Results of Operations We generate commission revenue from selling insurance policies in the commercial auto markets on behalf of our insurance carrier partners, which compensate us through first year and renewal commissions. We use our proprietary technology and processes to generate and obtain consumer leads and allocate those leads to agents whom we believe are best suited for those consumers. As a result, one of the primary factors affecting our growth is our total number of agents, comprised of both existing core agents and the number of new agents that we contract to sell new policies. We view agents as a critical component of helping consumers through the purchasing process to enable them to identify the most appropriate coverage that suits their needs. Through our years of experience, we have expanded our recruiting efforts and enhanced our training programs, both of which have allowed us to expand our agent force. We have also developed proprietary technologies and processes that enable us to expand our lead acquisition efforts to maintain agent productivity. The amount of revenue we expect to recognize is based on multiple factors, including our commission rates with our insurance carrier partners and the market demand for the types of products we offer. The higher our submission volume and hit ratios on new policies and the higher our retention ratios on our renewal policies, the more revenue we expect to generate. Additionally, we may earn certain volume and underwriting profit based compensation from some unrelated risk taking partners, which can include a renewal rights component. Our goal is to maximize policyholder lifetime value by optimizing efficiency and scale, which starts by providing consumers with a transparent, valuable and best-in-class consumer experience by endeavoring to support our distribution channel effectively and providing insurance solutions that meet the specific needs of our customers. Recent Events InMarch 2020 , theWorld Health Organization formally declared the novel coronavirus ("COVID-19") outbreak a pandemic. With social distancing measures that have been implemented to curtail the spread of the virus, we enacted a robust business continuity plan, including a work-from-home policy for all our employees. We believe our technology platform and pre-existing remote agent capabilities have allowed for a seamless transition to a remote working environment and that our technology platforms continue to provide agents with tools and company contacts necessary to quote our products to our markets. COVID-19 has dramatically reduced the addressable market. At the time of filing, it is difficult to estimate the near and longer-term impact on market size and potential revenue, and the impact of COVID-19 on our customers appears to have resulted in an approximate reduction of trips and vehicles in operation in the range of 26% to as much as 70% as compared to the same periods of 2019. This directly impacts our revenue and the ability to generate new business. The Company's current strategy focuses on AGMI's managing general agency operation as the primary go-forward business. During 2019 and 2020, we worked with insurance regulators and advisors to evaluate and take steps intended to achieve the best outcome for stakeholders in connection with our Insurance Subsidiaries pursuant to regulatory actions. As a result of management no longer having financial control of the ASI Pool Companies, they have been deconsolidated from our results sinceOctober 1, 2019 while Global Liberty has been classified as discontinued operations sinceOctober 1, 2019 . The metrics discussed in the following MD&A have changed as a result of the deconsolidation of the ASI Pool Companies and classification of Global Liberty as a discontinued operation (see "Part I, Item 1, Note 17, Subsequent Events"). OnSeptember 1, 2021 , the Company and certain of its subsidiaries entered into a Convertible Senior Secured Delayed-Draw Credit Agreement and a Restructuring Support Agreement (see "Part I, Item 1, Note 14, Notes Payable") 23
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Table of Contents II. Operating Results Highlights •Commission income was$2.0 million for the three months endedSeptember 30, 2021 , an increase of 22.2% from$1.7 million for the three months endedSeptember 30, 2020 . •Net realized losses were$1.5 million for the three months endedSeptember 30, 2021 which related to the impairment charge on the Company's corporate headquarters. There were no impairment charges for the three months endedSeptember 30, 2020 . •Total revenue, including the impact of net realized losses, was$1.8 million for the three months endedSeptember 30, 2021 , a decrease of 12.6% from$2.0 million for the three months endedSeptember 30, 2020 . •Loss from operating activities was$3.3 million in third quarter 2021 compared to a loss from operating activities of$3.5 million in third quarter 2020. •Net loss from continuing operations was$4.1 million , or$0.28 per common share diluted, in third quarter 2021 compared to a net loss from continuing operations of$3.6 million , or$0.30 loss per common share diluted, in third quarter 2020. •Net income from discontinued operations was$14,000 , or$0.00 earnings per common share diluted, in third quarter 2021 compared to net income from discontinued operations of$39,000 , or$0.00 earnings per common share diluted, in third quarter 2020.
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