NOTE 5. DISCONTINUED OPERATIONS

During July 2019, the Company was notified that judgments had been entered against the Company in favor of six holders of the Company’s convertible notes in the state of New York. Certain of these convertible noteholders sought to levy against the bank account of the Company’s former subsidiary, Benchmark, and filed an order directing the Company to turn over all Company’s assets. The Company’s failure to satisfy, vacate or stay these judgments constituted an event of default under the Credit Agreement. As a result, on October 10, 2019, the Company consented to a Proposal for Surrender of Collateral and Strict Foreclosure (the “Foreclosure Proposal”), from Lateral, Lateral Builders LLC (“Lateral Builders”) and Benchmark Holdings, LLC (“Benchmark Holdings” and together with Lateral Recovery LLC (“Lateral Recovery”), the (“Foreclosing Lenders”)), pursuant to which the Lenders took possession and ownership of the Subject Collateral (see below) by means of a strict foreclosure by the Foreclosing Lenders (the “Benchmark Foreclosure”).

On October 10, 2019, pursuant to the Foreclosure Proposal, the Company transferred: (i) to Benchmark Holdings all of its (a) equity interests in Benchmark, the Company’s principal operating subsidiary, and (b) cash on hand in excess of levels specified in the Foreclosure Proposal; and, (ii) to Lateral Recovery, all of the Credit Parties’ interests in certain commercial tort litigation claims, fraud claims, and insurance claims as specified in the Foreclosure Proposal. Accordingly, a total of $56,156 in Lateral Existing Term Loans and the Super Senior Term Loan principal and interest, as well as $6,416 in unamortized deferred finance costs, was removed from the Company books. See Note 13.

As a result of the actions taken in accordance with the Foreclosure Proposal, on October 10, 2019, the Company removed the debts and its investment in its wholly-owned subsidiary Benchmark of $44,262 and recognized a gain on the foreclosure of $31,538.

The disposition of Benchmark qualified as discontinued operations, as it represented a significant strategic shift of the Company’s operations and financial results. In addition, the operations and cash flows of Benchmark could be distinguished, operationally and for financial reporting purposes, from the rest of the Company.

The historical balance sheet and statements of operations of the Benchmark business have been presented as discontinued operations in the consolidated financial statements for periods prior to the foreclosure. Discontinued operations include the results of Benchmark, except for certain allocated corporate overhead costs and certain costs associated with transition services provided by the Company to Benchmark. Certain of these previously allocated costs remain part of continuing operations.

The carrying amounts of the major classes of assets and liabilities of the Company’s discontinued operations as of December 31, 2018 were as follows:

The operating results of the Company’s discontinued operations through the date of the foreclosure are as follows:

The significant operating and investing cash and noncash items of the discontinued operations included in the Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018 were as follows: