usac20160831

[ X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________________ to _________________________________

US ALLIANCE CORPORATION
(Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes [X] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One)

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ]Yes [X] No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

	Nine Months Ended September 30,
	2016			2015
Cash Flows from Operating Activities:
Net loss	$	(1,120,789	)	$	(832,400	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		29,074			21,028
Net realized losses (gains) on the sale of securities		(40,653	)		849
Amortization of investment securities, net		12,406			12,160
Deferred acquisition costs capitalized		(182,537	)		(105,045	)
Deferred acquisition costs amortized		128,540			83,791
Interest credited on deposit type contracts		49,395			20,333
(Increase) decrease in operating assets:
Investment income due and accrued		3,097			(10,243	)
Reinsurance related assets		(51,893	)		(12,443	)
Pre-paid expenses		96,207			(118,034	)
Other assets		(4,854	)		5,818
Increase (decrease) in operating liabilities:
Policyowner benefit reserves		1,497,064			810,785
Advance premiums		41,297			29,220
Other liabilities		73,434			378,928
Accounts payable and accrued expenses		(16,609	)		(13,669	)
Net cash provided by operating activities		513,179			271,078

Cash Flows from Investing Activities:
Available-for-sale securities
Purchase of fixed income investments		(2,624,560	)		(1,960,485	)
Purchase of equity investments		(1,210,646	)		(1,497,703	)
Proceeds from fixed income sales and repayments		573,590			314,322
Proceeds from equity sales and repayments		190,583			104,137
Purchase of property, equipment and software		-			(24,524	)
Net cash (used in) investing activities		(3,071,033	)		(3,064,253	)

Cash Flows from Financing Activities:
Receipts on deposit-type contracts		1,485,628			670,750
Withdrawals on deposit-type contracts		(170,906	)		(34,278	)
Proceeds received from exercise of warrants, net of costs of issuance		1,783,835			3,528,835
Net cash provided by financing activities		3,098,557			4,165,307

Net increase in cash and cash equivalents		540,703			1,372,132

Cash and Cash Equivalents:
Beginning		2,466,526			575,005
Ending	$	3,007,229		$	1,947,137

Note 1. Description of Business and Significant Accounting Policies

Description of business: US Alliance Corporation (“the Company”) is a Kansas corporation located in Topeka, Kansas. The Company was incorporated April 24, 2009, as a holding company to form, own, operate and manage a life insurance company and its marketing and investment affiliates. On June 9, 2011, the wholly owned subsidiary, US Alliance Life and Security Company was incorporated. US Alliance Life and Security Company received its Certificate of Authority from the Kansas Insurance Department (KID) effective January 2, 2012. On April 23, 2012, US Alliance Investment Corporation and US Alliance Marketing Corporation were incorporated as wholly-owned subsidiaries of the Company to provide investment management and marketing services.

The Company terminated its initial public offering on February 24, 2013. During the balance of 2013, the Company achieved approval of an array of life insurance and annuity products, began development of various distribution channels and commenced insurance operations and product sales. The Company sold its first insurance product on May 1, 2013. The Company continued to expand its product offerings and distribution channels throughout 2014 and 2015. On February 24, 2015, the Company commenced a warrant exercise offering set to expire on February 24, 2016. On February 24, 2016, the Company extended its current offering until February 24, 2017 and made additional shares available for purchase. All outstanding warrants expired on April 1, 2016.

The Company began offering third party administrative (“TPA”) services in 2015. TPA agreements generate service fee income for the Company. The Company currently has one TPA agreement in place. The Company has been able to perform its TPA services using existing resources.

Basis of presentation: The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting primarily of normal recurring accruals) considered necessary for a fair presentation of the results for the interim periods have been included.

The results of operation for the three and nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the year ended December 31, 2016 or for any other interim period or for any other future year. Certain financial information which is normally included in notes to financial statements prepared in accordance with US GAAP, but which are not required for interim reporting purposes, has been condensed or omitted. The accompanying financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company’s report on Form 10 and amendments thereto for the year ended December 31, 2015.

Principles of consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated from the consolidated financial statements.

Area of Operation: US Alliance Life and Security Company is authorized to operate in the states of Kansas, North Dakota and Missouri.

Common stock and earnings (loss) per share: The par value for common stock is $0.10 per share with 9,000,000 shares authorized. As of September 30, 2016 and December 31, 2015, the company had 5,554,134 and 5,177,245 common shares issued and outstanding, respectively.

Earnings (loss) per share attributable to the Company’s common stockholders were computed based on the net loss and the weighted average number of shares outstanding during each year. The weighted average number of shares outstanding during the quarters ended September 30, 2016 and 2015 were 5,552,277 and 4,690,797 shares, respectively. The weighted average number of shares outstanding during the nine months ended September 30, 2016 and 2015 were 5,395,456 and 4,350,844 shares, respectively. Potential common shares are excluded from the computation when their effect is anti-dilutive. Basic and diluted net loss per common share is the same for the quarters and nine months ended September 30, 2016 and 2015 because all warrants for common shares are anti-dilutive.

US Alliance Corporation

Notes to Consolidated Financial Statements (unaudited)

As of December 31, 2015, the Company had a stock subscription receivable of $827,952. This represents the value of share purchases agreed to but which will settle after the statement date. There was no such subscription receivable balance as of September 30, 2016.

New accounting standards

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (“FASB”) issued updated guidance to clarify the principles for recognizing revenue. While insurance contracts are not within the scope of this updated guidance, the Company's fee income related to providing services will be subject to this updated guidance. The updated guidance requires an entity to recognize revenue as performance obligations are met, in order to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration the entity is entitled to receive for those goods or services.

The following steps are applied in the updated guidance: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when, or as, the entity satisfies a performance obligation.

In July 2015, the FASB deferred the effective date of the updated guidance on revenue recognition by one year to the quarter ending March 31, 2018. The adoption of this guidance is not expected to have a material effect on the Company’s result of operations, financial position or liquidity.

Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern

In August 2014, the FASB issued guidance to address the diversity in practice in determining when there is substantial doubt about an entity's ability to continue as a going concern and when an entity must disclose certain relevant conditions and events. The new guidance requires an entity to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued). The new guidance allows the entity to consider the mitigating effects of management's plans that will alleviate the substantial doubt and requires certain disclosures when substantial doubt is alleviated as a result of consideration of management's plans.

If conditions or events raise substantial doubt that is not alleviated, an entity should disclose that there is substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued), along with the principal conditions or events that raise substantial doubt, management's evaluation of the significance of those conditions or events in relation to the entity's ability to meet its obligations and management's plans that are intended to mitigate those conditions.

The guidance is effective for annual periods ending after December 15, 2016, and interim and annual periods thereafter. The adoption of this guidance is not expected to have a material effect on the Company's results of operations, financial position or liquidity.

Recognition and Measurement of Financial Assets and Financial Liabilities

In January 2016, the FASB issued updated guidance regarding financial instruments. This guidance intends to enhance reporting for financial instruments and addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The significant amendments in this update generally require equity investments to be measured at fair value with changes in fair value recognized in net income, require the use of an exit price notion when measuring the fair value of financial instruments for disclosure purposes and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities. This guidance also intends to enhance the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments.

US Alliance Corporation

Notes to Consolidated Financial Statements (unaudited)

This guidance is effective for fiscal years beginning after December 15, 2017. The recognition and measurement provisions of this guidance will be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption and early adoption is not permitted. The Company is evaluating this guidance but expects the primary impact will be the recognition of unrealized gains and losses on available-for-sale equity securities in net income. Currently, all unrealized gains and losses on available-for-sale equity securities are recognized in other comprehensive income (loss).

The effect of the adoption of this guidance on the Company’s results of operations, financial position and liquidity is primarily dependent on the fair value of the available-for-sale equity securities in future periods and the existence of a deferred tax asset related to available-for-sale securities in future periods that have not yet been fully assessed.

Leases

In February 2016, the FASB issued updated guidance to require lessees to recognize a right-to-use asset and a lease liability for leases with terms of more than 12 months. The updated guidance retains the two classifications of a lease as either an operating or finance lease (previously referred to as a capital lease). Both lease classifications require the lessee to record the right-to-use asset and the lease liability based upon the present value of cash flows. Finance leases will reflect the financial arrangement by recognizing interest expense on the lease liability separately from the amortization expense of the right-to-use asset. Operating leases will recognize lease expense (with no separate recognition of interest expense) on a straight-line basis over the term of the lease. The accounting by lessors is not significantly changed by the updated guidance. The updated guidance requires expanded qualitative and quantitative disclosures, including additional information about the amounts recorded in the financial statements.

The updated guidance is effective for reporting periods beginning after December 15, 2018, and will require that the earliest comparative period presented include the measurement and recognition of existing leases with an adjustment to equity as if the updated guidance had always been applied. Early adoption is permitted. The adoption of this guidance is not expected to have a material effect on the Company’s results of operations, financial position or liquidity.

Contingent Put and Call Options in Debt Instruments

In March 2016, the FASB issued updated guidance clarifying that when a call (put) option in a debt instrument can accelerate the repayment of principal on the debt instrument, a reporting entity does not need to assess whether the contingent event that triggers the ability to exercise the call (put) option is related to interest rates or credit risk in determining whether the option should be accounted for separately. The updated guidance is effective for reporting periods beginning after December 15, 2016. Early adoption is permitted. The adoption of this guidance is not expected to have a material effect on the Company’s results of operations, financial position or liquidity.

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued updated guidance for the accounting for credit losses for financial instruments. The updated guidance applies a new credit loss model (current expected credit losses or CECL) for determining credit-related impairments for financial instruments measured at amortized cost (e.g. reinsurance recoverables) and requires an entity to estimate the credit losses expected over the life of an exposure or pool of exposures. The estimate of expected credit losses should consider historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. The expected credit losses, and subsequent adjustments to such losses, will be recorded through an allowance account that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented on the consolidated balance sheet at the amount expected to be collected.

The updated guidance also amends the current other-than-temporary impairment model for available-for-sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists.

The updated guidance is effective for reporting periods beginning after December 15, 2019. Early adoption is permitted for reporting periods beginning after December 15, 2018. The Company will not be able to determine the impact that the updated guidance will have on its results of operations, financial position or liquidity until the updated guidance is adopted.

Classification of Certain Cash Receipts and Cash Payment

In August 2016, the FASB issued new guidance that clarifies the classification of certain cash receipts and cash payments in the statement of cash flows under eight different scenarios including, but not limited to: (i) debt prepayment or debt extinguishment costs; (ii) proceeds from the settlement of corporate-owned life insurance policies including bank-owned life insurance policies; (iii) distributions received from equity method investees; and (iv) separately identifiable cash flows and application of the predominance principle. This guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its statement of cash flows.

All other new accounting standards and updates of existing standards issued through the date of this filing were considered by management and did not relate to accounting policies and procedures pertinent or material to the Company at this time.

Note 2. Investments

The amortized cost and fair value of available for sale and held to maturity investments as of September 30, 2016 and December 31, 2015 is as follows:

September 30, 2016

Cost or

Gross

Amortized

Unrealized

Cost

Gains

Losses

Fair Value

(unaudited)

Available for sale:

Fixed maturities:

US Treasury securities

313,778

7,075

320,853

Corporate bonds

3,829,016

146,421

(8,111

)

3,967,326

Municipal bonds

2,687,059

192,521

(647

)

2,878,933

Mortgage backed and asset backed securities

3,519,191

119,852

(2,914

)

3,636,129

Total fixed maturities

10,349,044

465,869

(11,672

)

10,803,241

Equities:

Equities

4,338,345

314,844

(86,124

)

4,567,065

Other equity investments

247,754

32,050

(894

)

278,910

Total equities

4,586,099

346,894

(87,018

)

4,845,975

Total available for sale

14,935,143

812,763

(98,690

)

15,649,216

	December 31, 2015
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Available for sale:
Fixed maturities:
US Treasury securities	$	461,132	$	-	$	(34,816	)	$	426,316
Corporate bonds		3,039,539		15,715		(143,701	)		2,911,553
Municipal bonds		1,726,098		28,634		(10,595	)		1,744,137
Mortgage backed and asset backed securities		3,083,390		19,554		(53,831	)		3,049,113
Total fixed maturities		8,310,159		63,903		(242,943	)		8,131,119
Equities:
Equities		3,387,927		219,883		(177,756	)		3,430,054
Other equity investments		137,778		36,436		-			174,214
Total equities		3,525,705		256,319		(177,756	)		3,604,268
Total available for sale	$	11,835,864	$	320,222	$	(420,699	)	$	11,735,387

The amortized cost and fair value of debt securities as of September 30, 2016, by contractual maturity, are shown below. Equity securities do not have stated maturity dates and therefore are not included in the following maturity summary. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized
	Cost		Fair Value
	(unaudited)
Amounts maturing in:
One year or less	$	49,879	$	49,925
After one year through five years		1,820,706		1,839,613
After five years through ten years		1,603,698		1,665,396
More than 10 years		3,355,570		3,612,178
Mortgage backed and asset backed securities		3,519,191		3,636,129
Total fixed maturities	$	10,349,044	$	10,803,241

US Alliance Corporation

Notes to Consolidated Financial Statements (unaudited)

Proceeds from the sale of securities, maturities, and asset paydowns for the first nine months of 2016 and 2015 were $764,173 and $418,459, respectively. Realized gains and losses related to the sale of securities are summarized as follows:

	Nine Months Ended September 30,
	(unaudited)
	2016			2015
Gross gains	$	42,719		$	7,793
Gross losses		(2,066	)		(8,642	)
Net security (losses) gains	$	40,653		$	(849	)

Proceeds from the sale of securities, maturities, and asset paydowns for the three months ended September 30, 2016 and 2015 were $204,422 and $192,032, respectively. Realized gains and losses related to the sale of securities for the three months ended September 30, 2016 and 2015 are summarized as follows:

	Three Months Ended September 30,
	(unaudited)
	2016		2015
Gross gains	$	29,889	$	7,691
Gross losses		-		(8,642	)
Net security (losses) gains	$	29,889	$	(951	)

Gross unrealized losses by duration are summarized as follows:

(unaudited)

Less than 12 months

Greater than 12 months

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

Value

Loss

Value

Loss

Value

Loss

September 30, 2016

Available for sale:

Fixed maturities:

Corporate bonds

860,155

(3,071

)

193,590

(5,040

)

1,053,745

(8,111

)

Municipal bonds

99,353

(647

)

99,353

(647

)

Mortgage backed and asset backed securities

23,436

(17

)

128,089

(2,897

)

151,525

(2,914

)

Total fixed maturities

982,944

(3,735

)

321,679

(7,937

)

1,304,623

(11,672

)

Equities:

Equities

536,449

(14,499

)

1,135,166

(71,625

)

1,671,615

(86,124

)

Other equity investments

56,665

(894

)

56,665

(894

)

Total equities

593,114

(15,393

)

1,135,166

(71,625

)

1,728,280

(87,018

)

Total available for sale

1,576,058

(19,128

)

1,456,845

(79,562

)

3,032,903

(98,690

)

	Less than 12 months					Greater than 12 months					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss
December 31, 2015
Available for sale:
Fixed maturities:
US Treasury securities	$	197,719	$	(1,351	)	$	228,597	$	(33,465	)	$	426,316	$	(34,816	)
Corporate bonds		2,141,253		(143,701	)		-		-			2,141,253		(143,701	)
Municipal bonds		675,885		(10,595	)		-		-			675,885		(10,595	)
Mortgage backed and asset backed securities		1,943,017		(39,189	)		438,173		(14,642	)		2,381,190		(53,831	)
Total fixed maturities		4,957,874		(194,836	)		666,770		(48,107	)		5,624,644		(242,943	)
Equities:
Equities		1,036,877		(75,352	)		820,370		(102,404	)		1,857,247		(177,756	)
Total equities		1,036,877		(75,352	)		820,370		(102,404	)		1,857,247		(177,756	)
Total available for sale	$	5,994,751	$	(270,188	)	$	1,487,140	$	(150,511	)	$	7,481,891	$	(420,699	)

Unrealized losses occur from market price declines that may be due to a number of factors, including economic downturns, changes in interest rates, competitive forces within an industry, issuer specific events, operational difficulties, lawsuits, and market pricing anomalies caused by factors such as temporary lack of liquidity.

US Alliance Corporation

Notes to Consolidated Financial Statements (unaudited)

The total number of securities in the investment portfolio in an unrealized loss position as of September 30, 2016 was 24, which represented an unrealized loss of $98,690 of the aggregate carrying value of those securities. The 24 securities breakdown as follows: 10 bonds, 3 mortgage and asset backed securities, 6 common stocks, 2 high yield corporate bond fund, 2 preferred stock index fund, and 1 senior loan fund. The total number of securities in the investment portfolio in an unrealized loss position as of December 31, 2015 was 70, which represented an unrealized loss of $420,699 of the aggregate carrying value of those securities. The 70 securities breakdown as follows: 36 bonds, 25 mortgage and asset backed securities, 5 common stocks, 2 high yield corporate bond fund, 1 preferred stock index fund, and 1 senior loan fund. The Company determined that no securities were considered to be other-than-temporarily impaired as of September 30, 2016 and December 31, 2015. The unrealized gains on the remainder of the available for sale portfolio as of September 30, 2016 and December 31, 2015 were $812,763 and $320,222, respectively.

Note 3. Fair Value Measurements

The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability. The Company uses a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

●

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement rate.

●

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The Company’s Level 2 assets and liabilities include fixed maturity securities with quoted prices that are traded less frequently than exchange-traded instruments or assets and liabilities whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes U.S. Government and agency mortgage-backed debt securities and corporate debt securities.

●

Level 3 inputs are unobservable for the asset or liability and reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Investments, available for sale: Investments in securities that are classified as available for sale are recorded at fair value utilizing Level 1 and Level 2 measurements.

US Alliance Corporation

Notes to Consolidated Financial Statements (unaudited)

The following table presents the amounts of assets measured at fair value on a recurring basis as of September 30, 2016 and December 31, 2015:

September 30, 2016 (unaudited)

Total

Level 1

Level 2

Level 3

Available for sale:

Fixed maturities:

US Treasury securities

320,853

Corporate bonds

3,967,326

Municipal bonds

2,878,933

Mortgage backed and asset backed securities

3,636,129

Total fixed maturities

10,803,241

320,853

10,482,388

Equities:

Equities

4,567,065

Other equity investments

278,910

Total equities

4,845,975

Total

15,649,216

5,166,828

10,482,388

	December 31, 2015
	Total		Level 1		Level 2		Level 3
Available for sale:
Fixed maturities:
US Treasury securities	$	426,316	$	426,316	$	-	$	-
Corporate bonds		2,911,553		-		2,911,553		-
Municipal bonds		1,744,137		-		1,744,137		-
Mortgage backed and asset backed securities		3,049,113		-		3,049,113		-
Total fixed maturities		8,131,119		426,316		7,704,803		-
Equities:
Equities		3,430,054		3,430,054		-		-
Other equity investments		174,214		174,214		-		-
Total equities		3,604,268		3,604,268		-		-
Total	$	11,735,387	$	4,030,584	$	7,704,803	$	-

The Company discloses the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above. The estimated fair value approximates carrying value for accrued interest. The methodologies for other financial assets and financial liabilities are discussed below:

Cash and cash equivalents: The carrying amounts approximate fair value because of the short maturity of these instruments.

Policyholder deposits in deposit-type contracts: Policyholder deposits in investment type contracts have fair value estimated based upon the actuarial assumptions of the underlying product.

The estimated fair values of the Company’s financial assets and liabilities at September 30, 2016 and December 31, 2015 are as follows:

	September 30, 2016				December 31, 2015
	(unaudited)
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial Assets:
Cash and cash equivalents	$	3,007,229	$	3,007,229	$	2,466,526	$	2,466,526
Investments, at fair value		15,649,216		15,649,216		11,735,387		11,735,387
Total Financial Assets	$	18,656,445	$	18,656,445	$	14,201,913	$	14,201,913

Financial Liabilities:
Policyholder deposits in deposit-type contracts	$	2,938,105	$	3,024,907	$	1,573,988	$	1,406,724
Total Financial Liabilities	$	2,938,105	$	3,024,907	$	1,573,988	$	1,406,724

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto included in this Form 10-Q. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf. We disclaim any obligation to update forward looking statements.

USAC was formed as a Kansas corporation on April 24, 2009 for the purpose of raising capital to form a new Kansas-based life insurance company. We presently conduct our business through our three wholly-owned subsidiaries: USALSC, a life insurance corporation; USAMC, an insurance marketing corporation; and USAIC, an investment management corporation

On January 2, 2012, USALSC was issued a Certificate of Authority to conduct life insurance business in the State of Kansas. We began third party administrative services in 2015.

Our accounting and reporting policies are in accordance with GAAP. Preparation of the consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The following is an explanation of our accounting policies and the estimates considered most significant by management. These accounting policies inherently require significant judgment and assumptions and actual operating results could differ significantly from management’s estimates determined using these policies. We believe the following accounting policies, judgments and estimates are the most critical to the understanding of our results of operations and financial position. A detailed discussion of significant accounting policies is provided in this report in the Notes to Consolidated Financial Statements included with this Registration Statement.

The Company's principal investments are in fixed maturity and equity securities. Fixed maturity and equity securities, classified as available for sale, are carried at their fair value in the consolidated balance sheets, with unrealized gains or losses recorded in comprehensive income (loss). Our fixed income investment manager utilizes external independent third-party pricing services to determine the fair values of investment securities available for sale.

We have a policy and process in place to identify securities that could potentially have an impairment that is other-than-temporary. The assessment of whether impairments have occurred is based on a case-by-case evaluation of underlying reasons for the decline in fair value. We consider severity of impairment, duration of impairment, forecasted recovery period, industry outlook, financial condition of the issuer, issuer credit ratings and whether we intend to sell a security, or it is more likely than not that we would be required to sell a security, prior to the recovery of the amortized cost.

The recognition of other-than-temporary impairment losses on debt securities is dependent on the facts and circumstances related to the specific security. If we intend to sell a security or it is more likely than not that we would be required to sell a security prior to recovery of the amortized cost, the difference between amortized cost and fair value is recognized in the income statement as an other-than-temporary impairment. As it relates to debt securities, if we do not expect to recover the amortized basis, do not plan to sell the security and if it is not more likely than not that we would be required to sell a security before the recovery of its amortized cost, the other-than-temporary impairment would be recognized. We would recognize the credit loss portion through earnings in the income statement and the noncredit loss portion in accumulated other comprehensive loss. The Company had one investment security that was evaluated to be other than temporarily impaired as of June 30, 2016. The Company subsequently sold this security in July 2016. No securities were determined to be other than temporarily impaired as of September 30, 2016.

Incremental direct costs, net of amounts ceded to reinsurers, that result directly from and are essential to a product sale and would not have been incurred by us had the sale not occurred, are capitalized, to the extent recoverable, and amortized over the life of the premiums produced. Recoverability of deferred acquisition costs is evaluated periodically by comparing the current estimate of the present value of expected pretax future profits to the unamortized asset balance. If this current estimate is less than the existing balance, the difference is charged to expense.

In the normal course of business, we seek to limit aggregate and single exposure to losses on risk by purchasing reinsurance. The amounts reported in the consolidated balance sheets as reinsurance recoverable include amounts billed to reinsurers on losses paid as well as estimates of amounts expected to be recovered from reinsurers on insurance liabilities that have not yet been paid. Reinsurance recoverable on unpaid losses are estimated based upon assumptions consistent with those used in establishing the liabilities related to the underlying reinsured contracts. Insurance liabilities are reported gross of reinsurance recoverable. Management believes the recoverables are appropriately established. We diversify our credit risks related to reinsurance ceded. Reinsurance premiums are generally reflected in income in a manner consistent with the recognition of premiums on the reinsured contracts. Reinsurance does not extinguish our primary liability under the policies written. We regularly evaluate the financial condition of our reinsurers including their activities with respect to claim settlement practices and commutations, and establish allowances for uncollectible reinsurance recoverable as appropriate.

We establish liabilities for amounts payable under insurance policies, including traditional life insurance and annuities. Generally, amounts are payable over an extended period of time. Liabilities for future policy benefits of traditional life insurance have been computed by using a net level premium method based upon estimates at the time of issue for investment yields, mortality and withdrawals. These estimates include provisions for experience less favorable than initially expected. Mortality assumptions are based on industry experience expressed as a percentage of standard mortality tables. Such liabilities are reviewed quarterly by an independent consulting actuary.

Deferred tax assets are recorded based on the differences between the financial statement and tax basis of assets and liabilities at the enacted tax rates. The principal assets and liabilities giving rise to such differences are investments, insurance reserves, and deferred acquisition costs. A deferred tax asset valuation allowance is established when there is uncertainty that such assets would be realized. We have no uncertain tax positions that we believe are more-likely-than-not that the benefit will not to be realized.

Revenues on traditional life insurance products consist of direct and assumed premiums reported as earned when due.

Amounts received as payment for annuities are recognized as deposits to policyholder account balances and included in future insurance policy benefits. Revenues from these contracts are comprised of investment earnings of the deposits, which are recognized over the period of the contracts, and included in revenue. Deposits are shown as a financing activity in the Consolidated Statements of Cash Flows.

A detailed discussion of new accounting standards is provided in the Notes to Consolidated Financial Statements beginning on p. 7 of this quarterly report.

Revenues. Insurance revenues are primarily generated from premium revenues and investment income. Insurance revenues for the nine months ended September 30, 2016 and 2015 are summarized in the table below.

Insurance revenues for the three months ended September 30, 2016 and 2015 are summarized in the table below.

Premium revenue: Premium revenue for the first nine months of 2016 was $4,721,091 compared to $2,983,147 in the first nine months of 2015, an increase of $1,737,944. This growth is attributable to both an increase in direct written premiums due to our organic growth efforts and an increase in assumed premiums from our reinsurance treaty with ULIC.

Direct, assumed and ceded premiums for the nine months ended September 30, 2016 and 2015 are summarized in the following table.

Premium revenue for the third quarter of 2016 was $1,490,255 compared to $997,915 in 2015, an increase of $492,340. This growth is attributable to both an increase in direct written premiums due to our organic growth efforts and an increase in assumed premiums from our reinsurance treaty with ULIC.

Direct, assumed and ceded premiums for the three months ended September 30, 2016 and 2015 are summarized in the table below.

The Company is pursuing new product and distribution opportunities to increase premium production.

Investment income, net of expenses: The components of net investment income for the nine months ended September 30, 2016 and 2015 are as follows:

Net investment income for the first nine months of 2016 was $320,491, compared to $191,432 in 2015, an increase of $129,059. This increase in investment income is primarily a result of increased invested assets as a result of our warrant exercise offering and premium income.

The components of net investment income for the three months ended September 30, 2016 and 2015 are as follows:

Net investment income for the third quarter of 2016 was $116,780, compared to $77,796 in 2015, an increase of $38,984. This increase in investment income is a result of increased invested assets as a result of our warrant exercise offering and premium income.

Net realized gains on investments: Net realized gains on investments for the nine months ended September 30, 2016 were $40,653, compared to losses of $849 in 2015, an increase of $41,502. Realized gains and losses related to the sale of securities for the nine months ended September 30, 2016 and 2015 are summarized as follows:

Net realized losses on investments for the third quarter of 2016 were $29,889 compared to losses of $951 in 2015. Realized gains and losses related to the sale of securities for the three months ended September 30, 2016 and 2015 are summarized as follows:

Other income: Other income for the nine months ended September 30, 2016 was $57,468 compared to $12,353 in 2015, an increase of $45,115. This increase is due to the growth of our third party administration business.

Other income for the third quarter of 2016 was $21,878 compared to $7,205 in 2015, an increase of $14,673. This increase is due to the growth of our third party administration business.

Expenses. Expenses for the nine months ended September 30, 2016 and 2015 are summarized in the table below.

Expenses for the three months ended September 30, 2016 and 2015 are summarized in the table below.

Death and other benefits: Death benefits were $465,763 in the nine months ended September 30, 2016 compared to $276,263 in 2015, an increase of $189,500. This increase is attributable to the growth of our in-force block of life insurance policies. The majority of death claims paid from inception have been on pre-need policies. We expect these claims to grow as we continue to increase the size of our in-force pre-need business.

Death benefits were $132,499 for the three months ended September 30, 2016, compared to $78,475 for the same period in 2015, an increase of $54,024. This increase is attributable to the growth of our in-force block of life insurance policies. We expect these claims to grow as we continue to increase the size of our in-force life business.

Policyholder benefits: Policyholder benefits were $2,581,251 in the nine months ended September 30, 2016 compared to $1,665,138 in 2015, an increase of $916,113. The primary driver of this increase is the growth of our assumed business and is more than offset by the increased premiums associated with this block of assumed policies.

Policyholder benefits were $719,581 during the third quarter of 2016, compared to $573,561 in the third quarter of 2015, an increase of $146,020. The primary driver of this increase is the growth of our assumed business and is more than offset by the increased premiums associated with this block of assumed policies.

Increase in policyholder reserves: Policyholder reserves increased $1,302,380 in the nine months ended September 30, 2016, compared to $793,308 in 2015, an increase of $509,072. The increase in policyholder reserves reflects the growth in new business for 2016 as well as the maturation of in-force policies.

Policyholder reserves increased by $539,476 in the third quarter of 2016, compared to $265,053 in the third quarter of 2015, an increase of $274,423. The increase in policyholder reserves reflects the growth in new business in 2016 as well as the maturation of in-force policies.

Commissions, net of deferrals: The Company pays commissions to the ceding company on a block of assumed policies. Commissions were $315,550 in the nine months ended September 30, 2016, compared to $221,657 in 2015, an increase of $93,893. This increase is due to an increase in assumed premiums.

Commissions were $88,952 in the third quarter of 2016, compared to $67,641 in the third quarter of 2015, an increase of $21,311. This increase is due to an increase in assumed premiums.

Amortization of deferred acquisition costs: The amortization of deferred acquisition costs was $128,540 in the nine months ended September 30, 2016, compared to $83,791 in 2015, an increase of $44,749. This increase is due to a corresponding increase in our deferred acquisition cost asset as a result of our growing block of in-force policies.

The amortization of deferred acquisition costs was $39,441 in the third quarter of 2016, compared to $25,463 in the third quarter of 2016, an increase of $13,978. This increase is due to a corresponding increase in our deferred acquisition cost asset as a result of our growing block of in-force policies.

Salaries and benefits: Salaries and benefits were $564,410 for the nine months ended September 30, 2016, compared to $400,581 in 2015, an increase of $163,829. The increase is attributable to service team training, increased staffing in our service team to meet the increased volume of our group products, as well as the payment of incentive compensation. More than a third of the increased expense is attributable to staffing for our group products and increased health insurance costs.

Salaries and benefits were $171,226 in the third quarter of 2016, compared to $158,446 in the third quarter of 2015, an increase of $12,780. The increase is attributable to service team training, increased staffing in our service team to meet the increased volume of our group products, as well as the payment of incentive compensation.

Other expenses: Other operating expenses were $902,598 in the nine months ended September 30, 2016, compared to $577,745 in 2015, an increase of $324,853. This increase is driven by higher regulatory compliance costs associated with becoming a Securities and Exchange Commission registrant. We have had over $125,000 in increased regulatory costs, the bulk of which fall into this category. Additionally, we incurred additional expenses associated with new product development and systems enhancements.

Other operating expenses were $321,925 during the third quarter of 2016, compared to $120,576 in the third quarter of 2015, an increase of $201,349. This increase is primarily due to higher regulatory compliance costs associated with becoming a Securities and Exchange Commission registrant, new product development costs and systems enhancements.

Net Loss: Our net loss was $1,120,789 in the nine months ended September 30, 2016 compared to net loss of $832,400 in the same period of 2015, an increase of $288,389. This increase is attributable to our continued investment in the long term success of the Company as well as our increased regulatory compliance costs. Our net loss per share increased to $0.21 from $0.19 in 2015, basic and diluted.

Our net loss was $354,298 for the third quarter of 2016, compared to $207,250 for the same period in 2015, an increase of $147,048. This increase is attributable to our continued investment in the long term success of the Company as well as our increased regulatory compliance costs. Our net loss per share was $0.06 per share in the third quarter of 2016, basic and diluted, compared to $0.04 net loss per share in the third quarter of 2015.

Assets. Assets have increased to $19,239,097 as of September 30, 2016, an increase of $4,436,899 from December 31, 2015. This is primarily the result of the growth of our available for sale assets and cash and cash equivalents.

Available for sale fixed maturity securities: As of September 30, 2016, we had available for sale fixed maturity assets of $10,803,241, an increase of $2,672,122 from the December 31, 2015 balance of $8,131,119. This growth is driven by our premium income and our warrant exercise offering.

Available for sale equity securities: As of September 30, 2016, we had available for sale equity assets of $4,845,975, an increase of $1,241,707 from the December 31, 2015 balance of $3,604,268. This growth is driven by our premium income and our warrant exercise offering.

Cash and cash equivalents: As of September 30, 2016, we had cash and cash equivalent assets of $3,007,229, an increase of $540,703 from the December 31, 2015 balance of $2,466,526. This growth is driven by our premium income and our warrant exercise offering.

Investment income due and accrued: As of September 30, 2016, our investment income due and accrued was $75,443 compared to $78,540 as of December 31, 2015. This decrease is attributable to normal investment activity.

Reinsurance related assets: As of September 30, 2016, our reinsurance related assets were $73,337 compared to $21,444 as of December 31, 2015. This increase is the result of a group life claim recovery on an in course of settlement claim.

Deferred acquisition costs, net: As of September 30, 2016, our deferred acquisition costs were $140,050 compared to $86,053 as of December 31, 2015. This is the result of our growing block of in-force policies and we expect this balance to continue to grow along with the size of our in-force business.

Property, equipment and software, net: As of September 30, 2016 our property, equipment and software assets were $254,509 compared to $283,582 as of December 31, 2015. This decrease is a result of normal amortization during the period. We did not purchase any new property, equipment and software during the first nine months of 2016.

Pre-paid expenses: As of September 30, 2016, our pre-paid expenses were $26,955 compared to $123,162 as of December 31, 2015. This decrease was the result of our utilization of pre-paid expenses during the first nine months of 2016.

Liabilities. Our total liabilities were $7,270,708 as of September 30, 2016, an increase of $2,959,303 from our December 31, 2015 liability of $4,311,405.

Policy liabilities: Our total policy liabilities as of September 30, 2016 were $7,123,003 compared to $4,220,525 as of December 31, 2015. This increase is the result of new policy sales and the growth of our in-force policies. The growth in deposit-type contracts is the result of our annuity sales and the growth of our annuity block of business. The growth in policyholder benefit reserves is the result of our life insurance sales and the growth of our life insurance block of business. The growth of advance premiums is also attributable to the growth of our life insurance block of business.

Accounts payable and accrued expenses: As of September 30, 2016, our accounts payable and accrued expenses were $69,279 compared to $85,888 as of December 31, 2015. The Company had fewer outstanding invoices as of September 30, 2016.

Shareholders’ Equity. Our shareholders’ equity was $11,968,389 as of September 30, 2016, an increase of $1,477,596 from our December 31, 2015 shareholders’ equity of $10,490,793. The growth in shareholders’ equity was driven by the exercise of warrants during the first six months of 2016. This resulted in the increased common stock par value and additional paid in capital. The increased accumulated deficit is the direct result of our net loss during the first nine months of 2016. The increase in accumulated other comprehensive income reflects the change in unrealized gains and losses in our available for sale securities.

Our overall investment philosophy is reflected in the allocation of our investments. We emphasize investment grade debt securities with smaller holdings in equity securities and other investments. The following table shows the carrying value of our investments by investment category and cash and cash equivalents, and the percentage of each to total invested assets as of September 30, 2016 and December 30, 2015.

The total value of our investments increased to $18,656,445 as of September 30, 2016 from $14,201,913 at December 31, 2015, an increase of $4,454,532. Increases in investments are attributable to premiums received by USALSC and to proceeds from our intrastate warrant offering.

The following table shows the distribution of the credit ratings of our portfolio of fixed maturity securities by carrying value as of September 30, 2016 and December 31, 2015.

Reflecting the high quality of securities maintained by us, 100% of all fixed maturity securities were investment grade as of December 31, 2015. As of September 30, 2016, 98.2% of all fixed maturity securities were investment grade. The increase in BB ratings is attributable to a credit downgrade by credit rating agencies of three securities already owned.

The amortized cost and fair value of debt securities as of December 31, 2015 and September 30, 2016, by contractual maturity, are shown below. Equity securities do not have stated maturity dates and therefore are not included in the following maturity summary. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

We hold a diversified portfolio of investments that primarily includes cash, bonds and equity securities. Each of these investments is subject to market risks that can affect their return and their fair value. A majority of the investments are fixed maturity securities including debt issues of corporations, US Treasury securities, or securities issued by government agencies. The primary market risks affecting the investment portfolio are interest rate risk, credit risk, and equity risk.

Interest rate risk arises from the price sensitivity of investments to changes in interest rates. Interest represents the greatest portion of an investment's return for most fixed maturity securities in stable interest rate environments. The changes in the fair value of such investments are inversely related to changes in market interest rates. As interest rates fall, the interest and dividend streams of existing fixed-rate investments become more valuable and fair values rise. As interest rates rise, the opposite effect occurs.

We attempt to mitigate our exposure to adverse interest rate movements through laddering the maturities of the fixed maturity investments and through maintaining cash and other short term investments to assure sufficient liquidity to meet our obligations and to address reinvestment risk considerations. Due to the composition of our book of insurance business, management believes it is unlikely that we would encounter large surrender activity due to an interest rate increase that would force the disposal of fixed maturities at a loss.

We are exposed to credit risk through counterparties and within the investment portfolio. Credit risk relates to the uncertainty associated with an obligor's ability to make timely payments of principal and interest in accordance with the contractual terms of an instrument or contract. We manage our credit risk through established investment policies and guidelines which address the quality of creditors and counterparties, concentration limits, diversification practices and acceptable risk levels. These policies and guidelines are regularly reviewed and approved by senior management and USAC's Board of Directors.

Since inception, our operations have been financed primarily through the sale of voting common stock. Our operations have not been profitable and have generated significant operating losses since we were incorporated in 2009.

Aside from raising capital, which has funded the vast majority of our operations, premium income, deposits to policyholder account balances, and investment income are the primary sources of funds while withdrawals of policyholder account balances, investment purchases, policy benefits in the form of claims, and operating expenses are the primary uses of funds. To ensure we will be able to pay future commitments, the funds received as premium payments and deposits are invested in primarily fixed income securities. Funds are invested with the intent that the income from investments, plus proceeds from maturities, will in the future meet our ongoing cash flow needs. The approach of matching asset and liability durations and yields requires an appropriate mix of investments. Our investments consist primarily of marketable debt securities that could be readily converted to cash for liquidity needs. Cash flow projections and cash flow tests under various market interest scenarios are also performed annually to assist in evaluating liquidity needs and adequacy.

Net cash provided by operating activities was $513,179 for the nine months ended September 30, 2016. The primary sources of cash from operating activities were premiums and deposits received from policyholders. The primary uses of cash for operating activities were for payments of commissions to agents and settlement of policy liabilities. Net cash used in investing activities was $3,071,033. The primary source of cash was from sales of available for sale securities and the sale of the short-term investments. Offsetting this source of cash was our purchases of investments in available-for-sale securities. Cash provided by financing activities was $3,098,557. The primary sources of cash were receipts on deposit-type contracts and issuance of common stock from warrants exercised.

At September 30, 2016, we had cash and cash equivalents totaling $3,007,229. We believe that our existing cash and cash equivalents will be sufficient to fund the anticipated operating expenses and capital expenditures through at least 2017. We have based this estimate upon assumptions that may prove to be wrong and we could use our capital resources sooner than we currently expect. The growth of our insurance subsidiary is uncertain and will require additional capital if it continues to grow.

Insurance premiums are established before the amount of losses, or the extent to which inflation may affect such losses and expenses, are known. We attempt, in establishing premiums, to anticipate the potential impact of inflation. If, for competitive reasons, premiums cannot be increased to anticipate inflation, this cost would be absorbed by us. Inflation also affects the rate of investment return on the investment portfolio with a corresponding effect on investment income.

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

As a “smaller reporting company”, the Company is not required to provide disclosure pursuant to this item.

We have established disclosure controls and procedures to ensure, among other things, material information relating to our Company, including our consolidated subsidiaries, is made known to our officers who certify our financial reports and to the other members of our senior management and the Board of Directors.

As required by Exchange Act Rule 13a-15(b), management of the Company, including the Chief Executive Officer and the Executive Vice President of US Alliance Life and Security Company conducted an evaluation as of the end of the period covered by this report, of the effectiveness of the Company’s disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e). Based upon an evaluation at the end of the period, the Chief Executive Officer and the Executive Vice President of US Alliance Life and Security Company concluded that the disclosure controls and procedures are effective in timely alerting them to material information relating to us and our consolidated subsidiaries required to be disclosed in our periodic reports under the exchange act.

There were no changes to the Company’s internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) during the nine months ended September 30, 2016 that have materially affected, or are reasonably likely to materially affect, the Company’s control over financial reporting.

We are involved in litigation incidental to our operations from time to time. We are not presently a party to any legal proceedings other than litigation arising in the ordinary course of business, and we are not aware of any claims that could materially affect our financial position or results of operation.

As a “smaller reporting company”, the Company is not required to provide disclosure pursuant to this item.

During the quarter ended September 30, 2016, the Company issued 2,786 shares of common stock, for aggregate consideration of $19,502, pursuant to an offering to residents of the state of Kansas that was registered with the Kansas Securities Commissioner.

The offering of shares in the above –described transaction was self-underwritten and sold through agents of the Company licensed to sell securities in Kansas. Proceeds from the sale of common stock were used to finance the growth of the Company’s life insurance subsidiary and to provide working capital for the Company. The offer and sale of common stock was exempt from registration under Section 3(a)11 of the Securities Act of 1933 for securities offered and sold on a wholly intrastate basis. The shares of common stock were sold only to bona fide residents of the state of Kansas.

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized

KANSAS	26-4824142
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4123 SW Gage Center Drive, Suite 240, Topeka, Kansas	66604
(Address of principal executive offices)	(Zip Code)

Part I - Financial Information

Item	Item Description	Page
Item 1	Financial Statements	3

	Consolidated Balance Sheets	3

	Consolidated Statements of Comprehensive Loss	4

	Consolidated Statements of Changes in Shareholders' Equity	5

	Consolidated Statements of Cash Flows	6

	Notes to Consolidated Financial Statements	7

Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3	Quantitative and Qualitative Disclosures About Market Risk	24

Item 4	Controls and Procedures	24

Part II - Other Information

Item	Item Description	Page
Item 1	Legal Proceedings	25

Item 1A	Risk Factors	25

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 3	Defaults Upon Senior Securities	25

Item 4	Mine Safety Disclosures	25

Item 5	Other Information	25

Item 6	Exhibits	26

	Signatures	27

	September 30, 2016			December 31, 2015
	(unaudited)
Assets
Investments
Available for sale fixed maturity securities (amortized cost: $10,349,044 and $8,310,159 as of September 30, 2016 and December 31, 2015, respectively)	$	10,803,241		$	8,131,119
Available for sale equity securities (amortized cost: $4,586,099 and $3,325,705 as of September 30, 2016 and December 31, 2015, respectively)		4,845,975			3,604,268
Total investments		15,649,216			11,735,387

Cash and cash equivalents		3,007,229			2,466,526
Investment income due and accrued		75,443			78,540
Reinsurance related assets		73,337			21,444
Deferred acquisition costs, net		140,050			86,053
Property, equipment and software, net		254,509			283,582
Pre-paid expenses		26,955			123,162
Other assets		12,358			7,504
Total assets	$	19,239,097		$	14,802,198


Liabilities and Shareholders' Equity
Liabilities:
Policy liabilities
Deposit-type contracts	$	2,938,105		$	1,573,988
Policyholder benefit reserves		4,074,028			2,576,964
Advance premiums		110,870			69,573
Total policy liabilities		7,123,003			4,220,525

Accounts payable and accrued expenses		69,279			85,888
Other liabilities		78,426			4,992
Total liabilities		7,270,708			4,311,405

Shareholders' Equity:
Common stock, $0.10 par value. Authorized 9,000,000 shares; issued and outstanding 5,554,134 and 5,177,245 shares as of September 30, 2016 and December 31, 2015, respectively		555,414			517,725
Outstanding warrants		-			15,876
Common stock subscribed		-			13,799
Common stock subscription receivable		-			(827,952	)
Additional paid-in capital		17,966,154			17,018,285
Accumulated deficit		(7,267,252	)		(6,146,463	)
Accumulated other comprehensive income (loss)		714,073			(100,477	)
Total shareholders' equity		11,968,389			10,490,793

Total liabilities and shareholders' equity	$	19,239,097		$	14,802,198

	Nine Months Ended September 30,						Three Months Ended September 30,
	2016			2015			2016			2015
Income:
Premium income	$	4,721,091		$	2,983,147		$	1,490,255		$	997,915
Net investment income		320,491			191,432			116,780			77,796
Net realized (loss) gain on sale of securities		40,653			(849	)		29,889			(951	)
Other income		57,468			12,353			21,878			7,205
Total income		5,139,703			3,186,083			1,658,802			1,081,965

Expenses:
Death claims		465,763			276,263			132,499			78,475
Policyholder benefits		2,581,251			1,665,138			719,581			573,561
Increase in policyholder reserves		1,302,380			793,308			539,476			265,053
Commissions, net of deferrals		315,550			221,657			88,952			67,641
Amortization of deferred acquisition costs		128,540			83,791			39,441			25,463
Salaries & benefits		564,410			400,581			171,226			158,446
Other operating expenses		902,598			577,745			321,925			120,576
Total expense		6,260,492			4,018,483			2,013,100			1,289,215

Net loss	$	(1,120,789	)	$	(832,400	)	$	(354,298	)	$	(207,250	)

Unrealized net holding (losses) gains arising during the period		855,203			(286,028	)		168,793			(181,648	)
Reclassification adjustment for loss (gains) included in net loss		(40,653	)		849			(29,889	)		951
Other comprehensive (loss) income		814,550			(285,179	)		138,904			(180,697	)

Comprehensive loss	$	(306,239	)	$	(1,117,579	)	$	(215,394	)	$	(387,947	)

Net loss per common share, basic and diluted	$	(0.21	)	$	(0.19	)	$	(0.06	)	$	(0.04	)

	Number of Shares of Common Stock		Common Stock		Additional Paid-in Capital			Outstanding Warrants			Common Stock Subscribed			Subscription Receivable			Accumulated Other Comprehensive Income / (Loss)			Accumulated Deficit			Total
Balance, January 1, 2015		4,232,400	$	423,240	$	11,353,508		$	25,324		$	-		$	-		$	287,082		$	(4,809,086	)	$	7,280,068
Common stock issued upon exercise of warrants, $6.00 per share		668,258		66,826		3,949,401			(6,683	)		-			-			-			-			4,009,544
Costs associated with warrant exercise		-		-		(480,709	)		-			-			-			-			-			(480,709	)
Common stock subscribed		-		-		860,482			-			14,584			(875,066	)		-			-			-
Other comprehensive loss		-		-		-			-			-			-			(285,179	)		-			(285,179	)
Net loss		-		-		-			-			-			-			-			(832,400	)		(832,400	)
Balance, September 30, 2015		4,900,658	$	490,066	$	15,682,682		$	18,641		$	14,584		$	(875,066	)	$	1,903		$	(5,641,486	)	$	9,691,324

Balance, January 1, 2016		5,177,245	$	517,725	$	17,018,285		$	15,876		$	13,799		$	(827,952	)	$	(100,477	)	$	(6,146,463	)	$	10,490,793
Common stock issued upon exercise of warrants, $6.00 per share		372,003		37,200		2,210,694			(15,876	)		-			-			-			-			2,232,018
Common stock issued, $7 per share		4,886		489		33,713			-			-			-			-			-			34,202
Costs associated with common stock issued		-		-		(482,385	)		-			-			-			-			-			(482,385	)
Common stock subscribed		-		-		(814,153	)		-			(13,799	)		827,952			-			-			-
Other comprehensive income		-		-		-			-			-			-			814,550			-			814,550
Net loss		-		-		-			-			-			-			-			(1,120,789	)		(1,120,789	)
Balance, September 30, 2016		5,554,134	$	555,414	$	17,966,154		$	-		$	-		$	-		$	714,073		$	(7,267,252	)	$	11,968,389

	Nine Months ended September 30,
	2016			2015
	(unaudited)
Direct	$	2,048,060		$	1,182,071
Assumed		2,770,010			1,837,208
Ceded		(96,979	)		(36,132	)
Total	$	4,721,091		$	2,983,147

	Nine Months Ended September 30,
	2016			2015
	(unaudited)
Fixed maturities	$	225,790		$	136,871
Equity securities		126,571			77,766
Cash and short term investments		1,527			464
		353,888			215,101
Less investment expenses		(33,397	)		(23,669	)
	$	320,491		$	191,432

	Three Months Ended September 30,
	2016			2015
	(unaudited)
Fixed maturities	$	80,174		$	49,325
Equity securities		48,130			31,445
Cash and short term investments		761			151
		129,065			80,921
Less investment expenses		(12,285	)		(3,125	)
	$	116,780		$	77,796

	September 30, 2016					December 31, 2015
	Fair		Percent			Fair		Percent
	Value		of Total			Value		of Total
	(unaudited)					(audited)
Fixed maturities:
US Treasury securities	$	320,853		1.7	%	$	426,316		3.0	%
Corporate bonds		3,967,326		21.3	%		2,911,553		20.5	%
Municipal bonds		2,878,933		15.4	%		1,744,137		12.3	%
Mortgage backed and asset backed securities		3,636,129		19.5	%		3,049,113		21.4	%
Total fixed maturities		10,803,241		57.9	%		8,131,119		57.2	%
Equities:
Equities		4,567,065		24.5	%		3,430,054		24.2	%
Other equity investments		278,910		1.5	%		174,214		1.2	%
Total equities		4,845,975		26.0	%		3,604,268		25.4	%
Cash and cash equivalents		3,007,229		16.1	%		2,466,526		17.4	%
Total	$	18,656,445		100.0	%	$	14,201,913		100.0	%

	As of September 30, 2016				As of December 31, 2015
	(unaudited)				(audited)
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Amounts maturing in:
One year or less	$	49,879	$	49,925	$	50,105	$	50,127
After one year through five years		1,820,706		1,839,613		1,046,934		1,040,747
After five years through ten years		1,603,698		1,665,396		1,664,103		1,592,766
More than 10 years		3,355,570		3,612,178		2,465,627		2,398,366
Mortgage backed and asset backed securities		3,519,191		3,636,129		3,083,389		3,049,113
	$	10,349,044	$	10,803,241	$	8,310,158	$	8,131,119

3.1		Articles of Incorporation of US Alliance Corporation (filed as Exhibit 3.1 to the Company’s Registration Statement on Form 10 filed on May 2, 2016 (File No. 000-55627), is incorporated herein by reference as Exhibit 3.1)

3.2		Bylaws of US Alliance Corporation (filed as Exhibit 3.2 to the Company’s Registration Statement on Form 10 filed on May 2, 2016 (File No. 000-55627), is incorporated herein by reference as Exhibit 3.2).

4.1		Form of Warrant to Purchase Common Shares of US Alliance (filed as Exhibit 4.1 to the Company’s Registration Statement on Form 10 filed on May 2, 2016 (File No. 000-55627), is incorporated herein by reference as Exhibit 4.1)

31.1		Certification of Chief Executive Officer of US Alliance Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Principal Financial Officer of US Alliance Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certifications of the Chief Executive Officer of US Alliance pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certifications of the Principal Financial Officer of US Alliance pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS XBRL Instance 101.SCH XBRL Taxonomy Extension Schema 101.CAL XBRL Taxonomy Extension Calculation 101.DEF XBRL Taxonomy Extension Definition 101.LAB XBRL Taxonomy Extension Labels 101.PRE XBRL Taxonomy Extension Presentation **XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

Date	November 14, 2016
By:	/s/ Jack H. Brier
	Jack H. Brier, President and Chairman