10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2015

or

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

For the transition period from _________ to ________

Commission File Number: None

GWG HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	26-2222607
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

220 South Sixth Street, Suite 1200

Minneapolis, MN 55402

(Address of principal executive offices, including zip code)

(612) 746-1944

(Registrant’s telephone number, including area code)

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. ☒ 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☐ Yes    ☒  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 (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes    ☒ No

As of August 13, 2015, GWG Holdings, Inc. had 5,933,041 shares of common stock outstanding.

GWG HOLDINGS, INC.

Index to Form 10-Q

for the Quarter Ended June 30, 2015

		Page No.
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of June 30, 2015, and December 31, 2014	3
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2015 and 2014	4
	Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2015 and 2014	5
	Condensed Consolidated Statement of Stockholders’ Equity	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 4.	Controls and Procedures	52
PART II.	OTHER INFORMATION
Item 6.	Exhibits	53
SIGNATURES		54

2

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GWG HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2015			December 31, 2014
	(unaudited)
ASSETS
Cash and cash equivalents	$	38,198,189		$	30,662,704
Restricted cash		7,923,190			4,296,053
Policy benefits receivable		2,500,000			1,750,000
Investment in life settlements, at fair value		301,498,527			282,883,010
Other assets		6,623,561			3,478,762
TOTAL ASSETS	$	356,743,467		$	323,070,529
LIABILITIES & STOCKHOLDERS’ EQUITY (DEFICIT)
LIABILITIES
Revolving credit facility	$	65,011,048		$	72,161,048
Series I Secured notes		24,347,531			27,616,578
L Bonds		223,118,514			182,782,884
Interest payable		11,593,220			11,128,519
Accounts payable and accrued expenses		2,071,879			1,718,009
Deferred taxes, net		6,525,336			5,273,555
TOTAL LIABILITIES		332,667,528			300,680,593
STOCKHOLDERS’ EQUITY
CONVERTIBLE PREFERRED STOCK
(par value $0.001; shares authorized 40,000,000; shares outstanding 2,746,412 and 2,738,966; liquidation preference of $20,598,000 and $20,542,000, respectively)		20,559,823			20,527,866
COMMON STOCK
Common stock (par value $0.001: shares authorized 210,000,000; shares issued and outstanding is 5,933,041 and 5,870,193 on June 30, 2015 and December 31, 2014, respectively)		5,933			5,870
Additional paid-in capital		16,900,193			16,257,686
Accumulated deficit		(13,390,010	)		(14,401,486	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		24,075,939			22,389,936
TOTAL LIABILITIES & EQUITY (DEFICIT)	$	356,743,467		$	323,070,529

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

3

GWG HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three Months Ended						Six Months Ended
	June 30, 2015			June 30, 2014			June 30, 2015		June 30, 2014
REVENUE
Gain on life settlements, net	$	8,473,886		$	5,484,889		$	25,257,295	$	11,001,094
Interest and other income		90,380			6,380			139,676		13,747
TOTAL REVENUE		8,564,266			5,491,269			25,396,971		11,014,841
EXPENSES
Employee compensation and benefits		2,144,725			1,178,819			3,872,642		2,147,564
Legal and professional fees		642,931			419,337			1,166,184		826,339
Interest expense		7,322,347			6,608,043			14,498,881		12,934,591
Other expenses		1,881,321			1,188,479			3,415,060		1,865,784
TOTAL EXPENSES		11,991,324			9,394,678			22,952,767		17,774,278
INCOME (LOSS) BEFORE INCOME TAXES		(3,427,058	)		(3,903,409	)		2,444,204		(6,759,437	)
INCOME TAX EXPENSE (BENEFIT)		(1,176,643	)		(1,316,712	)		1,432,728		(2,271,570	)
NET INCOME (LOSS)	$	(2,250,415	)	$	(2,586,697	)	$	1,011,476	$	(4,487,867	)
(Income) loss attributable to preferred shareholders		344,847			(101,271	)		698,003		(226,984	)
INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(1,905,568	)	$	(2,687,968	)	$	1,709,479	$	(4,714,851	)
NET INCOME (LOSS) PER SHARE
Basic	$	(0.32	)	$	(0.59	)	$	0.29	$	(1.03	)
Diluted	$	(0.32	)	$	(0.59	)	$	0.21	$	(1.03	)
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		5,876,618			4,562,000			5,873,423		4,562,000
Diluted		5,876,618			4,562,000			7,987,923		4,562,000

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

4

GWG HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

	Three Months Ended						Six Months Ended
	June 30, 2015			June 30, 2014			June 30, 2015			June 30, 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(2,250,415	)	$	(2,586,697	)	$	1,011,476		$	(4,487,867	)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Gain on life settlements		(14,028,327	)		(10,852,425	)		(12,134,482	)		(22,211,338	)
Amortization of deferred financing and issuance costs		507,026			1,354,007			(42,004	)		1,707,664
Deferred income taxes		(930,470	)		(1,316,712	)		1,251,781			(2,271,570	)
Convertible, redeemable preferred stock dividends payable		146,420			196,991			335,232			389,331
(Increase) decrease in operating assets:
Policy benefits receivable		17,140,000			(300,000	)		(750,000	)		(300,000	)
Other assets		(225,376	)		(697,073	)		(356,549	)		(948,919	)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		(1,333,241	)		1,890,337			1,302,446			3,168,163
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(974,383	)		(12,311,572	)		(9,382,100	)		(24,954,536	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		(7,777,541	)		(2,608,232	)		(10,224,018	)		(10,879,435	)
Proceeds from settlement of life settlements		132,388			68,500			3,742,983			68,500
NET CASH FLOWS USED IN INVESTING ACTIVITIES		(7,645,153	)		(2,539,732	)		(6,481,035	)		(10,810,935	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of revolving credit facility		(7,150,000	)		-			(7,150,000	)		-
Payments for redemption of Series I Secured notes		(2,344,355	)		(670,621	)		(3,617,544	)		(1,538,924	)
Proceeds from issuance of L Bonds		22,538,059			14,868,830			50,498,356			33,234,487
Payments for redemption and issuance of L Bonds		(6,134,935	)		(4,393,523	)		(13,013,057	)		(9,322,411	)
Proceeds from restricted cash		3,410,427			43,330			(3,627,137	)		3,022,537
Issuance of common stock		582,000			-			582,000			-
Redemptions of convertible, redeemable preferred stock		(273,998	)		(20,056	)		(273,998	)		(20,056	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		10,627,198			9,827,960			23,398,620			25,375,633
NET INCREASE IN CASH AND CASH EQUIVALENTS		2,007,662			(5,023,344	)		7,535,485			(10,389,838	)
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD		36,190,527			28,083,299			30,662,704			33,449,793
END OF PERIOD	$	38,198,189		$	23,059,955		$	38,198,189		$	23,059,955

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

5

GWG HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS – CONTINUED

(unaudited)

	Three Months Ended				Six Months Ended
	June 30, 2015		June 30, 2014		June 30, 2015		June 30, 2014
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	$	7,041,000	$	3,531,000	$	13,143,000	$	7,781,000
NON-CASH INVESTING AND FINANCING ACTIVITIES
Series I Secured notes:
Non-cash conversion of accrued interest and commissions payable to principal	$	86,000	$	40,000	$	127,000	$	105,000
L Bonds:
Non-cash conversion of accrued interest and commission payable to principal	$	219,000	$	162,000	$	438,000	$	282,000
Convertible, redeemable preferred stock
Non-cash conversion of dividends payable	$	150,000	$	193,000	$	334,000	$	380,000
Non-cash accretion of convertible, redeemable preferred stock to redemption value	$	-	$	101,000	$	-	$	227,000
Investment in life settlements included in accounts payable	$	61,000	$	75,000	$	61,000	$	75,000

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

6

GWG HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

	Preferred Stock			Preferred			Common		Common Stock		Additional Paid-in			Accumulated			Total
	Shares			Stock			Shares		(par)		Capital			Deficit			Equity
Balance, December 31, 2013		-		$	-			4,562,000	$	4,562	$	2,942,000		$	(8,438,577	)	$	(5,492,015	)
Net income		-			-			-		-		-			(5,962,909	)		(5,962,909	)
Issuance of common stock		-			-			800,000		800		8,642,990			-			8,643,790
Series A Preferred Stock conversion		-			-			508,193		508		4,956,591			-			4,957,099
Reclassification of preferred stock from temporary equity to permanent equity due to initial public offering (*)		2,710,214			20,326,605			-		-		-			-			20,326,605
Issuance of preferred stock		28,752			201,261			-		-		-			-			201,261
Issuance of stock options		-			-			-		-		122,412			-			122,412
Extension of warrants		-			-			-		-		47,120			-			47,120
Accretion of preferred stock to liquidation value		-			-			-		-		(453,427	)		-			(453,427	)
Balance, December 31, 2014		2,738,966		$	20,527,866			5,870,193	$	5,870	$	16,257,686		$	(14,401,486	)	$	22,389,936
Net income		-			-			-		-		-			1,011,476			1,011,476
Issuance of common stock		-			-			60,000		60		581,940			-			582,000
Series A Preferred Stock conversion to common stock		(3,797	)		(28,478	)		2,848		3		28,475			-			-
Issuance of preferred stock		11,243			60,435			-		-		-			-			60,435
Issuance of stock options		-			-			-		-		32,092			-			32,092
Balance, June 30, 2015		2,746,412		$	20,559,823			5,933,041	$	5,933	$	16,900,193		$	(13,390,010	)	$	24,075,939

* Subject to the terms of the Certificate of Designation for Series A Convertible Preferred Stock, the listing of our common stock on The Nasdaq Capital Market on September 25, 2014 resulted in the termination of a redemption right in favor of the holders of such preferred stock. Preferred stock that is not redeemable by a shareholder is treated as stockholders’ equity as shown in the table above.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

7

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(1) Nature of business and summary of significant accounting policies

Nature of business - GWG Holdings, Inc. (GWG Holdings) and subsidiaries, located in Minneapolis, Minnesota, facilitates the purchase of life insurance policies for its own investment portfolio through its wholly owned subsidiaries, GWG Life, LLC (GWG Life), and GWG Life USA, LLC (GWG Life USA), and GWG Life’s own subsidiaries, GWG Trust (Trust), GWG DLP Funding II, LLC (DLP II) and its wholly owned subsidiary, GWG DLP Master Trust II (the Trust II), and GWG DLP Funding III, LLC (DLP III). All of these entities are legally organized in Delaware. Unless the context otherwise requires or we specifically so indicate, all references in this report to "we", "us", "our", "our Company", "GWG", or the "Company" refer to these entities collectively. References to particular entities, such as “GWG Holdings” or “GWG Life”, are meant to refer only to the particular entity referenced.

Use of estimates - The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The most significant estimates with regard to these consolidated financial statements relates to (1) the determination of the assumptions used in estimating the fair value of the investment in life insurance policies, and (2) the value of deferred tax assets and liabilities.

Cash and cash equivalents - The Company considers cash in demand deposit accounts and temporary investments purchased with an original maturity of three months or less to be cash equivalents. The Company maintains its cash and cash equivalents with highly rated financial institutions. From time to time, the Company’s balances in its bank accounts exceed Federal Deposit Insurance Corporation limits. The Company periodically evaluates the risk of exceeding insured levels and may transfer funds as it deems appropriate. The Company has not experienced any losses with regards to balances in excess of insured limits or as a result of other concentrations of credit risk.

Life settlements - ASC 325-30, Investments in Insurance Contracts, allows a reporting entity the election to account for its investments in life settlements using either the investment method or the fair value method. The election shall be made on an instrument-by-instrument basis and is irrevocable. Under the investment method, an investor shall recognize the initial investment at the purchase price plus all initial direct costs. Continuing costs (policy premiums and direct external costs, if any) to keep the policy in force shall be capitalized. Under the fair value method, an investor shall recognize the initial investment at the purchase price. In subsequent periods, the investor shall re-measure the investment at fair value in its entirety at each reporting period and shall recognize the change in fair value in current period income net of premiums paid. The Company uses the fair value method to account for all life settlements.

The Company recognizes realized gains (revenue) from life settlement contracts upon one of the two following events:

1)	Receipt of death notice or verified obituary of insured
2)	Sale of policy and filing of change of ownership forms and receipt of payment

The Company recognizes the difference between the death benefits and carrying values of the policy when an insured event has occurred and the Company determines that settlement and ultimate collection of the death benefits is realizable and reasonably assured. Revenue from a transaction must meet both criteria in order to be recognized. In an event of a sale of a policy, the Company recognizes gain or loss as the difference between the sale price and the carrying value of the policy on the date of the receipt of payment on such sale.

Deposits and initial direct costs advanced on unsettled policy acquisitions are recorded as other assets until policy ownership has been transferred to the Company. Such deposits and direct cost advances were $222,000 and $27,000 at June 30, 2015 and December 31, 2014, respectively.

8

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Deferred financing and issuance costs – Costs incurred to obtain financing under the revolving credit facility, as described in note 5, have been capitalized and are amortized using the straight-line method over the term of the revolving credit facility. Amortization of deferred financing costs was $300,000 and $89,000 for the three-month periods ended June 30, 2015 and 2014, and $300,000 and $179,000 for the six-month periods ended June 30, 2015 and 2014, respectively. The future amortization is expected to be $1,500,000 for the next ten months ending April 30, 2016. The Series I Secured notes, as described in note 6, are reported net of issuance costs, sales commissions and other direct expenses, which are amortized using the interest method over the term of each respective borrowing. The L Bonds, as described in note 7, are reported net of issuance costs, sales commissions and other direct expenses, which are amortized using the interest method over the term of each respective borrowing. The Series A preferred stock, as described in note 8, was also reported net of issuance costs, sales commissions, including the fair value of warrants issued, and other direct expenses, which were amortized using the interest method as interest expense over the three-year redemption period. As of December 31, 2014 those costs were fully amortized.

Earnings (loss) per share - Basic per share earnings (loss) attributable to non-redeemable interests is calculated using the weighted-average number of shares outstanding during the period. Diluted earnings per share is calculated based on the potential dilutive impact, if any, of the Company’s convertible, redeemable preferred stock, and outstanding warrants, and stock options.

Subsequent events - Subsequent events are events or transactions that occur after the balance sheet date but before consolidated financial statements are issued. The Company recognizes in the consolidated financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing the consolidated financial statements. The Company’s consolidated financial statements do not recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date and before the consolidated financial statements are available to be issued. The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the consolidated financial statements are filed for potential recognition or disclosure.

Recently adopted pronouncements - On April 7, 2015 the FASB issued Accounting Standards Update (ASU) No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” as part of its simplification initiative. The ASU changes the presentation of debt issuance costs in financial statements. Under the ASU, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. For public business entities, the guidance in the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. For entities other than public business entities, the guidance is effective for fiscal years beginning after December 15, 2015, and interim periods beginning after December 15, 2016. Early adoption is allowed for all entities for financial statements that have not been previously issued. Entities would apply the new guidance retrospectively to all prior periods (i.e., the balance sheet for each period is adjusted). The impact of the new ASU on the Company’s balance sheet would be a reduction of approximately $3,629,000 to assets and the corresponding reduction to liabilities. There would be no impact on the Company’s statements of operations.

(2) Restrictions on cash

The Company is required by its lenders to maintain collection and escrow accounts. These accounts are used to fund the acquisition, pay annual premiums of insurance policies, pay interest and other charges under the revolving credit facility, and collect policy benefits. DZ Bank AG, as agent for Autobahn Funding Company, LLC, the lender for the revolving credit facility as described in note 5, authorizes the disbursements from these accounts. At June 30, 2015 and December 31, 2014 there was a balance of $7,923,000, and $4,296,000, respectively, maintained in these restricted cash accounts.

(3) Investment in life insurance policies

The life insurance policies (Level 3 fair value measurements) are valued based on unobservable inputs that are significant to the overall fair value measurement. Changes in the fair value of these instruments are recorded in gain or loss on life insurance policies in the consolidated statements of operations (net of the cash premiums paid on the policies). The fair value is determined on a discounted cash flow basis that incorporates life expectancy assumptions. Life expectancy reports have been obtained from widely accepted life expectancy providers. The discount rate incorporates current information about market interest rates, the credit exposure to the insurance company that issued the life insurance policy and our estimate of the risk premium an investor in the policy would require. As a result of management’s analysis, discount rates of 11.19% and 11.43% were applied to the portfolio as of June 30, 2015 and December 31, 2014.

A summary of the Company’s life insurance policies accounted for under the fair value method and their estimated maturity dates, based on remaining life expectancy is as follows:

	As of June 30, 2015						As of December 31, 2014
Years Ending December 31,	Number of Contracts		Estimated Fair Value		Face Value		Number of Contracts		Estimated Fair Value		Face Value
2015		-	$	-	$	-		3	$	5,063,000	$	6,000,000
2016		5		7,198,000		8,500,000		7		8,144,000		11,550,000
2017		16		17,063,000		23,857,000		17		21,916,000		35,542,000
2018		30		42,478,000		72,171,000		30		41,994,000		76,206,000
2019		48		53,052,000		109,810,000		45		47,303,000		106,973,000
2020		43		46,597,000		101,574,000		41		43,429,000		102,614,000
2021		42		34,486,000		96,956,000		36		29,789,000		90,921,000
Thereafter		130		100,625,000		393,406,000		112		85,245,000		349,293,000
Totals		314		301,499,000		806,274,000		291	$	282,883,000	$	779,099,000

9

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The Company recognized policy benefits of $750,000 and $300,000 during the three-month periods ended June 30, 2015 and 2014, respectively, related to policies with a carrying value of $132,000 and $68,000, respectively. The Company recorded realized gains of $618,000 and $232,000 on such policies. The Company recognized policy benefits of $29,375,000 and $300,000 during the six-month periods ended June 30, 2015 and 2014, respectively, related to policies with carrying value of $3,743,000 and $68,000, respectively. The company recorded realized gains of $25,632,000 and $232,000, respectively on such policies.

Reconciliation of gain on life settlements:

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Change in fair value	$	14,028,000		$	10,852,000		$	12,134,000		$	22,211,000
Premiums and other annual fees		(6,172,000	)		(5,599,000	)		(12,509,000	)		(11,442,000	)
Policy maturities		618,000			232,000			25,632,000			232,000
Gain on life settlements, net	$	8,474,000		$	5,485,000		$	25,257,000		$	11,001,000

The estimated expected premium payments to maintain the above life insurance policies in force through 2020, assuming no mortalities, are as follows:

Years Ending December 31,	Premiums		Servicing		Premiums and Servicing Fees
Six months ending December 31, 2015	$	13,292,000	$	377,000	$	13,669,000
2016		27,985,000		377,000		28,362,000
2017		31,333,000		377,000		31,710,000
2018		34,191,000		377,000		34,568,000
2019		38,001,000		377,000		38,378,000
2020		42,158,000		377,000		42,535,000
	$	186,960,000	$	2,262,000	$	189,222,000

Management anticipates funding the estimated premium payments as noted above with proceeds from the DZ Bank revolving credit facility and through additional debt and equity financing as well as from cash proceeds from maturities of life insurance policies. The proceeds of these capital sources are also intended to be used for the purchase, financing, and maintenance of additional life insurance policies.

(4) Fair value definition and hierarchy

ASC 820 establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring assets and liabilities at fair value. Market price observability is affected by a number of factors, including the type of investment, the characteristics specific to the investment and the state of the marketplace including the existence and transparency of transactions between market participants. Assets and liabilities with readily available active quoted prices or for which fair value can be measured from actively quoted prices in an orderly market generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. ASC 820 establishes a three-level valuation hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

10

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The hierarchy is broken down into three levels based on the observability of inputs as follows:

● Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

● Level 2 - Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

● Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The availability of observable inputs can vary by types of assets and liabilities and is affected by a wide variety of factors, including, for example, whether instrument is established in the marketplace, the liquidity of markets and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by management in determining fair value is greatest for assets and liabilities categorized in Level 3.

Level 3 Valuation Process

The estimated fair value of the Company’s life settlements are determined on a quarterly basis by the Company’s portfolio management committee, taking into consideration changes in discount rate assumptions, estimated premium payments and life expectancy assumptions, as well as any changes in economic and other relevant conditions. These inputs are then used to estimate the discounted cash flows using the MAPS probabilistic portfolio pricing model, which estimates the cash flows using various different probabilities and scenarios. The valuation process includes a review by senior management as of each valuation date. Management also engages a third party expert to independently test the accuracy of the valuations using the inputs provided by management.

Life insurance policies represent financial instruments recorded at fair value on a recurring basis. The following table reconciles the beginning and ending fair value of the Company’s Level 3 investments in life insurance policies for the three and six-month periods ending June 30, as follows:

	Three month ended June 30,						Six months ended June 30,
	2015			2014			2015			2014
Beginning balance	$	278,395,000		$	254,504,000		$	282,883,000		$	234,673,000
Purchases		9,208,000			2,608,000			10,225,000			11,080,000
Maturities (cash in excess of carrying value)		(132,000	)		(68,000	)		(3,743,000	)		(68,000	)
Net change in fair value		14,028,000			10,852,000			12,134,000			22,211,000
Ending balance (June 30)	$	301,499,000		$	267,896,000		$	301,499,000		$	267,896,000

The fair value of a portfolio of life insurance policies is based on information available to the Company at the reporting date. Fair value is based upon a discounted cash flow model that incorporates life expectancy estimate assumptions. Life expectancy estimates are obtained from independent, third-party, widely accepted life expectancy estimate providers at policy acquisition. The life expectancy values of each insured, as determined at policy acquisition, are rolled down monthly for the passage of time by the MAPS actuarial software the Company uses for ongoing valuation of its portfolio of life insurance policies. The discount rate incorporates current information about discount rates applied by other reporting companies owning portfolios of life insurance policies, discount rates observed in the life insurance secondary market, market interest rates, the credit exposure to the insurance company that issued the life insurance policy and management’s estimate of the risk premium a purchaser would require to receive the future cash flows derived from our portfolio of life insurance policies.

On September 15, 2014, 21st Services announced changes to its mortality tables primarily for insureds age 90 and older, as well as updated adjustment factors designed to better underwrite seniors with multiple impairments. These changes represent small portions of 21st Services’ historical underwritings. We expect medical-actuarial underwriting firms to continue improving and refining their underwriting methodology.

11

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The fair value of life insurance policies is estimated using present value calculations of estimated cash flows based on the data specific to each individual life insurance policy. Estimated future policy premium payments are calculated based on the terms of the policy and the premium payment history. The following summarizes the unobservable inputs utilized in estimating the fair value of the portfolio of life insurance policies:

	As of June 30, 2015			As of December 31, 2014
Weighted average age of insured		82.9			82.8
Weighted average life expectancy, months*		78.7			78.4
Average face amount per policy	$	2,568,000		$	2,677,000
Discount rate		11.19	%		11.43	%

* Standard life expectancy as adjusted for insured’s specific circumstances.

These assumptions are, by their nature, inherently uncertain and the effect of changes in estimates may be significant. The techniques used in estimating the present value of estimated cash flows are derived from valuation techniques generally used in the industry that include inputs for the asset that are not based on observable market data. The extent to which the fair value could reasonably vary in the near term has been quantified by evaluating the effect of changes in significant underlying assumptions used to estimate the fair value. If the life expectancy estimates were increased or decreased by four and eight months on each outstanding policy and the discount factors were increased or decreased by 1% and 2%, while all other variables are held constant, the fair value of the investment in life insurance policies would increase or (decrease) by the amounts summarized below: 

	Change in life expectancy estimates
	minus 8 months		minus 4 months		plus 4 months			plus 8 months
June 30, 2015	$	41,402,000	$	20,590,000	$	(20,105,000	)	$	(39,752,000	)
December 31, 2014	$	40,634,000	$	20,130,000	$	(19,664,000	)	$	(38,864,000	)

	Change in discount rate
	minus 2%		minus 1%		plus 1%			plus 2%
June 30, 2015	$	29,494,000	$	14,144,000	$	(13,061,000	)	$	(25,148,000	)
December 31, 2014	$	28,179,000	$	13,522,000	$	(12,502,000	)	$	(24,085,000	)

Other Fair Value Considerations

Carrying value of receivables, prepaid expenses, accounts payable and accrued expenses approximate fair value due to their short-term maturities and low credit risk. The estimated fair value of the Company’s Series I Secured notes and L Bonds is approximately $253,263,000 based on a weighted average market interest rate of 7.08% based on an income approach, the combined face value of these notes is $251,038,000 as of June 30, 2015. The carrying value of the revolving credit facility reflects interest charged at the commercial paper rate plus an applicable margin. The margin represents our credit risk, and the strength of the portfolio of life insurance policies collateralizing the debt. The overall rate reflects market, and the carrying value of the revolver approximates fair value. All of the financial instruments are Level 3 fair value measurements.

The Company has issued warrants to purchase common stock in connection with the issuance of its convertible, redeemable preferred stock. Warrants were determined by the Company as permanent equity. The fair value measurements associated with the warrants, measured at issuance represent level 3 instruments.

12

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

As of June 30, 2015:

Month issued	Warrants issued		Fair value per share		Risk free rate			Volatility			Term
December 2011		68,937	$	0.22		0.42	%		25.25	%	5 years
March 2012		38,130	$	0.52		0.38	%		36.20	%	5 years
June 2012		161,840	$	1.16		0.41	%		47.36	%	5 years
July 2012		144,547	$	1.16		0.41	%		47.36	%	5 years
September 2012		2,500	$	0.72		0.31	%		40.49	%	5 years
September 2014		16,000	$	1.26		1.85	%		17.03	%	5 years
		431,954

Volatility is based upon the weekly percentage change in the stock price of selected comparable insurance companies. The percentage change is calculated on the average price of those selected stocks at the weekly close of business for the year preceding the balance sheet date. We compare annual volatility based on this weekly information.

(5) Credit facilities

Revolving credit facility – Autobahn Funding Company LLC

On July 15, 2008, DLP II and United Lending entered into a revolving credit facility pursuant to a Credit and Security Agreement (Agreement) with Autobahn Funding Company LLC (Autobahn), providing the Company with a maximum borrowing amount of $100,000,000. Autobahn is a commercial paper conduit that issues commercial paper to investors in order to provide funding to DLP II. DZ Bank AG Deutsche Zentral-Genossenschaftsbank (DZ Bank) acts as the agent for Autobahn. The original Agreement was to expire on July 15, 2013. On January 29, 2013, GWG Holdings, together with GWG Life and DLP II, entered into an Amended and Restated Credit and Security Agreement with Autobahn, extending the facility expiration date to December 31, 2014. On May 29, 2014, GWG Holdings, together with GWG Life and DLP II, entered into an Amendment No. 1 to Amended and Restated Credit and Security Agreement with Autobahn and DZ Bank (as committed lender and Agent). The amendment was entered into for the purpose of extending the maturity date for borrowings under the Agreement to December 31, 2016. Effective May 11, 2015, GWG Holdings, together with certain of its subsidiaries, entered into a Second Amended and Restated Credit and Security Agreement with Autobahn Funding Company LLC, as the conduit lender, and DZ Bank AG Deutsche Zentral-Genossenschaftsbank, as the committed lender and as the agent on behalf of secured parties under such agreement. The Second Amended and Restated Credit and Security Agreement extends the maturity date of borrowings made by the Company’s subsidiaries, GWG DLP Funding II, LLC and GWG DLP Funding III, LLC, to June 30, 2018. Advances under the credit facility made after May 11, 2015 will bear interest at the commercial paper rate of the lender at the time of the advance, or at the lender’s cost of borrowing plus 4.25 percent, which is 1.75 percent less than under the previous Credit and Security Agreement executed on January 25, 2013. In addition to the extended term and decreased interest rate and borrowing cost, the Second Amended and Restated Credit and Security Agreement also removes the requirement that the Company maintain a reserve for certain projected expenditures (including anticipated premium payments required to service its life insurance portfolio), thereby allowing for the Company’s full use of the credit facility up to its limit of $105,000,000.

In connection with the Second Amended and Restated Credit and Security Agreement, GWG Holdings and its subsidiaries entered into certain other agreements and amendments and restatements of earlier agreements entered into in connection with the original and renewal Credit and Security Agreements. Included among these other agreements was an Amended and Restated Performance Guaranty affirming the performance guaranty that GWG Holdings earlier provided in connection with the original and first amended and restated Credit and Security Agreements to DZ Bank AG Deutsche Zentral-Genossenschaftsbank, as agent. The amount outstanding under this facility was $65,011,000 and $72,161,000 at June 30, 2015 and December 31, 2014, respectively.

The Agreement requires DLP II to pay, on a monthly basis, interest at the commercial paper rate plus an applicable margin, as defined in the Agreement. The effective rate was 5.41% at June 30, 2015 and 6.24% at December 31, 2014. The Agreement also requires payment of an unused line fee on the unfunded amount under the revolving credit facility. The weighted-average effective interest rate (excluding the unused line fee) was 5.37% and 6.20% for the three months ended June 30, 2015 and 2014, respectively, and 6.00% and 6.21% for the six months ended June 30, 2015 and 2014, respectively. The note is secured by substantially all of DLP II’s and DLP III’s assets, which consist primarily of life insurance policies.

13

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The Agreement has certain financial and nonfinancial covenants. The Company was in compliance with these covenants at June 30, 2015 and December 31, 2014. The Agreement generally prohibits the Company from:

● changing its corporate name, offices, and jurisdiction of incorporation

● changing any deposit accounts or payment instructions to insurers;

● changing any operating policies and practices such that it would be reasonably likely to adversely affect the collectability of any asset in any material respect;

● merging or consolidating with, or selling all or substantially all of its assets to, any third party;

● selling any collateral or creating or permitting to exist any adverse claim upon any collateral;

● engaging in any other business or activity than that contemplated by the Agreement;

● incurring or guaranteeing any debt for borrowed money;

● amending the Company’s certificate of incorporation or bylaws, making any loans or advances to, investments in, or paying any dividends to, any person unless both before and after any such loan, advance, investment or dividend there exists no actual event of default, potential event of default or termination event;

● removing an independent director on the board of directors except for cause or with the consent of the lender; or

● making payment on or issuing any subsidiary secured notes or debentures, or amending any agreements respecting such notes or debentures, if an event of default, potential event of default or termination event exists or would arise from any such action.

In addition, the Company has agreed to maintain (i) a positive consolidated net income on a non-GAAP basis (as defined and calculated under the Agreement) for each complete fiscal year and (ii) a tangible net worth on a non-GAAP basis (again, as defined and calculated under the Agreement) of not less than $45 million, and (iii) maintain cash and eligible investments at $15 million or above.

Consolidated tangible net worth and net income as of and for the four quarters ended June 30, 2015, as calculated on non-GAAP basis under the agreement, was $101,427,000 and $44,503,000, respectively.

Advances under the Agreement are subject to a borrowing base formula, which limits the availability of advances on the borrowing base calculation based on attributes of policies pledged to the facility. Over-concentration of policies by insurance carrier, over-concentration of policies by insurance carriers with ratings below a AA- rating, and the premiums and facility fees reserve are the three primary factors with the potential of limiting availability of funds on the facility. Total funds available for additional borrowings under the borrowing base formula criteria at June 30, 2015 and December 31, 2014, were $33,409,000 and $20,585,000 respectively.

On July 15, 2008, Holdings delivered a performance guaranty in favor of Autobahn pursuant to which it guaranteed the obligations of GWG Life, in its capacity as the seller and master servicer, under the Credit and Security Agreement and related documents. On January 29, 2014 and in connection with the Amended and Restated Credit and Security Agreement, Holdings delivered a reaffirmation of its performance guaranty. The obligations of Holdings under the performance guaranty and subsequent reaffirmation do not extend to the principal and interest owed by DLP II and DLP III as the borrower under the credit facility.

(6) Series I Secured notes

Series I Secured Notes are secured by assets of GWG Life and are subordinate to our revolving credit facility (see note 5). On June 14, 2011, the Company closed the offering to additional investors; however, existing investors may elect to continue advancing amounts outstanding upon maturity subject to the Company’s option to repay such notes. Series I Secured Notes have maturity dates ranging from six months to seven years with fixed interest rates varying from 5.65% to 9.55% depending on the term of the note. Interest is payable monthly, quarterly, annually or at maturity depending on the terms of the note. At June 30, 2015 and December 31, 2014, the weighted-average interest rate of Series I Secured Notes was 8.49% and 8.37%, respectively. The notes are secured by assets of GWG Life. The principal amount outstanding under these Series I Secured Notes was $24,728,000 and $28,047,000 at June 30, 2015 and December 31, 2014, respectively. The difference between the amount outstanding on the Series I Secured Notes and the carrying amount on the consolidated balance sheet is due to netting of unamortized deferred issuance costs. Overall, interest expense includes amortization of deferred financing and issuance costs of $81,000 and $211,000 for the three and six months ended June 30, 2015, respectively, and $134,000 and $301,000 for the three and six months ended June 30, 2014, respectively. Future expected amortization of deferred financing costs is $390,000 over the next six years.

14

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The use of proceeds from the issuances of L Bonds is limited to the following: (1) payment of commissions on sales of L Bonds, (2) payment of offering expenses, (3) purchase of life insurance policies, (4) payment of premiums on life insurance policies, (5) payment of principal and interest on L Bonds, (6) payment of portfolio operations expenses, and (7) general working capital.

Future contractual maturities of Series I Secured notes at June 30, 2015 are as follows:

Years Ending December 31,	Contractual Maturities		Amortization of Deferred Financing Costs
Six months ending December 31, 2015	$	5,085,000	$	20,000
2016		10,964,000		144,000
2017		6,164,000		149,000
2018		1,127,000		36,000
2019		347,000		7,000
Thereafter		1,041,000		34,000
	$	24,728,000	$	390,000

(7) L Bonds (formerly Renewable Secured Debentures)

The Company registered with the SEC, effective January of 2012, the offer and sale of $250,000,000 of Renewable Secured Debentures (subsequently renamed “L Bonds”). The debentures are secured by assets of GWG Holdings and GWG Life and are subordinate to our revolving credit facility (see note 5). L Bonds have maturity dates ranging from six months to seven years with fixed interest rates varying from 4.25% to 9.50% depending on the term of the note. Interest is payable monthly, annually or at maturity depending on the terms of the debenture. Effective January 9, 2015, The Company launched a $1 billion follow-on to our publicly registered L Bond offering. The Company is offering L Bonds on a continuous basis and there is no minimum amount of L Bonds that must be sold before The Company can use proceeds from the sale of L Bonds. The Company plans to use the net proceeds from the offering of the L Bonds primarily to purchase and finance additional life insurance assets, and to service and retire other outstanding debt obligations. Emerson Equity LLC is serving as the managing broker-dealer for the offering, which is being sold through a network of participating dealers and licensed financial advisors and representatives in minimum increments of $25,000. At June 30, 2015 and December 31, 2014, the weighted-average interest rate of L Bonds was 7.27% and 7.45%, respectively. The amount outstanding under these L Bonds was $226,310,000 and $186,377,000 at June 30, 2015 and December 31, 2014, respectively. The difference between the amount outstanding on the L Bonds and the carrying amount on the consolidated balance sheets is due to netting of unamortized deferred issuance costs and cash receipts for new issuances in process. Amortization of deferred issuance costs was $1,366,000 and $2,340,000 for the three and six months ended June 30, 2015, respectively, and $908,000 and $1,755,000 for the three and six months ended June 30, 2014, respectively. Future expected amortization of deferred financing costs as of June 30, 2015 is $6,312,000 in total over the next seven years.

The use of proceeds from the issuances of L Bonds is limited to the following: (1) payment of commissions on sales of L Bonds, (2) payment of offering expenses, (3) purchase of life insurance policies, (4) payment of premiums on life insurance policies, (5) payment of principal and interest on L Bonds, (6) payment of portfolio operations expenses, and (7) general working capital.

Future contractual maturities of L Bonds and future amortization of their deferred financing costs at June 30, 2015 are as follows:

Years Ending December 31,	Contractual Maturities		Amortization of Deferred Financing Costs
Six months ending December 31, 2015	$	48,082,000	$	243,000
2016		67,120,000		1,229,000
2017		43,051,000		1,520,000
2018		31,012,000		1,450,000
2019		14,342,000		612,000
Thereafter		22,703,000		1,258,000
	$	226,310,000	$	6,312,000

15

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The Company entered into an Indenture effective October 19, 2011 with Holdings as obligor, GWG Life as guarantor, and Bank of Utah as trustee for the benefit of the debenture holders.  The Indenture has certain financial and nonfinancial covenants.  The Company was in compliance with these covenants at June 30, 2015 and December 31, 2014.

(8) Convertible, redeemable preferred stock

The Company offered 3,333,333 shares of convertible redeemable preferred stock (Series A Preferred Stock) for sale to accredited investors in a private placement on July 31, 2011. The offering of Series A Preferred Stock concluded on September 2, 2012 and resulted in 3,278,000 shares being issued for gross consideration of $24,582,000. As of June 30, 2015, 324,000 shares have been issued as a result of the payment of $2,271,000 in dividends in the form of shares of Series A Preferred Stock and 678,000 shares have been converted to 508,000 shares of the Company’s common stock. The Series A Preferred Stock was sold at an offering price of $7.50 per share. Series A Preferred Stock has a preferred yield of 10% per annum, and each share has the right to convert into 0.75 shares of the Company’s common stock. Series A preferred shareholders also received three-year warrants to purchase, at an exercise price per share of $12.50, one share of common stock for every 40 shares of Series A Preferred Stock purchased. The warrants are exercisable immediately. Upon their original issuance, these warrants had a three-year exercise period. Effective August 1, 2014, the Board of Directors authorized the extension of the warrant exercise period for an additional two years. In the Certificate of Designations for the Series A Preferred Stock dated July 31, 2011, the Company agreed to permit preferred shareholders to sell their shares back to the Company for the stated value of $7.50 per share, plus accrued dividends, according to the following schedule:

● Up to 33% of the holder’s unredeemed shares one year after issuance:

● Up to 66% of the holder’s unredeemed shares two years after issuance; and

● Up to 100% of the holder’s unredeemed shares three years after issuance.

The Company’s obligation to redeem its Series A Preferred Stock terminated upon the Company completing a registration of its common stock with the SEC which occurred on September 24, 2014 (See Note 10). As such, the convertible redeemable preferred stock was reclassified from temporary equity to permanent equity. The Company may redeem the Series A preferred shares at a price equal to 110% of their liquidation preference ($7.50 per share) at any time. As of June 30, 2015, the Company had redeemed an aggregate of 182,000 shares of Series A Preferred Stock. The Series A Preferred Stock shares (i) were convertible, at the election of the Company, into common stock of the Company in the event of either a registered offering of the Company’s common stock with the SEC aggregating gross proceeds of at least $5.0 million and at a price equal to or greater than $11.00 per share; (ii) remain convertible at the option of each holder; and (iii) are required to be converted upon the consent of shareholders holding at least a majority of the then-outstanding Series A Preferred Stock. In connection with the Company’s initial public offering, the Company elected to cause the conversion of 678,000 shares of preferred stock into 508,000 shares of common stock. As of June 30, 2015, the Company had 2,746,000 shares of Series A Preferred Stock outstanding with gross consideration of $20,560,000 (including cash proceeds, conversion of Series I Secured Notes and accrued interest on Series I, and conversion of preferred dividends payable). The Company incurred Series A Preferred Stock issuance costs of $2,838,000, all of which was included as a component of additional paid in capital as of December 31, 2014.

The Company determined that the grant date fair value of the outstanding warrants attached to the Series A Preferred Stock was $428,000 for warrants outstanding as of June 30, 2015. The Company may redeem outstanding warrants prior to their expiration, at a price of $0.01 per share upon 30 days written notice to the investors at any time after (i) the Company has completed a registration of its common stock with the SEC and (ii) the volume of weighted-average sale price per share of common stock equals or exceeds $14.00 per share for ten consecutive trading days ending on the third business day prior to proper notice of such redemption.

Total warrants outstanding as of both June 30, 2015 and December 31, 2014, were 431,954 with a weighted-average remaining life of 1.93 and 2.43 years, respectively. As of June 30, 2015, none of these warrants have been exercised.

Dividends on the Series A preferred stock may be paid in either cash or additional shares of Series A preferred stock at the election of the holder and approval of the Company. The dividends are reported as an expense and included in the caption interest expense in the consolidated statements of operations. The Company declared and accrued dividends of $495,000 and $638,000 during the three months ended June 30, 2015 and 2014, respectively, and $1,032,000 and $1,276,000 during the six months ended June 30, 2015 and 2014, respectively, pursuant to a board resolution declaring the dividend. 21,000 and 28,000 shares of Series A preferred stock were issued in lieu of cash dividends in the three month periods ended June 30, 2015 and 2014, and 48,000 and 54,000 shares of Series A preferred stock were issued in lieu of cash dividends in the six month periods ended June 30, 2015 and 2014, respectively. The shares issued in lieu of cash dividends were issued at $7.00 per share.  As of June 30, 2015, Holdings has $514,000 of accrued preferred dividends which were paid or converted to shares of Series A preferred stock on July 15, 2015.

16

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(9) Income taxes

The Company has a $181,000 and $0 of current income tax liability as of June 30, 2015 and December 31, 2014. The components of current and deferred income tax expense (benefit) for the three and six months ended June 30, 2015 and income tax benefit for the three month ended June 30, 2014, consisted of the following:

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,		June 30,
	2015			2014			2015		2014
Income tax provision (benefit):
Current:
Federal	$	(182,000	)	$	-		$	141,000	$	-
State	$	(64,000	)	$	-		$	40,000	$	-
Total current tax expense (benefit)		(246,000	)		-			181,000		-
Deferred:
Federal	$	(670,000	)	$	(1,106,000	)	$	984,000	$	(1,909,000	)
State	$	(261,000	)	$	(211,000	)	$	268,000	$	(363,000	)
Total deferred tax expense (benefit)		(931,000	)		(1,317,000	)		1,252,000		(2,272,000	)
Total income tax expense (benefit)		(1,177,000	)		(1,317,000	)		1,433,000		(2,272,000	)

The primary differences between the Company’s June 30, 2015 effective tax rate and the statutory federal rate are the accrual of nondeductible preferred stock dividend expense of $514,000 state taxes, and other non-deductible expenses. The most significant temporary differences between GAAP net income and taxable net income are the treatment of interest costs with respect to the acquisition of the life insurance policies and revenue recognition with respect to the mark-to-market of life insurance portfolio.

(10) Common Stock

On September 24, 2014, GWG consummated an initial public offering of its common stock which resulted in the sale of 800,000 shares of common stock at $12.50 per share. The sale resulted in net proceeds of approximately $8.6 million after the deduction of underwriting commissions, discounts and expense reimbursements. In connection with this offering, the Company listed its common stock on The NASDAQ Capital Market under the ticker symbol “GWGH” effective September 25, 2014. The Company used the net proceeds from the offering to promote and advertise the opportunities for consumers owning life insurance and investors to profit from participating in the secondary market for life insurance policies, purchase additional life insurance policies in the secondary market, pay premiums on the Company’s life insurance policy assets, fund its portfolio operations, and for working capital purposes.

Stock split — On June 24, 2014, the Company’s Board of Directors and majority stockholders approved a joint resolution to effect an amendment to the Company’s Certificate of Incorporation in the state of Delaware whereby the company shall enact a reverse split of the common stock such that for every two (2) shares of common stock issued and outstanding immediately prior to the effective date shall, automatically and without any action on the part of the respective holders thereof, be combined and converted into one (1) share of common stock. The effective date of the amendment and reverse stock split is June 24, 2014. In lieu of fractional shares, stockholders received cash payments in an amount equal to the fraction to which the stockholder would otherwise be entitled multiplied by the price of the common stock, as determined by the Board of Directors of the Company, but adjusted so as to give effect to the reverse stock split. The par value of the common stock remained at $0.001 per share.

On June 23, 2015 GWG issued 60,000 shares of restricted common stock at $9.70 per share determined by closing market price, to a vendor as a form of payment for the services the vendor will provide to the Company in the next three years. The cost of the issued shares will be amortized over the next 12 months.

(11) Stock Incentive Plan

The Company adopted the GWG Holdings, Inc. 2013 Stock Incentive Plan on March 27, 2013. On April 23, 2015 the Board of Directors approved amendments to the plan which were subsequently approved by a majority of the Company’s stockholders at the annual meeting of stockholders on June 1, 2015. The plan is administered by Compensation Committee of the Board of Directors of the Company. The Company’s Chief Executive Officer may, on a discretionary basis and without committee review or approval, grant incentives to new employees of the Company who are not officers of the Company. Incentives under the plan may be granted in one or a combination of the following forms: (a) incentive stock options and non-statutory stock options; (b) stock appreciation rights; (c) stock awards; (d) restricted stock; (e) restricted stock units; and (f) performance shares. Eligible participants include officers and employees of the company, members of the Board of Directors, and consultants or other independent contractors. 2,000,000 shares are issuable under the plan. No person shall receive grants of stock options and SARs under the plan that exceed, in the aggregate 400,000 shares of common stock in any one year. The term of each stock option shall be determined by the committee but shall not exceed ten years. Vested stock options may be exercised in whole or part by the holder giving notice to the Company. The holder of the option may provide payment for the exercise price or surrender shares equal to the exercise price.

17

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The Company issued stock options for 991,401 shares of common stock to employees, officers, and directors of the Company through June 30, 2015. Options for 443,381 shares have vested, and the remaining options will vest over three years. The options were issued with an exercise price between $8.20 and $10.18 for those owning more than 10% of the Company’s stock and between $6.73 and $10.25 for others, which is equal to the estimated market price of the shares on the date of grant valued using Black-Scholes binomial option pricing model. The expected volatility used in the Black-Scholes model valuation of options issued during the year was 17.03% annualized. The annual volatility rate is based on the standard deviation of the average continuously compounded rate of return of five selected comparable companies over the previous 52 weeks. Forfeiture rate of 15% is based on historical Company information and expected future trend. As of June 30, 2015, stock options for 113,499 shares were forfeited and stock options for 28,001 shares were exercised.

In September 2014, we entered into a stock option agreement (the Agreement) with a new management employee (the Employee) granting the Employee the right to purchase up to 318,000 of the Company’s common stock at an exercise price of $12.50. The grant of such rights to purchase the Company’s common stock was treated as an inducement grant and was issued outside the GWG Holdings Inc. 2013 Stock Incentive Plan. The Agreement specifies that, among other things, options to purchase 159,000 shares of the Company’s common stock will vest with the Employee ratably on the first, second and third anniversary of the date of the Agreement. The remaining 159,000 options will vest quarterly using a formula based upon the closing price of the Company’s common stock on the last business day of such quarter. The maximum number of these remaining options that will vest with the Employee is 53,000 in each successive one-year period beginning on the date of the Agreement.

Outstanding stock options:

	Vested			Un-vested			Total
Balance as of December 31, 2014		314,288			685,813			1,000,101
Granted during the year		53,500			192,300			245,800
Vested during the year		44,592			(44,592	)		-
Exercised during the year		(27,667	)		-			(27,667	)
Forfeited during the year		(2,250	)		(48,083	)		(50,333	)
Balance as of June 30, 2015		382,463			785,438			1,167,901

Compensation expense related to un-vested options not yet recognized is $642,000. We expect to recognize this compensation expense over the next three years ($185,000 in 2015, $229,000 in 2016, $189,000 in 2017, and 39,000 in 2018). The Company issues new common stock for options exercised.

(12) Net loss per common share

The Company began issuing Series A Preferred Stock on September 1, 2011, as described in note 8. The Series A Preferred Stock and vested stock options are dilutive to the net income/loss per common share calculation for the six-month period ended June 30, 2015 and anti-dilutive for the three-month period ended June 30, 2015. The Series A Preferred Stock and vested stock options are anti-dilutive for both three and six-month periods ended June 30, 2014. The Company has also issued warrants to purchase common stock in conjunction with the sale of convertible preferred stock, discussed in note 8. The warrants are anti-dilutive for all described three and six-month periods of 2015 and 2014 and have not been included in the fully diluted net income/loss per common share calculation.

(13) Commitments

The Company entered into an office lease with U.S. Bank National Association as the landlord. The lease was effective April 22, 2012 with a term through August 31, 2015. The lease is for 11,695 square feet of office space located at 220 South Sixth Street, Minneapolis, Minnesota. The Company is obligated to pay base rent plus common area maintenance and a share of the building operating costs. Rent expenses under this agreement were $122,000 and $101,000 during the six-month periods ended June 30, 2015 and 2014, respectively, and $55,000 and $49,000 during the three-month periods ended June 30, 2015 and 2014, respectively. The minimum lease payments for 2015 under the lease agreement are $70,000.

.

18

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(14) Contingencies

Litigation - In the normal course of business, the Company is involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings would not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Opportunity Finance, LLC, owned by Jon Sabes and Steven Sabes, is subject to litigation clawback claims by the bankruptcy trustee for third-party matters for payments that may have been deemed preference payments. In addition, Jon Sabes and Steven Sabes are subject to litigation clawback claims by the bankruptcy trustee for third-party matters for payments received from Opportunity Finance that may have been deemed preference payments. If the parties are unsuccessful in defending against these claims, their equity ownership in the Company may be sold or transferred to other parties to satisfy such claims. In addition, the Company loaned $1,000,000 to Opportunity Finance, LLC, and was repaid in full plus interest of $177,000. This investment amount may also be subject to clawback claims by the bankruptcy court.

(15) Guarantees of secured debt

GWG Holdings has registered with the SEC the offer and sale $250,000,000 of L Bonds, and effective January 9, 2015, launched a $1 billion follow-on to its publicly registered L Bond offering as described in note 7. The L Bonds are secured by the assets of Holdings as described in note 7 and a pledge of all the common stock held by the largest individual shareholders. Obligations under the L Bonds are guaranteed by GWG Life. This guarantee involves the grant of a security interest in all the assets of GWG Life. The payment of principal and interest on the L Bonds is fully and unconditional guaranteed by GWG Life. Substantially all of the Company’s life insurance policies are held by DLP II, DLP III and the Trust. The policies held by DLP II are not collateral for the L Bond obligations as such policies serve as collateral for the credit facility.

The consolidating financial statements are presented in lieu of separate financial statements and other related disclosures of the subsidiary guarantors and issuer because management does not believe that separate financial statements and related disclosures would be material to investors. There are currently no significant restrictions on the ability of Holdings or GWG Life, the guarantor subsidiary, to obtain funds from its subsidiaries by dividend or loan, except as follows. DLP II and DLP III are borrowers under a credit agreement with Autobahn, with DZ Bank AG as agent, as described in note 5. The significant majority of insurance policies owned by the Company are subject to a collateral arrangement with DZ Bank AG described in notes 2 and 5. Under this arrangement, collection and escrow accounts are used to fund premiums of the insurance policies and to pay interest and other charges under the revolving credit facility. DZ Bank AG and Autobahn must authorize all disbursements from these accounts, including any distributions to GWG Life. Distributions are limited to an amount that would result in the borrowers (DLP II, DLP III, GWG Life and Holdings) realizing an annualized rate of return on the equity funded amount for such assets of not more than 18%, as determined by DZ Bank AG. After such amount is reached, the credit agreement requires that excess funds be used for repayments of borrowings before any additional distributions may be made.

The following represents consolidating financial information as of June 30, 2015 and December 31, 2014, with respect to the financial position, and for the three and six months ended June 30, 2015 and 2014 with respect to results of operations and cash flows of Holdings and its subsidiaries. The parent column presents the financial information of Holdings, the primary obligor of the L Bonds. The guarantor subsidiary column presents the financial information of GWG Life, the guarantor subsidiary of the L Bonds, presenting its investment in DLP II, DLP III and Trust under the equity method. The non-guarantor subsidiaries column presents the financial information of all non-guarantor subsidiaries including DLP II, DLP III and Trust.

19

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Condensed Consolidating Balance Sheets

June 30, 2015	Parent			Guarantor Sub		Non-Guarantor Sub		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	37,814,528		$	233,553	$	150,108	$	-		$	38,198,189
Restricted cash		-			185,000		7,738,190		-			7,923,190
Policy benefits receivable		-			-		2,500,000		-			2,500,000
Investment in life settlements, at fair value		-			-		301,498,527		-			301,498,527
Other assets		2,688,215			1,730,651		2,204,695		-			6,623,561
Investment in subsidiaries		222,479,390			248,566,916		-		(471,046,306	)		-
TOTAL ASSETS	$	262,982,133		$	250,716,120	$	314,091,520	$	(471,046,306	)	$	356,743,467
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Revolving credit facility	$	-		$	-	$	65,011,048	$	-		$	65,011,048
Series I Secured notes		-			24,347,531		-		-			24,347,531
L Bonds		223,118,514			-		-		-			223,118,514
Interest payable		7,967,900			3,374,563		250,757		-			11,593,220
Accounts payable and other accrued expenses		1,294,444			664,744		112,691		-			2,071,879
Deferred taxes, net		6,525,336			-		-		-			6,525,336
TOTAL LIABILITIES		238,906,194			28,386,838		65,374,496		-			332,667,528
STOCKHOLDERS’ EQUITY (DEFICIT)
Member capital		-			222,329,282		248,717,024		(471,046,306	)		-
Convertible preferred stock		20,559,823										20,559,823
Common stock		5,933			-		-		-			5,933
Additional paid-in capital		16,900,193			-		-		-			16,900,193
Accumulated deficit		(13,390,010	)		-		-		-			(13,390,010	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		24,075,939			222,329,282		248,717,024		(471,046,306	)		24,075,939
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	262,982,133		$	250,716,120	$	314,091,520	$	(471,046,306	)	$	356,743,467

20

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Condensed Consolidating Balance Sheets (continued)

December 31, 2014	Parent			Guarantor Subsidiary		Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	30,446,473		$	216,231	$	-	$	-		$	30,662,704
Restricted cash		-			82,500		4,213,553		-			4,296,053
Policy benefits receivable		-			-		1,750,000		-			1,750,000
Investment in life settlements, at fair value		-			-		282,883,010		-			282,883,010
Other assets		1,673,728			1,777,534		27,500		-			3,478,762
Investment in subsidiaries		185,636,417			215,124,779		-		(400,761,196	)		-
TOTAL ASSETS	$	217,756,618		$	217,201,044	$	288,874,063	$	(400,761,196	)	$	323,070,529
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Revolving credit facility	$	-		$	-	$	72,161,048	$	-		$	72,161,048
Series I Secured notes		-			27,616,578		-		-			27,616,578
L Bonds		182,782,884			-		-		-			182,782,884
Interest payable		6,598,250			3,513,615		1,016,654		-			11,128,519
Accounts payable and other accrued expenses		711,993			434,433		571,583		-			1,718,009
Deferred taxes, net		5,273,555			-		-		-			5,273,555
TOTAL LIABILITIES		195,366,682			31,564,626		73,749,285		-			300,680,593
STOCKHOLDERS’ EQUITY (DEFICIT)
Member capital		-			185,636,418		215,124,778		(400,761,196	)		-
Convertible preferred stock		20,527,866			-		-		-			20,527,866
Common stock		5,870			-		-		-			5,870
Additional paid-in capital		16,257,686			-		-		-			16,257,686
Accumulated deficit		(14,401,486	)		-		-		-			(14,401,486	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		22,389,936			185,636,418		215,124,778		(400,761,196	)		22,389,936
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	217,756,618		$	217,201,044	$	288,874,063	$	(400,761,196	)	$	323,070,529

21

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Condensed Consolidating Statements of Operations

For the six months ended June 30, 2015	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Origination and servicing income	$	-		$	1,018,750		$	-	$	(1,018,750	)	$	-
Gain on life settlements, net		-			-			25,257,295		-			25,257,295
Interest and other income		25,023			6,880			107,773		-			139,676
TOTAL REVENUE		25,023			1,025,630			25,365,068		(1,018,750	)		25,396,971
EXPENSES
Origination and servicing fees		-			-			1,018,750		(1,018,750	)		-
Employee compensation and benefits		2,911,596			961,046			-		-			3,872,642
Legal and professional fees		828,858			337,326			-		-			1,166,184
Interest expense		11,031,758			1,458,965			2,008,158		-			14,498,881
Other expenses		2,056,188			1,302,036			56,836		-			3,415,060
TOTAL EXPENSES		16,828,400			4,059,373			3,083,744		(1,018,750	)		22,952,767
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(16,803,377	)		(3,033,743	)		22,281,324		-			2,444,204
EQUITY IN INCOME OF SUBSIDIARY		19,247,581			22,281,217			-		(41,528,798	)		-
NET INCOME BEFORE INCOME TAXES		2,444,204			19,247,474			22,281,324		(41,528,798	)		2,444,204
INCOME TAX EXPENSE		1,432,728			-			-		-			1,432,728
NET LOSS	$	1,011,476		$	19,247,474		$	22,281,324	$	(41,528,798	)	$	1,011,476

For the six months ended June 30, 2014	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Origination and servicing income	$	-		$	1,308,906		$	-	$	(1,308,906	)	$	-
Gain on life settlements, net		-			-			11,001,094		-			11,001,094
Interest and other income		12,929			169,976			63		(169,221	)		13,747
TOTAL REVENUE		12,929			1,478,882			11,001,157		(1,478,127	)		11,014,841
EXPENSES
Origination and servicing fees		-			-			1,308,906		(1,308,906	)		-
Employee compensation and benefits		1,255,079			892,485			-		-			2,147,564
Legal and professional fees		723,106			103,233			-		-			826,339
Interest expense		8,691,989			1,572,269			2,670,333		-			12,934,591
Other expenses		1,106,635			734,138			194,232		(169,221	)		1,865,784
TOTAL EXPENSES		11,776,809			3,302,125			4,173,471		(1,478,127	)		17,774,278
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(11,763,880	)		(1,823,243	)		6,827,686		-			(6,759,437	)
EQUITY IN INCOME OF SUBSIDIARY		5,004,443			6,827,686			-		(11,832,129	)		-
NET INCOME BEFORE INCOME TAXES		(6,759,437	)		5,004,443			6,827,686		(11,832,129	)		(6,759,437	)
INCOME TAX BENEFIT		(2,271,570	)		-			-		-			(2,271,570	)
NET LOSS	$	(4,487,867	)	$	5,004,443		$	6,827,686	$	(11,832,129	)	$	(4,487,867	)

22

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Condensed Consolidating Statements of Operations (continued)

For the three months ended June 30, 2015	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Origination and servicing income	$	-		$	661,264		$	-	$	(661,264	)	$	-
Gain on life settlements, net		-			-			8,473,886		-			8,473,886
Interest and other income		17,480			430			72,470		-			90,380
TOTAL REVENUE		17,480			661,694			8,546,356		(661,264	)		8,564,266
EXPENSES
Origination and servicing fees		-			-			661,264		(661,264	)		-
Employee compensation and benefits		1,605,795			538,930			-		-			2,144,725
Legal and professional fees		351,507			291,424			-		-			642,931
Interest expense		5,781,796			684,879			855,672		-			7,322,347
Other expenses		1,104,826			732,243			44,252		-			1,881,321
TOTAL EXPENSES		8,843,924			2,247,476			1,561,188		(661,264	)		11,991,324
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(8,826,444	)		(1,585,782	)		6,985,168		-			(3,427,058	)
EQUITY IN INCOME OF SUBSIDIARY		5,399,386			6,985,112			-		(12,384,498	)		-
NET INCOME BEFORE INCOME TAXES		(3,427,058	)		5,399,330			6,985,168		(12,384,498	)		(3,427,058	)
INCOME TAX BENEFIT		(1,176,643	)		-			-		-			(1,176,643	)
NET LOSS	$	(2,250,415	)	$	5,399,330		$	6,985,168	$	(12,384,498	)	$	(2,250,415	)

For the three months ended June 30, 2014	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Origination and servicing income	$	-		$	342,850		$	-	$	(342,850	)	$	-
Gain on life settlements, net		-			-			5,484,889		-			5,484,889
Interest and other income		6,000			362			18		-			6,380
TOTAL REVENUE		6,000			343,212			5,484,907		(342,850	)		5,491,269
EXPENSES
Origination and servicing fees		-			-			342,850		(342,850	)		-
Employee compensation and benefits		664,495			514,324			-		-			1,178,819
Legal and professional fees		375,243			44,094			-		-			419,337
Interest expense		4,475,461			793,702			1,338,880		-			6,608,043
Other expenses		767,096			408,883			12,500		-			1,188,479
TOTAL EXPENSES		6,282,295			1,761,003			1,694,230		(342,850	)		9,394,678
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(6,276,295	)		(1,417,791	)		3,790,667		-			(3,903,409	)
EQUITY IN INCOME OF SUBSIDIARY		2,372,886			3,790,667			-		(6,163,563	)		-
NET INCOME BEFORE INCOME TAXES		(3,903,409	)		2,372,886			3,790,667		(6,163,563	)		(3,903,409	)
INCOME TAX BENEFIT		(1,316,712	)		-			-		-			(1,316,712	)
NET LOSS	$	(2,586,697	)	$	2,372,886		$	3,790,667	$	(6,163,563	)	$	(2,586,697	)

23

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Condensed Consolidating Statements of Cash Flows

For the six months ended June 30, 2015	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,011,476		$	19,247,474		$	22,281,324		$	(41,528,798	)	$	1,011,476
Adjustments to reconcile net income to net cash flows from operating activities:
(Equity) of subsidiaries		(19,247,582	)		(22,281,216	)		-			41,528,798			-
Gain on life settlements		-			-			(12,134,482	)		-			(12,134,482	)
Amortization of deferred financing and issuance costs		1,729,175			211,116			(1,982,295	)		-			(42,004	)
Deferred income taxes		1,251,781			-			-			-			1,251,781
Convertible, redeemable preferred stock issued for dividends		335,232			-			-			-			335,232
(Increase) in operating assets:
Policy benefits receivable		-			-			(750,000	)					(750,000	)
Other assets		(17,998,823	)		(11,114,039	)		-			28,756,313			(356,549	)
Increase in operating liabilities:
Accounts payable and accrued expenses		2,493,495			228,640			(1,419,689	)		-			1,302,446
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(30,425,246	)		(13,708,025	)		(5,994,858	)		28,756,313			(9,382,100	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(10,224,018	)		-			(10,224,018	)
Proceeds from settlement of life settlements		-			-			3,742,983			-			3,742,983
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(6,481,035	)		-			(6,481,035	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of revolving credit facility		-			-			(7,150,000	)		-			(7,150,000	)
Payments for redemption of Series I Secured notes		-			(3,617,544	)		-			-			(3,617,544	)
Proceeds from issuance of L Bonds		50,498,356			-			-			-			50,498,356
Payments for redemption and issuance of L Bonds		(13,013,057	)		-			-			-			(13,013,057	)
Proceeds from restricted cash		-			(102,500	)		(3,524,637	)		-			(3,627,137	)
Issuance of common stock		582,000			-			-			-			582,000
Redemptions of convertible, redeemable preferred stock		(273,998	)		-			-			-			(273,998	)
Issuance of member capital		-			17,445,391			11,310,922			(28,756,313	)		-
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		37,793,301			13,725,347			636,285			(28,756,313	)		23,398,620
NET INCREASE IN CASH AND CASH EQUIVALENTS		7,368,055			17,322			150,108			-			7,535,485
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		30,446,473			216,231			-			-			30,662,704
END OF THE PERIOD	$	37,814,528		$	233,553		$	150,108		$	-		$	38,198,189

24

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Consolidating Statements of Cash Flows (continued)

For the six months ended June 30, 2014	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(4,487,867	)	$	5,004,443		$	6,827,686		$	(11,832,129	)	$	(4,487,867	)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
(Equity) of subsidiaries		(5,004,443	)		(6,827,686	)		-			11,832,129			-
Life settlements – change in fair value		-			-			(22,211,338	)		-			(22,211,338	)
Amortization of deferred financing and issuance costs		1,727,610			301,104			(321,050	)					1,707,664
Deferred income taxes		(2,271,570	)		-			-						(2,271,570	)
Convertible, redeemable preferred stock dividends payable		389,331			-			-			-			389,331
(Increase) in operating assets:
Policy benefits receivable		-			-			(300,000	)		-			(300,000	)
Other assets		(26,622,350	)		(24,654,818	)		-			50,328,249			(948,919	)
Increase in operating liabilities:
Accounts payable and accrued expenses		1,971,543			302,402			894,218			-			3,168,163
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(34,297,746	)		(25,874,555	)		(15,110,484	)		50,328,249			(24,954,536	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(10,879,435	)		-			(10,879,435	)
Proceeds from settlement of life settlements		-			-			68,500			-			68,500
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(10,810,935	)		-			(10,810,935	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for redemption of Series I Secured notes		-			(1,538,924	)		-			-			(1,538,924	)
Proceeds from issuance of L Bonds		33,234,487			-			-			-			33,234,487
Payments for redemption and issuance of L Bonds		(9,322,411	)		-			-			-			(9,322,411	)
Proceeds from restricted cash		-			855,000			2,167,537			-			3,022,537
Redemptions of convertible, redeemable preferred stock		(20,056	)		-			-			-			(20,056	)
Issuance of member capital		-			26,574,367			23,753,882			(50,328,249	)		-
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		23,892,020			25,890,443			25,921,419			(50,328,249	)		25,375,633
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(10,405,723	)		15,888			-			-			(10,389,838	)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		32,711,636			738,157			-			-			33,449,793
END OF THE PERIOD	$	22,305,910		$	754,045		$	-		$	-		$	23,059,955

25

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Consolidating Statements of Cash Flows (continued)

For the three months ended June 30, 2015	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(2,250,415	)	$	5,399,330		$	6,985,168		$	(12,384,498	)	$	(2,250,415	)
Adjustments to reconcile net loss to net cash flows from operating activities:
(Equity) of subsidiaries		(5,399,386	)		(6,985,112	)		-			12,384,498			-
Gain on life settlements		-			-			(14,028,327	)		-			(14,028,327	)
Amortization of deferred financing and issuance costs		1,685,700			80,928			(1,259,602	)		-			507,026
Deferred income taxes		(930,470	)		-			-			-			(930,470	)
Convertible, redeemable preferred stock dividends payable		146,420			-			-			-			146,420
(Increase) in operating assets:
Policy benefits receivable		-			-			17,140,000			-			17,140,000
Other assets		(7,124,387	)		(5,236,604	)		-			12,135,615			(225,376	)
Increase (decrease) in operating liabilities:
Accounts payable and other accrued expenses		213,843			(509,444	)		(1,037,640	)		-			(1,333,241	)
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(13,658,695	)		(7,250,902	)		7,799,599			12,135,615			(974,383	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(7,777,541	)		-			(7,777,541	)
Proceeds from settlement of life settlements		-			-			132,388			-			132,388
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(7,645,153	)		-			(7,645,153	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of revolving credit facility		-			-			(7,150,000	)					(7,150,000	)
Payments for redemption of Series I Secured notes		-			(2,344,355	)		-			-			(2,344,355	)
Proceeds from issuance of L Bonds		22,538,059			-			-			-			22,538,059
Payments for redemption and issuance of L Bonds		(6,134,935	)		-			-			-			(6,134,935	)
Proceeds from restricted cash		-			1,677,500			1,732,927			-			3,410,427
Issuance of member capital		-			6,872,932			5,262,683			(12,135,615	)		-
Issuance of common stock		582,000			-			-			-			582,000
Redemptions of convertible, redeemable preferred stock		(273,998	)		-			-			-			(273,998	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		16,711,126			6,206,077			(154,390	)		(12,135,615	)		10,627,198
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		3,052,431			(1,044,825	)		56			-			2,007,662
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		34,762,097			1,278,378			150,052			-			36,190,527
END OF THE PERIOD	$	37,814,528		$	233,553		$	150,108		$	-		$	38,198,189

26

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Consolidating Statements of Cash Flows (continued)

For the three months ended June 30, 2014	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(2,586,697	)	$	2,372,886		$	3,790,677		$	(6,163,563	)	$	(2,586,697	)
Adjustments to reconcile net loss to cash:
(Equity) of subsidiaries		(2,372,886	)		(3,790,677	)		-			6,163,563			-
Gain on life settlements		-			-			(10,852,425	)		-			(10,852,425	)
Amortization of deferred financing and issuance costs		880,374			134,158			339,475			-			1,354,007
Deferred income taxes		(1,316,712	)		-			-			-			(1,316,712	)
Convertible, redeemable preferred stock dividends payable		196,991			-			-			-			196,991
(Increase) in operating assets:
Policy benefits receivable		-			-			(300,000	)		-			(300,000	)
Other assets		(10,674,637	)		(9,406,461	)		-			19,384,025			(697,073	)
Increase in operating liabilities:
Accounts payable and accrued expenses		1,257,758			72,959			559,620			-			1,890,337
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(14,615,809	)		(10,617,135	)		(6,462,653	)		19,384,025			(12,311,572	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(2,608,232	)		-			(2,608,232	)
Proceeds from settlement of life settlements		-			-			68,500			-			68,500
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(2,539,732	)		-			(2,539,732	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for redemption of Series I Secured notes		-			(670,621	)		-			-			(670,621	)
Proceeds from issuance of L Bonds		14,868,830			-			-			-			14,868,830
Payments for redemption and issuance of L Bonds		(4,393,523	)		-			-			-			(4,393,523	)
Proceeds from restricted cash		-			(215,000	)		258,330			-			43,330
Issuance of member capital		-			10,639,970			8,744,055			(19,384,025	)		-
Redemptions of convertible, redeemable preferred stock		(20,056	)		-			-			-			(20,056	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		10,455,251			9,754,349			9,002,385			(19,384,025	)		9,827,960
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(4,160,558	)		(862,786	)		-			-			(5,023,344	)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		26,466,468			1,616,831			-			-			28,083,299
END OF THE PERIOD	$	22,305,910		$	754,045		$	-		$	-		$	23,059,955

27

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(16) Concentrations

GWG purchases life insurance policies written by life insurance companies having investment grade ratings by independent rating agencies.  As a result there may be certain concentrations of contracts with life insurance companies.  The following summarizes the face value of insurance contracts with specific life insurance companies exceeding 10% of the total face value held by the Company.

	June 30,		December 31,
	2015		2014
Life insurance company	%		%
AXA Equitable		14.06		14.55
John Hancock		11.90		11.48

The following summarizes the number of insurance contracts held in specific states exceeding 10% of the total face value held by the Company:

	June 30,		December 31,
	2015		2014
State of residence	%		%
California		27.07		28.87
Florida		19.43		18.56

(17) Subsequent events

Subsequent to June 30, 2015, the Company has issued approximately an additional $11.1 million in principal amount of L Bonds.

28

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

You should read the following discussion in conjunction with the consolidated financial statements and accompanying notes and the information contained in other sections of this report. This discussion and analysis is based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. The statements in this discussion and analysis concerning expectations regarding our future performance, liquidity and capital resources, as well as other non-historical statements, are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties. Our actual results could differ materially from those suggested or implied by any forward-looking statements. Please see the “Risk Relating to Forward-Looking Statements” caption below.

Overview

We are engaged in the emerging secondary market for life insurance policies. We acquire life insurance policies in the secondary market from policy owners desiring to sell their policies at a discount to the face value of the insurance benefit. Once we purchase a policy, we continue paying the policy premiums to ultimately collect the face value of the insurance benefit. We generally seek to hold the individual policies to maturity, in order to ultimately collect the policy’s face value upon the insured’s mortality. Our strategy is to build a profitable and large portfolio of policies that is diversified in terms of insurance carriers and the medical conditions of insureds. We believe that diversification among insureds (by age and medical conditions), insurance carriers will lower our overall risk exposure, and that a larger portfolio of individual policies (diversification in overall number) creates a portfolio of greater value by virtue of improved actuarial stability.

Business Update

GWG’s business model provides value-added services to consumers owning life insurance and investors seeking alternative investment opportunities. To participate and compete in what we expect to be a growth market, we have spent and intend to continue to spend significant resources: (i) developing resources, strategies, and capabilities for investors to participate in a large portfolio of life insurance policies; and (ii) developing a robust operational platform, strategies, and systems for originating and purchasing life insurance policies

We have seen increasing interest among investors and financial professionals in participating in our $1,000,000,000 L Bond offering. Over the last three months, we added over 1,500 financial professionals who are now approved to sell our L Bond offering. This increases the total number of financial professionals offering our L Bond to over 3,000 advisors. The L Bond offers investors the opportunity to obtain a high yielding investment from our portfolio of life insurance policies, assets whose performance is not tied to the stock market, commodities, or real estate. We expect to continue growing our financial product distribution as awareness and understanding of our asset class increases.

We have also made significant progress in our origination protocols and practices for purchasing life insurance policies. Historically, we have purchased policies in the secondary market through a network of life insurance agents, life insurance brokers, and licensed providers who assist policy owners in accessing the secondary market. Since the fourth quarter of 2014, we have been working to expand our origination practices by marketing directly to consumers and the development of our Appointed Agent Program. Recently, we engaged a strategic partner in the development of a specialized service center whose focus is sourcing qualified leads and processing life insurance policies directly for our purchase. In conjunction with these activities, we are in the final stages of implementing new systems, processes and protocols, including a streamlined underwriting process for small face policies ($1,000,000 in face value policy benefits or less) in order to efficiently acquire life insurance policies directly from consumers.

In addition, we have developed and expanded our Appointed Agent Program. Our Appointed Agent Program empowers financial professionals to bring the secondary market’s value proposition directly to consumers owning life insurance. Central to the Appointed Agent Program is education, training, and marketing that support and empower financial professionals to offer clients significant value with a program that emphasizes regulatory compliance. Over the last year, the number of financial professionals sourcing life insurance policies directly for GWG has increased to approximately 850. We have experienced an added benefit from our model by the fact that many of the financial professionals seeking to participate in our Appointed Agent Program also distribute our investment products. This dual offering enables financial professionals the opportunity to develop expertise in our business model and a specialization for their financial practice. In conjunction with these activities, we have continued to sharpen our service offerings and marketing tools, available to broker-dealers and financial advisors who seek to market our products and services. These offerings have, in turn, led to an increasing acceptance by the financial profession of our business model and industry practices because they address a growing need for providing post-retirement financial services to seniors owning life insurance.

While these efforts are ongoing, and initial results are preliminary, the early outcomes from both our Appointed Agent Program and direct to consumer marketing efforts are very encouraging. In the last three months, we have experienced a significant increase in the number of life insurance policies that are now in our origination pipeline. All told, these efforts have increased our policy purchases from zero to now making up over 28% of all the life insurance policies in our current origination pipeline as of August 3, 2015. Our origination pipeline includes all the life insurance policies we are currently gathering information, evaluating, or in the process of closing a purchase. We expect to complete our initial development efforts on these systems, including supporting marketing, technology, reporting, processing, and underwriting protocols through the balance of 2015. When in place, we believe we will be well-positioned to scale for increased volume.

We have also expanded our own footprint in the various states and jurisdictions where secondary market life settlement transactions are regulated. Of the 42 jurisdictions that require licensure, we presently hold 30 licenses and have pending applications in another eight jurisdictions.

29

As for the secondary market itself, we have recently seen positive growth trends for the market, evidenced by increased competition for policy purchases through traditional channels, new efforts by market participants to reach consumers directly, and little change in the regulatory or legal environment which impact our market. In particular, we are aware of only two reported consumer complaints relating to life settlement transactions that have been received by insurance regulators nationally since 2012. During 2015 (with most state legislatures now in recess or adjourned until 2016), there was not any legislation introduced attempting to establish more restrictive processes or controls on life settlement transactions. In fact, we are aware of approximately one dozen state bills that were introduced thus far during 2015 recognizing that life settlements are good public policy by requiring insurance companies or governmental authorities to advise policyholders facing lapse or surrender that selling their policy on the secondary market is an option.

Furthermore, we are also aware that a class-action lawsuit against a major insurance company, alleging breach of fiduciary duty for failure to advise consumers about their life settlement options, was privately settled. We believe that this lawsuit may begin establishing precedent for insurance carriers and their agents to advise clients of their rights to effect a sale of their life insurance policy. Clearly, as for financial professionals who owe a fiduciary obligation to their clients, a precedent has been set for advising their clients on both their right and opportunity to sell their life insurance policy.

In sum, we believe these legislative and legal developments indicate that the market for life settlements is gaining growing acceptance from a public policy perspective, and that participants in the market are achieving success at adhering to the regulatory requirements imposed on them. When combined with the recent positive growth trends in the market, and our own efforts and successes in expanding our network of financial professionals involved in offering our products and services, we begin the second half of 2015 with confidence and optimism for the further development of our business and marketplace.

In the first six months of 2015, we recognized $25.6 million of revenue from the receipt of $29.4 million in policy benefits. In addition, we recognized an expense from the change in fair value of our life insurance policies, net of premiums and carrying costs, of $0.4 million. In the first six months of 2015, interest expense, including amortization of the deferred financing costs and preferred stock dividends, was $14.5 million, and selling, general and administrative expenses were $8.5 million. Income tax expense for the first half of 2015 was $1.4 million. Our net income before interest, taxes and amortization was $16.9 million and our net income after tax was $1 million for the first half of 2015.

In the first six months of 2014, we recognized $0.2 million of revenue from the receipt of $0.3 million in policy benefits. In addition, we recognized revenue from the change in fair value of our life insurance policies, net of premiums and carrying costs, of $10.8 million. Interest expense, including amortization of the deferred financing costs and preferred stock dividends, was $12.9 million for the six months ended June 30, 2014, and selling, general and administrative expenses were $4.8 million. Income tax benefit for the six months ended June 30, 2014 was $2.3 million. Our net income before interest, taxes and amortization was $6.2 million and our net loss after tax was $4.5 million for the first half of 2014.

To date, we have financed our business principally through the issuance of debt, including our registered public offerings of L Bonds and debt incurred by our subsidiary DLP Funding II under a senior revolving credit facility provided by Autobahn/DZ Bank. See the “Liquidity and Capital Resources” caption below.

Critical Accounting Policies

Critical Accounting Estimates

The preparation of our consolidated financial statements in accordance with the Generally Accepted Accounting Principles (GAAP) requires us to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our judgments, estimates and assumptions on historical experience and on various other factors believed to be reasonable under the circumstances.  Actual results could differ materially from these estimates. We evaluate our judgments, estimates and assumptions on a regular basis and make changes accordingly. We believe that the judgments, estimates and assumptions involved in the accounting for the valuation of investments in life insurance policies have the greatest potential impact on our consolidated financial statements and accordingly believe these to be our critical accounting estimates. Below we discuss the critical accounting policies associated with these estimates as well as certain other critical accounting policies.

Ownership of Life Insurance Policies—Fair Value Option

Our primary business involves the purchasing and financing of life insurance policies. As such, we account for the purchase of life insurance policies in accordance with Financial Accounting Standards Board’s Accounting Standards Codification (FASB ASC) 325-30, Investments in Insurance Contracts, which requires us to use either the investment method or the fair value method. We have elected to account for these life insurance policies as investments using the fair value method.

We initially record our purchase of life insurance policies at the transaction price, which is the amount paid for the policy, inclusive of all fees and costs associated with the acquisition. The fair value of our investment in the portfolio of insurance policies is evaluated at the end of each reporting period. Changes in the fair value of the portfolio of life insurance policies are based on periodic evaluations and are recorded as changes in fair value of life insurance policies in our consolidated and combined statement of operations. The fair value is determined as the net present value of the life insurance portfolio’s future expected cash flows that incorporates current life expectancy estimates and discount rate assumptions.

30

In addition to reporting our results of operations and financial condition based on the fair value of our life insurance policies as required by GAAP, management also makes calculations based on the weighted average expected internal rate of return of the policies. See “Non-GAAP Financial Measures” below.

Valuation of Insurance Policies

Unobservable inputs, as discussed below, are a critical component of our estimate for the fair value of our investments in life insurance policies. We currently use a probabilistic method of estimating and valuing the projected cash flows of our portfolio of life insurance policies, which we believe to be the preferred and most prevalent valuation method in the industry. In this regard, the most significant assumptions we make are the life expectancy estimates of the insureds and the discount rate applied to the projected cash flows to be derived from our portfolio.

In determining life expectancy estimates, we generally use actuarial medical reviews from independent medical underwriters. These medical underwriters evaluate the health of the insured by reviewing historical and current medical records. This evaluation is performed to produce an estimate of the insured’s mortality—a life expectancy report. In the case of a small face policy ($1.0 million face value of policy benefits or less), we may use one life expectancy report or estimate life expectancy based on a modified methodology which does not use actuarial medical reviews from independent medical underwriters. The life expectancy estimate represents a range of probabilities for the insured’s mortality against a group of cohorts with the same age, sex and smoking status. These mortality probabilities represent a mathematical curve known as an actuarial mortality curve, which is then used to generate a series of expected cash flows from the life insurance policy over the expected lifespan of the insured. A discount rate is used to calculate the net present value of the expected cash flows. The discount rate represents the internal rate of return we expect to earn on investments in a policy or in the portfolio as a whole at the stated fair value. The discount rate used to calculate fair value of our portfolio incorporates the guidance provided by ASC 820, Fair Value Measurements and Disclosures. Many of our current underwriting review processes, including our policy of obtaining actuarial medical reviews from independent medical underwriters as described above, are undertaken in satisfaction of obligations under our L Bond debt offering and revolving credit facility. As a result, we may in the future modify our underwriting review processes if permitted under our borrowing arrangements.

The table below provides the discount rate used to estimate the fair value of the life insurance policies for the period ending:

June 30, 2015	December 31, 2014
11.19%	11.43%

The change in the discount rate incorporates current information about discount rates applied by other reporting companies owning portfolios of life insurance policies, discount rates observed in the life insurance secondary market, market interest rates, the credit exposure to the issuing insurance companies and our estimate of the risk premium a purchaser would require to receive the future cash flows derived from our portfolio of life insurance policies. The discount rate to arrive at the fair value of our portfolio assumes an orderly and arms-length transaction (i.e., a non-distressed transaction in which neither seller nor buyer is compelled to engage in the transaction).

We engaged a third party, Model Actuarial Pricing Systems (MAPS), to prepare a third-party valuation of our life settlement portfolio. MAPS owns and maintains the portfolio pricing software we use. MAPS processed policy data, future premium data, life expectancy estimate data, and other actuarial information we supply to calculate a net present value for our portfolio using the specified discount rate of 11.19%. MAPS independently calculated the net present value of our portfolio of 314 policies to be $301.4 million, which is the same fair value estimate we used on the balance sheet as of June 30, 2015, and furnished us with a letter documenting its calculation. A copy of such letter is filed as Exhibit 99.1 to this report.

JOBS Act

On April 5, 2012, the Jumpstart Our Business Startups Act of 2012, or JOBS Act, was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933 for complying with new or revised accounting standards. This means that an “emerging growth company” can make an election to delay the adoption of certain accounting standards until those standards would apply to private companies. We have elected to delay such adoption of new or revised accounting standards and, as a result, we may not comply with new or revised accounting standards at the same time as other public reporting companies that are not “emerging growth companies.” This exemption will apply for a period of five years following our first sale of common equity securities under an effective registration statement or until we no longer qualify as an “emerging growth company” as defined under the JOBS Act, whichever is earlier.

31

Deferred Income Taxes

FASB ASC 740, Income Taxes, requires us to recognize deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is established for any portion of deferred tax assets that is not considered more likely than not to be realized.

We have provided a valuation allowance against the deferred tax asset related to a note receivable because we believe that, when realized for tax purposes, it will result in a capital loss that will not be utilized because we have no expectation of generating a capital gain within the applicable carryforward period. Therefore, we do not believe that it is more likely than not that the deferred tax asset will be realized.

We have also provided a valuation allowance against the deferred tax asset related to a tax basis capital loss generated with respect to its settlement and subsequent disposal of our investment in Athena Structured Funds PLC (see “Notes to Consolidated Financial Statements” Note 9). As we have no expectation of generating capital gains within the applicable carry-forward period, we do not believe that it is more likely than not that the deferred asset will be realized.

A valuation allowance is required to be recognized to reduce deferred tax assets to an amount that is more likely than not to be realized. Realization of deferred tax assets depends upon having sufficient past or future taxable income in periods to which the deductible temporary differences are expected to be recovered or within any applicable carryback or carryforward periods. We believe that it is more likely than not that we will be able to realize all of our deferred tax assets other than that which is expected to result in a capital loss.

Deferred Financing and Issuance Costs

Financing costs incurred to obtain financing under the revolving credit facility have been capitalized and are amortized using the straight-line method over the term of the revolving credit facility. The Series I Secured Note obligations are reported net of issuance costs, sales commissions, and other direct expenses, which are amortized using the interest method over the term of each respective borrowing. The L Bonds are reported net of issuance costs, sales commissions, and other direct expenses, which are amortized using the interest method over the term of each respective borrowing. The Series A Preferred Stock is reported net of issuance costs, sales commissions, including the fair value of warrants issued, and other direct expenses, which are amortized using the interest method as interest expense over a three-year redemption period. As of December 31, 2014 these costs have been fully amortized.

Risk Relating to Forward-Looking Statements

Certain matters discussed in this section of this report, and elsewhere in this report, are forward-looking statements.  We have based these forward-looking statements on our current expectations and projections about future events.  Nevertheless, these forward-looking statements are subject to risks, uncertainties and assumptions about our operations and the investments we make, including, among other things, the following:

● changes in the secondary market for life insurance;

● our limited operating history;

● the valuation of assets reflected on our financial statements;

● the reliability of our life expectancy estimates;

● the reliability of assumptions underlying our actuarial models;

● our reliance of debt financing;

● risks relating to the validity and enforceability of the life insurance policies we purchase;

● our reliance on information provided and obtained by third parties;

● federal and state regulatory matters;

● additional expenses, not reflected in our operating history, related to being a public reporting company;

● competition in the secondary life insurance market;

● the relative illiquidity of life insurance policies;

● life insurance company credit exposure;

● economic outlook;

● performance of our investments in life insurance policies;

32

● financing requirements;

● litigation risks; and

● restrictive covenants contained in borrowing agreements.

Forward-looking statements can generally be identified by the use of words like “believes,” “could,” “possibly,” “probably,” “anticipates,” “estimates,” “projects,” “expects,” “may,” “will,” “should,” “seek,” “intend,” “plan,” “expect” or “consider,” or the negative of these expressions or other variations, or by discussions of strategy that involve risks and uncertainties.  All forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual transactions, results, performance or achievements to be materially different from any future transactions, results, performance or achievements expressed or implied by such forward-looking statements.

Principal Revenue and Expense Items

We earn revenues from three primary sources as described below.

● Policy Benefits Realized. We recognize the difference between the death benefits and carrying values of the policy when an insured event has occurred and we determine that settlement and ultimate collection of the death benefits is realizable and reasonably assured. Revenue from a transaction must meet both criteria in order to be recognized. We generally collect the face value of the life insurance policy from the insurance company within 45 days of the insured’s mortality.

● Change in Fair Value of Life Insurance Policies.  We have elected to carry our investments in life insurance policies at fair value in accordance with ASC 325-30,  Investments in Life Insurance Contracts .  Accordingly, we value our investments in our portfolio of life insurance policies each reporting period in accordance with the fair value principles discussed herein, which includes the expected payment of premiums for future periods.

● Sale of a Life Insurance Policy or a Portfolio of Life Insurance Policies. In an event of a sale of a policy, we recognize gain or loss as the difference between the sale price and the carrying value of the policy on the date of the receipt of payment on such sale.

Our main components of expense are summarized below.

● Selling, General and Administrative Expenses. We recognize and record expenses incurred in the operations of the purchasing and servicing of life insurance policies. These expenses include professional fees, salaries, and sales and marketing expenditures.

● Interest Expense. We recognize and record interest expenses associated with the costs of financing our life insurance portfolio for the current period. These expenses include interest paid to our senior lender under our revolving credit facility, as well as all interest paid on our debentures and other outstanding indebtedness such as our subsidiary secured notes and dividends on convertible, redeemable preferred stock. When we issue long-term indebtedness, we amortize the issuance costs associated with such indebtedness over the outstanding term of the financing, and classify it as interest expense.

Results of Operations — Three and Six Months Ended June 30, 2015 Compared to the Same Periods in 2014

The following is our analysis of the results of operations for the periods indicated below.  This analysis should be read in conjunction with our consolidated financial statements and related notes.

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015			2014
Revenue recognized from the receipt of policy benefits (1)	$	618,000	$	231,000	$	25,632,000		$	231,000
Revenue (expense) recognized from the change in fair value of life insurance policies, net of premiums and carrying costs (2)		7,856,000		5,254,000		(375,000	)		10,770,000
Gain on life settlements, net	$	8,474,000	$	5,485,000	$	25,257,000		$	11,001,000
Number of policies matured		1		3		7			3
The change in fair value related to new policies acquired	$	4,511,000	$	1,595,000	$	5,123,000		$	6,559,000

(1) In the first half of 2015, we recognized $25.6 million of revenue from the receipt of $29.4 million in policy benefits. In the first half of 2014, we recognized only $0.07 million of revenue from the receipt of $0.3 million in policy benefits.

(2) The change in the discount rate incorporates current information about discount rates applied by other reporting companies owning portfolios of life insurance policies, discount rates observed by us in the life insurance secondary market, market interest rates, the credit exposure to the issuing insurance companies and our estimate of the risk premium a purchaser would require to receive the future cash flows derived from our portfolio of life insurance policies. Because we use the discount rate to arrive at the fair value of our portfolio, the rate we choose necessarily assumes an orderly and arms-length transaction (i.e., a non-distressed transaction in which neither seller nor buyer is compelled to engage in the transaction). The discount rate applied to estimate the fair value of the portfolio of life insurance policies we own was 11.19% as of June 30, 2015, compared to 11.56% as of June 30, 2014. The decrease in discount rate was due to an increase in prices our competitors were purchasing life insurance policies in the secondary market, an increase in the size and diversity of our portfolio that we believe results in a lower risk premium due to an increase in actuarial stability for any potential buyer. The carrying value of policies acquired during each quarterly reporting period are adjusted to their current fair value using the fair value discount rate applied to the entire portfolio as of that reporting date.

33

	Three Months Ended June 30,						Six Months Ended June 30,
	2015		2014		Increase		2015		2014		Increase
Employee compensation and benefits (1)	$	2,145,000	$	1,179,000	$	966,000	$	3,873,000	$	2,147,000	$	1,726,000
Interest expense (including amortization of deferred financing costs and preferred stock dividends) (2)		7,322,000		6,608,000		714,000		14,499,000		12,935,000		1,564,000
Legal and professional expenses (3)		643,000		419,000		224,000		1,166,000		826,000		340,000
Other expenses (4)		1,881,000		1,189,000		692,000		3,415,000		1,866,000		1,549,000
Total expenses	$	11,991,000	$	9,395,000	$	2,596,000	$	22,953,000	$	17,774,000	$	5,179,000

(1) We employed more staff and hired additional members to our sales, marketing and executive teams.

(2) The increase was due to the increase in the average debt outstanding.

(3) Increase is due to increased compliance work and SEC filings related to L Bond offerings.

(4) Marketing, recruiting and other expenses increased due to the continued development of a direct marketing campaign and related service center costs, increased activity related to our public offering of L Bonds and continued technology and infrastructure costs.

Income Tax Expense.  For the three and six months ended June 30, 2015, we had a loss of $3,427,000 and an income of $2,444,000 before income taxes and recorded income tax benefit of $1,176,000 and income tax expense of $1,433,000, respectively, or 34.3% and 58.6%, respectively.  In the same periods of 2014, we had a loss of $3,903,000 and $6,759,000 before income taxes and recorded income tax benefit of $1,317,000 and $2,272,000, respectively, or 33.7% and 33.6%, respectively.  The primary differences between our effective tax rate and the statutory federal rate are the accrual of preferred stock dividend expense, state taxes, and other non-deductible expenses.

The following table provides a reconciliation of our income tax expense at the statutory federal tax rate to our actual income tax expense:

	Three Months  Ended					Six Months Ended				Three Months Ended					Six Months Ended
Six months ended:	June 30, 2015					June 30, 2015				June 30, 2014					June 30, 2014
Statutory federal income tax	$	(1,167,000	)	34.0	%	$	831,000	34.0	%	$	(1,327,000	)	34.0	%	$	(2,298,000	)	34.0	%
State income taxes, net of federal benefit		(187,000	)	5.5	%		229,000	9.4	%		(209,000	)	5.4	%		(352,000	)	5.2	%
Series A preferred stock dividends		168,000		(4.9	)%		351,000	14.4	%		218,000		(5.6	)%		434,000		(6.4	)%
Other permanent differences		10,000		(0.3	)%		22,000	0.8	%		1,000		(0.1	)%		(56,000	)	0.8	%
Total income tax expense	$	(1,176,000	)	34.3	%	$	1,433,000	58.6	%	$	(1,317,000	)	33.7	%	$	(2,272,000	)	33.6	%

The most significant temporary differences between GAAP net income and taxable net income are the treatment of interest costs with respect to the acquisition of the life insurance policies and revenue recognition with respect to the mark-to-market of life insurance portfolio.

Liquidity and Capital Resources

We finance our business through a combination of policy benefit revenues, origination fees, equity offerings, debt offerings, and a credit facility. We have used our debt offerings and credit facility primarily for policy acquisition, policy servicing and portfolio related financing expenditures. We charge an intercompany origination fee in the amount of one to four percent of the face value of a life insurance policy’s benefit when we acquire the related life insurance policy. The origination fee we charge is included in the total purchase price we pay for a life insurance policy for purposes of our valuation and expected internal rate of return calculations, but is not netted against the purchase price we pay to a seller of an insurance policy. We generated cash flows $0.7 million and $1.0 million from origination fees during the three and six months ended June 30, 2015, and $0.3 million and $1.3 million during the same periods in 2014. Profit from intra-company origination fees for life insurance policies retained by the Company are eliminated from our consolidated statements of operations. As such, the origination fees collected under our life insurance policy financing arrangements are reflected in our consolidated statements of cash flows as cash flows from financing activities as they are received form of borrowings used to finance the acquisition of life insurance policies.  Our borrowing agreements allow us to use net proceeds of the L Bonds for policy acquisition, which includes origination fees. If the policy acquisition is not financed, no fees are included in the consolidated cash flows. See “Cash Flows” below for further information. We determine the purchase price of life insurance policies in accordance with ASC 325-30, Investments in Insurance Contracts , using the fair value method. Under the fair value method, the initial investment is recorded at the transaction price. Because the origination fees are paid from a wholly owned subsidiary to the parent company, these fees are not included in the transaction price as reflected in our consolidated financial statements. For further discussion on our accounting policies for life settlements, please refer to note 1 to our consolidated financial statements.

34

As of June 30, 2015 and December 31, 2014, we had approximately $71.6 million and $51.2 million, respectively, in combined available cash and available borrowing base surplus capacity under our revolving credit facility for the purpose of purchasing additional life insurance policies, paying premiums on existing policies, paying portfolio servicing expenses, and paying principal and interest on our outstanding financing obligations.

In January 2015, GWG registered a $1.0 billion debt offering of our L Bonds with the SEC. The $1.0 billion L Bond offering is as a follow-on offering to our $250.0 million debt offering of Renewable Secured Debentures (subsequently renamed L Bonds) which was registered with the SEC and was completed January 2015. Through June 30, 2015, the total amount of these L Bonds sold, including renewals, was $320.7 million. As of June 30, 2015, we had approximately $226.3 million in principal amount of L Bonds outstanding.

On September 24, 2014, we consummated an initial public offering of its common stock resulting in the sale of 800,000 shares of common stock at $12.50 per share and net proceeds of approximately $8.6 million after the deduction of underwriting commissions, discounts and expense reimbursements. We used the net proceeds from the offering to promote and advertise the opportunities for consumers owning life insurance and investors to profit from participating in the secondary market for life insurance policies, to purchase additional life insurance policies in the secondary market, to pay premiums on our life insurance policy assets, to fund our portfolio operations, and for working capital purposes.

In September 2012, we concluded a Series A Preferred Stock offering, having received an aggregate $24.6 million in subscriptions for our Series A Preferred Stock. These subscriptions consisted of $14.0 million in conversions of outstanding Series I Secured Notes and $10.6 million of new investments. We have used the proceeds from the sale of our Series A Preferred Stock to fund our operational expenditures.

In November 2009, we issued our first debt securities through our wholly owned subsidiary GWG Life commenced private placement of Series I Secured Notes to accredited investors only. This offering was closed in November 2011 and was followed-on by our first publicly registered $250.0 million debt offering of Renewable Secured Debentures (subsequently renamed L Bonds).

The weighted-average interest rate of our outstanding Series I Secured Notes as of June 30, 2015 and December 31, 2014 was 8.49% and 8.37%, respectively, and the weighted-average maturity at those dates was 1.23 and 1.11 years, respectively. The Series I Secured Notes have renewal features. Since we first issued our Series I Secured Notes, we have experienced $144.8 million in maturities, of which as of June 30, 2015, $111.8 million has renewed for an additional term. This has provided us with an aggregate renewal rate of approximately 77% for investments in these securities.

The weighted-average interest rate of our outstanding L Bonds as of June 30, 2015 and December 31, 2014 was 7.27% and 7.45%, respectively, and the weighted-average maturity at those dates was 1.86 and 2.01 years, respectively. Our L Bonds have renewal features that provide that investors will remain in their investment with GWG unless they provide us with notice within 30 days of the maturity of their bond. Since we first issued our L Bonds, we have experienced $94.4 million in maturities, of which as of June 30, 2015, $62.6 million has renewed for an additional term. This has provided us with an aggregate renewal rate of approximately 66% for investments in these securities. Future contractual maturities of Series I Secured Notes and L Bonds at June 30, 2015 are:

Years Ending December 31,	Series I Secured Notes		L Bonds		Total
2015	$	5,085,000	$	48,082,000	$	53,167,000
2016		10,964,000		67,120,000		78,084,000
2017		6,164,000		43,051,000		49,215,000
2018		1,127,000		31,012,000		32,139,000
2019		347,000		14,342,000		14,689,000
Thereafter		1,041,000		22,703,000		23,744,000
	$	24,728,000	$	226,310,000	$	251,038,000

35

The L Bonds and Series I Secured Notes are secured by all our assets, and are subordinate to our revolving credit facility with Autobahn/DZ Bank. The L Bonds and Series I Secured Notes are pari passu with respect to a security interest in our assets pursuant to an intercreditor agreement (see notes 6 and 7 to our consolidated financial statements).

We maintain a $105 million revolving credit facility with Autobahn/DZ Bank through GWG Life’s wholly owned subsidiaries DLP II and DLP III. The revolving credit facility is used to pay the premium expenses related to GWG’s portfolio of life insurance policies. As of both June 30, 2015 and December 31, 2014, we had approximately $65.0 million and $72.2 million, respectively, outstanding under the revolving credit facility and maintained an available borrowing base surplus of $33.4 million and $20.6 million, respectively. Effective May 11, 2015, we amended and restated our credit facility to reduce the interest cost and extend the term of the facility to June 2018 (see note 5 to our condensed consolidated financial statements).

We expect to meet our ongoing operational capital needs through a combination of the receipt of policy benefit revenues and proceeds from financing transactions. We expect to meet our policy acquisition, servicing, and financing capital needs principally from the receipt of policy benefit revenues from our portfolio of life insurance policies, net proceeds from our offering of L Bonds, and from our revolving credit facility. We have demonstrated continued access to credit and financing markets. Furthermore, we expect that policy benefit payments will increase as the average age of the insureds increase and mortality events occur over time, a trend which we experienced in 2014-2015 that will continue to increase. As a result of the foregoing, we estimate that our liquidity and capital resources are sufficient for our current and projected financial needs. Nevertheless, if we are unable to continue our offering of L Bonds for any reason (or if we become unsuccessful in selling L Bonds), and we are unable to obtain capital from other sources, we expect that our business would be materially and adversely affected. In addition, our business would be materially and adversely affected if we did not receive the policy benefits we forecast and if holders of our L Bonds or Series I Secured Notes failed to renew with the frequency we have historically experienced. In such a case, we could be forced to sell our investments in life insurance policies to service or satisfy our debt-related obligations and continue to pay policy premiums.

Capital expenditures have historically not been material and we do not anticipate making material capital expenditures in 2015 or beyond.

Debt Financings Summary

We had the following outstanding debt balances as of June 30, 2015: 

Issuer/Borrower	Principal Amount Outstanding		Weighted Average Interest Rate
GWG Holdings, Inc. – L Bonds	$	226,310,000		7.27	%
GWG Life Settlements, LLC -Series I Secured notes		24,728,000		8.49	%
GWG DLP Funding II, LLC - Revolving credit facility		65,011,000		5.41	%
Total	$	316,049,000		6.98	%

Our total credit facility and other indebtedness balance as of June 30, 2015 and December 31, 2014 was $316.0 million and $286.6 million, respectively. At June 30, 2015, the total outstanding face amount under our Series I Secured Notes outstanding was $24.7 million, less unamortized selling costs of $0.4 million, resulting in a carrying amount of $24.3 million. At December 31, 2014, the total outstanding face amount under our Series I Secured Notes outstanding was $28.0 million, less unamortized selling costs of $0.4 million, resulting in a carrying amount of $27.6 million. At June 30, 2015, the total outstanding face amount of L Bonds was $226.3 million plus $3.1 million of subscriptions in process, less unamortized selling costs of $6.3 million resulting in a carrying amount of $223.1 million. At December 31, 2014, the total outstanding face amount of L Bonds was $186.4 million plus $2.3 million of subscriptions in process, less unamortized selling costs of $5.9 million resulting in a carrying amount of $182.8 million. At June 30, 2015, the fair value of our investments in life insurance policies of $301.5 million plus our cash balance of $38.2 million and our restricted cash balance of $7.9 million, totaled $347.6 million, representing an excess of portfolio assets over secured indebtedness of $31.6 million. At December 31, 2014, the fair value of our investments in life insurance policies of $282.8 million plus our cash balance of $30.7 million and our restricted cash balance of $4.3 million, totaled $317.8 million, representing an excess of portfolio assets over secured indebtedness of $31.2 million. At June 30, 2015 our weighted average cost of capital was approximately 6.98%. The L Bonds and Series I Secured Notes are secured by all our assets and are subordinate to our revolving credit facility with Autobahn/DZ Bank. The L Bonds and Series I Secured Notes are pari passu with respect to a security interest in our asset pursuant to an intercreditor agreement.

36

The following forward-looking table seeks to illustrate the impact of the sale of our portfolio of life insurance assets at various discount rates in order to satisfy our debt obligations as of June 30, 2015. In all cases, the sale of the life insurance assets owned by DLP II and DLP III will be used first to satisfy all amounts owing under the revolving credit facility with Autobahn/ DZ Bank. The net sale proceeds remaining after satisfying all obligations under the revolving credit facility would be applied to L Bonds and Series I Secured notes on a pari passu basis.

Portfolio Discount Rate		10%		11%		12%		13%		14%
Value of portfolio	$	318,462,000	$	304,099,000	$	290,841,000	$	278,577,000	$	267,208,000
Cash and cash equivalents		46,121,000		46,121,000		46,121,000		46,121,000		46,121,000
Total assets		364,583,000		350,220,000		336,962,000		324,698,000		313,329,000
Revolving credit facility Autobahn/DZ Bank		65,011,000		65,011,000		65,011,000		65,011,000		65,011,000
Net after revolving credit facility		299,572,000		285,209,000		271,951,000		259,687,000		248,318,000
Series I Secured notes and L Bonds		251,038,000		251,038,000		251,038,000		251,038,000		251,038,000
Net after Series I Secured notes and L Bonds		48,534,000		34,171,000		20,913,000		8,649,000		(2,720,000	)
Impairment to Series I Secured notes and L Bonds	No impairment		No impairment		No impairment		No impairment		Impairment

The table illustrates that our ability to fully satisfy amounts owing under the L Bonds and Series I Secured Notes would likely be impaired upon the sale of all our life insurance assets at a price equivalent to a discount rate of approximately 13.75% or higher. At December 31, 2014 the impairment occurred at discount rate of approximately 14.09% or higher. The discount rates used to calculate the fair value of our portfolio for mark-to-market accounting were 11.19% and 11.43% as of June 30, 2015 and December 31, 2014, respectively.

The table does not include any allowance for transactional fees and expenses associated with a portfolio sale (which expenses and fees could be substantial), and is provided to demonstrate how various discount rates used to value our portfolio could affect our ability to satisfy amounts owing under our debt obligations, in light of our senior secured lender’s right to priority payments. You should read the above table in conjunction with the information contained in other sections of this report, including our discussion of discount rates included under the “— Critical Accounting Policies — Valuation of Insurance Policies” caption above. This discussion and analysis is based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. The forward-looking presentation above is subject to numerous risks and uncertainties. Our actual results could differ materially from those suggested or implied by the above table. Please see the caption “Risk Relating to Forward-Looking Statements” above.

Amended and Restated Credit Facility

Effective May 11, 2015, GWG Holdings, together with certain of its subsidiaries, entered into an Second Amended and Restated Credit and Security Agreement with Autobahn Funding Company LLC, as the conduit lender, and DZ Bank AG Deutsche Zentral-Genossenschaftsbank, as the committed lender and as the agent on behalf of secured parties under such agreement. The Second Amended and Restated Credit and Security Agreement extends the maturity date of borrowings made by the Company’s subsidiaries, GWG DLP Funding II, LLC and GWG DLP Funding III, LLC, to June 30, 2018. Advances under the credit facility made after May 11, 2015 will bear interest at the commercial paper rate of the lender at the time of the advance, or at the lender’s cost of borrowing plus 4.25 percent, which is 1.75 percent less than under the previous Credit and Security Agreement executed on January 25, 2013. In addition to the extended term and decreased interest rate and borrowing cost, the Second Amended and Restated Credit and Security Agreement also removes the requirement that the Company maintain a reserve for certain projected expenditures (including anticipated premium payments required to service its life insurance portfolio), thereby allowing for the Company’s full use of the credit facility up to its limit of $105,000,000.

In connection with the Second Amended and Restated Credit and Security Agreement, GWG Holdings and its subsidiaries entered into certain other agreements and amendments and restatements of earlier agreements entered into in connection with the original and renewal Credit and Security Agreements. Included among these other agreements was an Amended and Restated Performance Guaranty affirming the performance guaranty that GWG Holdings earlier provided in connection with the original and first amended and restated Credit and Security Agreements to DZ Bank AG Deutsche Zentral-Genossenschaftsbank, as agent.

37

Cash Flows

The payment of premiums and servicing costs to maintain life insurance policies represents our most significant requirement for cash disbursement. When a policy is purchased, we are able to calculate the minimum premium payments required to maintain the policy in-force. Over time as the insured age, premium payments will increase; however, the probability of actually needing to pay the premiums decreases since mortality becomes more likely. These scheduled premiums and associated probabilities are factored into our expected internal rate of return and cash-flow modeling described herein. Beyond premiums, we incur policy servicing costs, including annual trustee and tracking costs, and debt servicing costs, including principal and interest payments. Until we receive a stable amount of proceeds from the policy benefits, we intend to pay these costs from our credit facility, when permitted, and through the issuance of debt securities, including the L Bonds.

The amount of payments for anticipated premiums and servicing costs that we will be required to make over the next five years to maintain our current portfolio, assuming no mortalities, is set forth in the table below.

Years Ending December 31,	Premiums		Servicing		Premiums and Servicing Fees
Six months ending December 31, 2015	$	13,292,000	$	377,000	$	13,669,000
2016		27,985,000		377,000		28,362,000
2017		31,333,000		377,000		31,710,000
2018		34,191,000		377,000		34,568,000
2019		38,001,000		377,000		38,378,000
2020		42,158,000		377,000		42,535,000
	$	186,960,000	$	2,262,000	$	189,222,000

For the quarter end dates set forth below, the following table illustrates the total amount of face value of policy benefits owned, and the trailing 12 months of life insurance policy benefits collected and premiums paid on our portfolio. The trailing 12-month benefits/premium coverage ratio indicates the ratio of policy benefits received to premiums paid over the trailing 12-month period from our portfolio of life insurance policies.

Quarter End Date	Portfolio Face Amount		12-Month Trailing Benefits Collected		12-Month Trailing Premiums Paid		12-Month Trailing Benefits/Premium Coverage Ratio
March 31, 2012	$	482,455,000	$	4,203,000	$	14,977,000		28.06	%
June 30, 2012		489,255,000		8,703,000		15,412,000		56.47	%
September 30, 2012		515,661,000		7,833,000		15,837,000		49.46	%
December 31, 2012		572,245,000		7,350,000		16,597,000		44.28	%
March 31, 2013		639,755,000		11,350,000		18,044,000		62.90	%
June 30, 2013		650,655,000		13,450,000		19,182,000		70.11	%
September 30, 2013		705,069,000		18,450,000		20,279,000		90.98	%
December 31, 2013		740,648,000		16,600,000		21,733,000		76.38	%
March 31, 2014		771,940,000		12,600,000		21,930,000		57.46	%
June 30, 2014		784,652,000		6,300,000		22,598,000		27.88	%
September 30, 2014		787,964,000		4,300,000		23,121,000		18.60	%
December 31, 2014		779,099,000		18,050,000		23,265,000		77.58	%
March 31, 2015		754,942,000		46,675,000		23,786,000		196.23	%
June 30, 2015		806,274,000		47,125,000		24,348,000		193.55	%

We believe that the portfolio cash flow results set forth above are consistent with our general investment thesis: that the life insurance policy benefits we receive will continue to increase over time in relation to the premiums we are required to pay on the remaining polices in the portfolio. Nevertheless, we expect that our portfolio cash flow results on a period-to-period basis will remain inconsistent until such time as we achieve our goal of acquiring a larger, more diversified portfolio of life insurance policies in order to obtain more normalized actuarial results. As our receipt of life insurance policy benefits increases, we expect to begin servicing and paying down our outstanding indebtedness, or alternatively purchasing additional life insurance policies, from these cash flows.

38

The life insurance policies owned by DLP II and DLP III are subject to a collateral arrangement with the agent to our revolving credit lender, as described in note 5 to the consolidated financial statements. Under this arrangement, collection and escrow accounts are used to fund purchases and premiums of the insurance policies and to pay interest and other charges under our revolving credit facility. The lender and its agent must authorize all disbursements from these accounts, including any distributions to GWG Life or Holdings. If the facility advance rate exceeds 50%, the distributions are limited to an amount that would result in the borrowers (DLP II, DLP III, GWG Life, and Holdings) realizing an annualized rate of return on the equity funded amount for such assets of not more than 18%, as determined by the agent. After such amount is reached, the credit agreement requires that excess funds be used to fund repayments or a reserve account in a certain amount before any additional distributions may be made. In the future, these arrangements may restrict the cash flows available for payment of principal and interest on our debt obligations.

Inflation

Changes in inflation do not necessarily correlate with changes in interest rates. We presently do not foresee any material impact of inflation on our results of operations in the periods presented in our consolidated financial statements.

Off-Balance Sheet Arrangements

Operating Lease - We entered into an office lease with U.S. Bank National Association as the landlord. The lease was effective April 22, 2012 with a term through August 31, 2015. The lease is for 11,695 square feet of office space located at 220 South Sixth Street, Minneapolis, Minnesota. We are obligated to pay base rent plus common area maintenance and a share of the building operating costs. The minimum lease payment under the lease agreement is $0.1 million in 2015.

Credit Risk

We review the credit risk associated with our portfolio of life insurance policies when estimating its fair value. In evaluating the policies’ credit risk we consider insurance company solvency, credit risk indicators, economic conditions, ongoing credit evaluations, and company positions. We attempt to manage our credit risk related to life insurance policies typically by purchasing policies issued only from companies with an investment grade credit rating by either Standard & Poor’s, Moody’s, or A.M. Best Company. As of June 30, 2015, 95.5% of our life insurance policies, by face value benefits, were issued by companies that maintained an investment grade rating (BBB or better) by Standard & Poor’s.

Interest Rate Risk

Our credit facility is floating-rate financing. In addition, our ability to offer interest rates that attract capital (including in the offer and sale of L Bonds) is generally impacted by prevailing interest rates. Furthermore, while our other indebtedness provides us with fixed-rate financing, our debt coverage ratio is calculated in relation to our total cost of financing. Therefore, fluctuations in interest rates impact our business by increasing our borrowing costs, and reducing availability under our debt financing arrangements. Furthermore, we calculate our portfolio earnings based upon the spread generated between the return on our life insurance portfolio and the cost of our financing. As a result, increases in interest rates will reduce the earnings we expect to achieve from our investments in life insurance policies.

Non-GAAP Financial Measures

We use non-GAAP financial measures when evaluating our financial results, for planning and forecasting purposes, and for maintaining compliance with covenants contained in our borrowing agreements. Non-GAAP financial measures disclosed by management are provided as additional information to investors in order to provide them with an alternative method for assessing our financial condition and operating results. These non-GAAP financial measures are not in accordance with GAAP and may be different from non-GAAP measures used by other companies, including other companies within our industry. This presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for comparable amounts prepared in accordance with GAAP. See the notes to our consolidated financial statements and our audited financial statements contained herein.

We have elected to carry our investments in life insurance policies at fair value in accordance with ASC 325-30, Investments in Life Insurance Contracts . Accordingly, we value our investments in life insurance policies at the conclusion of each reporting period in accordance with GAAP fair value accounting principles. In addition to GAAP, we are required to report non-GAAP financial measures to Autobahn/DZ Bank under certain financial covenants made to that lender under our revolving credit facility. As indicated above, we also use non-GAAP financial reporting to manage and evaluate the financial performance of our business.

GAAP-based fair value requires us to mark-to-market our investments in life insurance policies, which by its nature, is based upon Level 3 measurements that are unobservable. As a result, this accounting treatment imports financial market volatility and subjective inputs into our financial reporting. We believe this type of accounting reporting is at odds with one of the key attractions for purchasing and owning a portfolio life insurance policies: the non-correlated nature of the returns to be derived from such policies. Therefore, in contrast to a GAAP-based fair valuation, we seek to measure the accrual of the actuarial gain occurring within the portfolio of life insurance policies at their expected internal rate of return based on statistical actuarial mortality probabilities for the insureds (using primarily the insured’s age, sex and smoking status). The expected internal rate of return tracks actuarial gain occurring within the policies according to a mortality table as the insureds’ age increases. By comparing the actuarial gain accruing within our portfolio of life insurance policies against our costs during the same period, we can estimate, manage and evaluate the overall financial profitability of our business without regard to mark-to-market volatility. We use this information to balance our life insurance policy purchasing and manage our capital structure, including the issuance of debt and utilization of our other sources of capital, and to monitor our compliance with borrowing covenants. We believe that these non-GAAP financial measures provide information that is useful for investors to understand period-over-period operating results separate and apart from fair value items that may, or could, have a disproportionately positive or negative impact on results in any particular period.

39

Our credit facility requires us to maintain a “positive net income” and “tangible net worth” each of which are calculated on an adjusted non-GAAP basis on the method described above, without regard to GAAP-based fair value measures. In addition, our revolving credit facility requires us to maintain an “excess spread,” which is the difference between (i) the weighted average of our expected internal rate of return of our portfolio of life insurance policies and (ii) the weighted average of our credit facility’s interest rate. These calculations are made using non-GAAP measures in the method described below, without regard to GAAP-based fair value measures.

In addition, our L Bonds and Series I Secured notes require us to maintain a “debt coverage ratio” designed to ensure that the expected cash flows from our portfolio of life insurance policies is able to adequately service our total outstanding indebtedness. In addition, our L Bonds requires us to maintain a “subordination ratio” which limits the total amount of indebtedness that can be issued senior in rank to the L Bonds and Series I Secured notes. These ratios are calculated using non-GAAP measures in the method described below, without regard to GAAP-based fair value measures.

Adjusted Non-GAAP Net Income. Our credit facility requires us to maintain a positive net income calculated on an adjusted non-GAAP basis. We calculate the adjusted net income by recognizing the actuarial gain accruing within our life insurance policies at the expected internal rate of return of the policies we own without regard to fair value. We net this actuarial gain against our costs during the same period to calculate our net income on a non-GAAP basis.

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
GAAP net income	$	(2,250,000	)	$	(2,587,000	)	$	1,011,000		$	(4,488,000	)
Unrealized fair value gain (1)		(14,028,000	)		(10,852,000	)		(12,134,000	)		(22,211,000	)
Adjusted cost basis increase (2)		12,414,000			10,777,000			24,643,000			22,174,000
Accrual of unrealized actuarial gain (3)		7,974,000			7,822,000			12,216,000			15,127,000
Total adjusted non-GAAP income (4)	$	4,110,000		$	5,160,000		$	25,736,000		$	10,602,000

(1)	Reversal of unrealized fair value gain of life insurance policies for current period.
(2)	Adjusted cost basis is increased to include those acquisition and servicing expenses which are not capitalized by GAAP.
(3)	Accrual of actuarial gain at expected internal rate of return based on investment cost basis for the period.
(4)	We must maintain an annual positive consolidated net income, calculated on a non-GAAP basis, to maintain compliance with our revolving credit facility with DZ Bank/Autobahn.

Adjusted Non-GAAP Tangible Net Worth. Our revolving credit facility requires us to maintain a tangible net worth in excess of $45 million calculated on an adjusted non-GAAP basis. We calculate the adjusted tangible net worth by recognizing the actuarial gain accruing within our life insurance policies at the expected internal rate of return of the policies we own without regard to fair value. We net this actuarial gain against our costs during the same period to calculate our tangible net worth on a non-GAAP basis.

	As of June 30, 2015			As of December 31, 2014
GAAP net worth (1)	$	24,076,000		$	22,390,000
Less intangible assets (2)		(11,313,000	)		(8,132,000	)
GAAP tangible net worth		12,763,000			14,258,000
Unrealized fair value gain (3)		(166,807,000	)		(154,672,000	)
Adjusted cost basis increase (4)		163,466,000			147,673,000
Accrual of unrealized actuarial gain (5)		92,005,000			80,122,000
Total adjusted non-GAAP tangible net worth (6)	$	101,427,000		$	87,381,000

(1)	Includes termination of redeemable member’s interest prior to corporate conversion and preferred stock classified as temporary equity.
(2)	Unamortized portion of deferred financing costs and pre-paid insurance.
(3)	Reversal of cumulative unrealized fair value gain or loss of life insurance policies.
(4)	Adjusted cost basis is increased by acquisition and servicing expenses which are not capitalized under GAAP.
(5)	Accrual of cumulative actuarial gain at expected internal rate of return based on investment cost basis.
(6)	We must maintain a total adjusted non-GAAP tangible net worth of $45 million to maintain compliance with our revolving credit facility with DZ Bank/Autobahn.

40

Excess Spread. Our revolving credit facility requires us to maintain a 2.00% “excess spread” between our weighted-average expected internal rate of return of our portfolio of life insurance policies and the credit facility’s interest rate. A presentation of our excess spread and our total excess spread is set forth below. Management uses the “total excess spread” to gauge expected profitability of our investments, and uses the “excess spread” to monitor compliance with our borrowing.

	As of June 30, 2015			As of December 31, 2014
Weighted-average expected IRR (1)		11.24	%		11.78	%
Weighted-average revolving credit facility interest rate (2)		5.41	%		6.24	%
Excess spread (3)		5.83	%		5.54	%
Total weighted-average interest rate on indebtedness for borrowed money (4)		6.98	%		7.24	%
Total excess spread		4.26	%		4.54	%

(1) This represents the weighted-average expected internal rate of return of the life insurance policies as of the measurement date based upon our investment cost basis of the insurance policies and the expected cash flows from the life insurance portfolio. Our investment cost basis is calculated as our cash investment in the life insurance policies, without regard to GAAP-based fair value measurements, and is set forth below:

Investment Cost Basis	As of June 30, 2015			As of December 31, 2014
GAAP fair value	$	301,499,000		$	282,883,000
Unrealized fair value gain (A)		(166,807,000	)		(154,672,000	)
Adjusted cost basis increase (B)		163,466,000			147,673,000
Investment cost basis (C)	$	298,158,000		$	275,884,000

	(A)	This represents the reversal of cumulative unrealized GAAP fair value gain of life insurance policies.
	(B)	Adjusted cost basis is increased to include those acquisition and servicing expenses that are not capitalized by GAAP.
	(C)	This is the full cash investment cost basis in life insurance policies from which our expected internal rate of return is calculated.
(2)	This is the weighted-average revolving credit relating to our revolving credit facility interest rate as of the measurement date.
(3)	We must maintain an excess spread of 2.00% relating to our revolving credit facility to maintain compliance under such facility.
(4)	Represents the weighted-average interest rate paid on all outstanding indebtedness as of the measurement date, determined as follows:

41

Outstanding Indebtedness	As of June 30, 2015		As of December 31, 2014
Revolving credit facility	$	65,011,000	$	72,161,000
Series I Secured notes		24,728,000		28,047,000
L Bonds		226,310,000		186,377,000
Total	$	316,049,000	$	286,585,000

Interest Rates on Indebtedness
Revolving credit facility	5.41	%	6.24	%
Series I Secured notes	8.49	%	8.37	%
L Bonds	7.27	%	7.45	%
Weighted-average interest rates on indebtedness	6.98	%	7.24	%

(5) Calculated as the weighted-average expected IRR (1) minus the weighted-average interest rate on indebtedness for borrowed money (4).

Debt Coverage Ratio and Subordination Ratio. Our L Bonds and Series I Secured notes require us to maintain a “debt coverage ratio” of less than 90%. The “debt coverage ratio” is calculated by dividing the sum of our total indebtedness by the sum of our cash and cash equivalents and the net present value of the life insurance portfolio. The “subordination ratio” for our L Bonds is calculated by dividing the total indebtedness that is senior to L Bonds and Series I Secured notes by the sum of the company’s cash and cash equivalents and the net present value of the life insurance portfolio. The “subordination ratio” must be less than 50%. For purposes of both ratio calculations, the net present value of the life insurance portfolio is calculated using a discount rate equal to the weighted average interest rate of all indebtedness.

	As of June 30, 2015			As of December 31, 2014
Life insurance portfolio policy benefits	$	806,274,000		$	779,099,000
Discount rate of future cash flows		6.98	%		7.24	%
Net present value of Life insurance portfolio policy benefits	$	369,937,000		$	347,786,000
Cash and cash equivalents		46,121,000			34,959,000
Total Coverage		416,058,000			382,745,000
Revolving credit facility		65,011,000			72,161,000
Series I Secured notes		24,728,000			28,047,000
L Bonds		226,310,000			186,377,000
Total Indebtedness	$	316,049,000		$	286,585,000
Debt Coverage Ratio		75.96	%		74.88	%
Subordination Ratio		15.63	%		18.85	%

As of June 30, 2015, we were in compliance with both the debt coverage ratio and the subordination ratio as required under our related financing agreements for L Bonds and Series I Secured notes.

42

Our Portfolio

Our portfolio of life insurance policies, owned by our subsidiaries as of June 30, 2015, is summarized below:

Life Insurance Portfolio Summary

Total portfolio face value of policy benefits		$	806,274,000
Average face value per policy		$	2,567,000
Average face value per insured life		$	2,819,000
Average age of insured (yrs.) *			82.9
Average life expectancy estimate (yrs.) *			6.56
Total number of policies			314
Number of unique lives			286
Demographics	68% Males; 32% Females
Number of smokers	4
Largest policy as % of total portfolio			1.24	%
Average policy as % of total portfolio			0.32	%
Average Annual Premium as % of face value			3.34	%

*  Averages presented in the table are weighted averages.

Our portfolio of life insurance policies, owned by our subsidiaries as of June 30, 2015, organized by the insured’s current age and the associated policy benefits, is summarized below:

Distribution of Policy Benefits by Current Age of Insured

Min Age		Max Age		Policy Benefits		Weighted Average Life Expectancy (yrs.)		Distribution
	90		94	$	47,497,000		3.02		5.89	%
	85		89		236,573,000		4.83		29.34	%
	80		84		278,567,000		6.92		34.55	%
	75		79		190,793,000		8.30		23.67	%
	70		74		42,437,000		9.90		5.26	%
	66		69		10,407,000		7.07		1.29	%
	Total			$	806,274,000		6.56		100.00	%

Our portfolio of life insurance policies, owned by our subsidiaries as of June 30, 2015, organized by the insured’s current age and number of policies owned, is summarized below:

Distribution of Policies by Current Age of Insured

Min Age		Max Age		Policies		Weighted Average Life Expectancy (yrs.)		Distribution
	90		94		22		3.02		7.01	%
	85		89		99		4.83		31.53	%
	80		84		103		6.92		32.79	%
	75		79		61		8.30		19.43	%
	70		74		20		9.90		6.37	%
	66		69		9		7.07		2.87	%
	Total				314		6.56		100.00	%

Our portfolio of life insurance policies, owned by our subsidiaries as of June 30, 2015, organized by the insured’s estimated life expectancy estimates and associated policy benefits, is summarized below:

Distribution of Policy Benefits by Current Life Expectancies of Insured

Min LE (Months)		Max LE (Months)		Policy Benefits		Distribution
	8		47	$	145,242,000		18.01	%
	48		71		191,914,000		23.80	%
	72		95		244,522,000		30.33	%
	96		119		129,801,000		16.10	%
	120		143		54,793,000		6.80	%
	144		188		40,002,000		4.96	%
	Total			$	806,274,000		100.00	%

43

We track concentrations of pre-existing medical conditions among insured individuals within our portfolio based on information contained in life expectancy reports. We track these medical conditions with ten primary disease categories: (1) cardiovascular, (2) cerebrovascular, (3) dementia, (4) cancer, (5) diabetes, (6) respiratory disease, (7) neurological disorders, (8) other, no disease, or multiple. Our primary disease categories are summary generalizations based on the ICD-9 codes we track on each insured individuals within our portfolio. ICD-9 codes, published by the World Health Organization, are used worldwide for medical diagnoses and treatment systems, as well as morbidity and mortality statistics. Currently, cardiovascular is the only primary disease category within our portfolio that represents a concentration over 10%.

Our portfolio of life insurance policies, owned by our subsidiaries as of June 30, 2015, organized by the primary disease categories of the insured and associated policy benefits, is summarized below:

Distribution of Policy Benefits by Primary Disease Category

Primary Disease Category	Policy Benefits		Distribution
Cancer	$	59,750,000		7.41	%
Cardiovascular		145,121,000		18.00	%
Cerebrovascular		24,462,000		3.03	%
Dementia		59,699,000		7.40	%
Diabetes		63,617,000		7.89	%
Multiple		190,970,000		23.69	%
Neurological Disorders		24,974,000		3.10	%
No Disease		97,641,000		12.11	%
Other		98,590,000		12.23	%
Respiratory Diseases		41,450,000		5.14	%
Total Policy Benefits	$	806,274,000		100.00	%

The primary disease category represents a general category of impairment. Within the primary disease category, there are a multitude of sub-categorizations defined more specifically by ICD-9 codes. For example, a primary disease category of cardiovascular includes subcategorizations such as atrial fibrillation, heart valve replacement, coronary atherosclerosis, etc. In addition, individuals may have more than one ICD-9 code describing multiple medical conditions within one or more primary disease categories. Where an individual’s ICD-9 codes indicate medical conditions in more than one primary disease categories, we categorize the individual as having multiple primary disease categories. We expect to continue to develop and refine our identification and tracking on the insured individuals medical conditions as we manage our portfolio of life insurance policies.

Portfolio Credit Risk Management

The life insurance assets in which we invest represent obligations of third-party life insurance companies to pay the benefits under the relevant policy. We rely on the payment of policy benefits by life insurance companies as our sole source of revenue collection. Accordingly, the possible insolvency of a life insurance company is a significant risk to our business. To manage this risk, we seek to invest in life insurance assets that are issued by insurance companies with investment-grade ratings from either A.M. Best, Moody’s or Standard & Poor’s. To further mitigate risk, we seek to have no more than 20% of our aggregate face value of policy benefits in our portfolio issued by any one life insurance company. In addition, to assure diversity and stability in our portfolio, we regularly review the various metrics of our portfolio relating to credit risk. We track industry rating agency reports and industry journals and articles in order to gain insight into possible financial problems of life insurance companies. Finally, we only invest in those life insurance policies that meet the underwriting standards established in the indenture governing our debt securities, as applicable.

44

As of June 30, 2015, 91.1% of insurance companies in our portfolio hold an investment-grade rating by Standard & Poor’s (BBB- or better), and the face value of policy benefits issued by one life insurance company with in the portfolio was 14.06%. Of the 45 insurance companies that insure the policies we own, ten companies insure approximately 73.07% of total face value of insurance benefits and the remaining 35 insurance companies insure the remaining approximately 26.93% of total face value of insurance benefits. The concentration risk of our ten largest insurance company holdings as of June 30, 2015 is set forth in the table below.

Rank		Policy Benefits		Percentage of Policy Benefit Amt.			Insurance Company	Ins. Co. S&P Rating
	1	$	113,380,000		14.06	%	AXA Equitable Life Insurance Company	A+
	2	$	95,939,000		11.90	%	John Hancock Life Insurance Company (U.S.A)	AA-
	3	$	77,922,000		9.66	%	Transamerica Life Insurance Company	AA-
	4	$	58,825,000		7.30	%	Voya Retirement Insurance and Annuity Company	A
	5	$	58,769,000		7.29	%	Jefferson-Pilot Life Insurance Company	AA-
	6	$	43,750,000		5.43	%	Massachusetts Mutual Life Insurance Company	AA+
	7	$	41,750,000		5.18	%	American General Life Insurance Company	A+
	8	$	34,546,000		4.28	%	Metropolitan Life Insurance Company	AA-
	9	$	33,750,000		4.19	%	West Coast Life Insurance Company	AA-
	10	$	30,500,000		3.78	%	Pacific Life Insurance Company	A+

Life Insurance Portfolio Detail

(as of June 30, 2015)

	Face Amount		Gender	Age (ALB)		LE (mo.)		Insurance Company	S&P Rating
1	$	4,000,000	Male		94		35.5	MetLife Investors USA Insurance Company		N/A
2	$	1,100,000	Male		94		30.0	Voya Retirement Insurance and Annuity Company		A
3	$	1,500,000	Female		94		33.4	Aviva Life Insurance Company		A-
4	$	3,200,000	Male		94		28.1	West Coast Life Insurance Company		AA-
5	$	1,000,000	Female		93		39.4	Transamerica Life Insurance Company		AA-
6	$	264,000	Female		93		25.6	Lincoln Benefit Life Company		BBB+
7	$	3,500,000	Male		92		41.3	Voya Retirement Insurance and Annuity Company		A
8	$	250,000	Male		92		23.04	Transamerica Life Insurance Company		AA-
9	$	3,000,000	Male		91		45.2	West Coast Life Insurance Company		AA-
10	$	500,000	Male		91		15.2	John Hancock Life Insurance Company (U.S.A)		AA-
11	$	5,000,000	Female		91		52.7	American General Life Insurance Company		A+
12	$	2,000,000	Female		91		13.7	Pruco Life Insurance Company		AA-
13	$	5,000,000	Female		91		32.5	John Hancock Life Insurance Company (U.S.A)		AA-
14	$	300,000	Female		91		31.0	West Coast Life Insurance Company		AA-
15	$	1,682,773	Female		90		51.0	Hartford Life and Annuity Insurance Company		BBB+
16	$	5,000,000	Male		90		32.5	John Hancock Life Insurance Company (U.S.A)		AA-
17	$	3,100,000	Female		90		34.1	Lincoln Benefit Life Company		BBB+
18	$	1,500,000	Female		90		68.8	Jefferson-Pilot Life Insurance Company		AA-
19	$	1,000,000	Male		90		24.5	State Farm Life Insurance Company		AA-
20	$	3,000,000	Female		90		33.6	Jefferson-Pilot Life Insurance Company		AA-
21	$	1,000,000	Male		90		8.3	Voya Retirement Insurance and Annuity Company		A
22	$	600,000	Female		90		21.6	Columbus Life Insurance Company		AA
23	$	1,000,000	Female		89		51.1	United of Omaha Life Insurance Company		AA-
24	$	3,500,000	Female		89		56.7	John Hancock Life Insurance Company (U.S.A)		AA-
25	$	2,500,000	Female		89		7.9	AXA Equitable Life Insurance Company		A+
26	$	2,500,000	Female		89		7.9	AXA Equitable Life Insurance Company		A+
27	$	5,000,000	Female		89		40.4	Voya Retirement Insurance and Annuity Company		A
28	$	5,000,000	Female		89		18.2	Lincoln National Life Insurance Company		AA-
29	$	715,000	Female		89		60.6	Jefferson-Pilot Life Insurance Company		AA-
30	$	1,203,520	Male		89		44.3	Columbus Life Insurance Company		AA

45

	Face Amount		Gender	Age (ALB)		LE (mo.)		Insurance Company	S&P Rating
31	$	1,350,000	Female		89		36.0	Jefferson-Pilot Life Insurance Company		AA-
32	$	3,500,000	Female		89		41.3	Lincoln National Life Insurance Company		AA-
33	$	5,000,000	Female		88		50.6	Massachusetts Mutual Life Insurance Company		AA+
34	$	2,500,000	Female		88		48.2	American General Life Insurance Company		A+
35	$	2,500,000	Male		88		39.9	Pacific Life Insurance Company		A+
36	$	4,000,000	Female		88		72.3	Transamerica Life Insurance Company		AA-
37	$	5,000,000	Male		88		53.6	AXA Equitable Life Insurance Company		A+
38	$	1,103,922	Female		88		61.9	Sun Life Assurance Company of Canada (U.S.)		AA-
39	$	1,500,000	Male		88		43.5	John Hancock Life Insurance Company (U.S.A)		AA-
40	$	1,500,000	Male		88		43.5	John Hancock Life Insurance Company (U.S.A)		AA-
41	$	1,000,000	Female		88		65.6	Transamerica Life Insurance Company		AA-
42	$	250,000	Female		88		65.6	Transamerica Life Insurance Company		AA-
43	$	1,050,000	Male		88		45.4	John Hancock Life Insurance Company (U.S.A)		AA-
44	$	1,000,000	Male		88		55.3	AXA Equitable Life Insurance Company		A+
45	$	500,000	Male		88		61.9	Lincoln National Life Insurance Company		AA-
46	$	4,785,380	Female		88		45.4	John Hancock Life Insurance Company (U.S.A)		AA-
47	$	1,803,455	Female		88		49.4	Metropolitan Life Insurance Company		AA-
48	$	1,529,270	Female		88		49.4	Metropolitan Life Insurance Company		AA-
49	$	800,000	Male		88		71.6	Lincoln National Life Insurance Company		AA-
50	$	5,000,000	Male		88		52.5	John Hancock Life Insurance Company (U.S.A)		AA-
51	$	2,225,000	Female		88		85.7	Transamerica Life Insurance Company		AA-
52	$	357,014	Female		88		36.7	RiverSource Life Insurance Company		A+
53	$	3,000,000	Female		88		82.0	Massachusetts Mutual Life Insurance Company		AA+
54	$	1,500,000	Male		88		46.5	Union Central Life Insurance Company		A+
55	$	3,000,000	Male		88		44.0	Jefferson-Pilot Life Insurance Company		AA-
56	$	2,000,000	Male		88		47.3	John Hancock Life Insurance Company (U.S.A)		AA-
57	$	396,791	Male		88		37.64	Lincoln National Life Insurance Company		AA-
58	$	3,000,000	Male		88		33.26	American General Life Insurance Company		A+
59	$	500,000	Female		87		68.2	Sun Life Assurance Company of Canada (U.S.)		AA-
60	$	5,000,000	Female		87		34.8	Transamerica Life Insurance Company		AA-
61	$	3,000,000	Male		87		50.4	Transamerica Life Insurance Company		AA-
62	$	1,200,000	Male		87		75.3	Transamerica Life Insurance Company		AA-
63	$	250,000	Male		87		72.4	Metropolitan Life Insurance Company		AA-
64	$	6,000,000	Female		87		56.2	Sun Life Assurance Company of Canada (U.S.)		AA-
65	$	3,000,000	Male		87		81.8	AXA Equitable Life Insurance Company		A+
66	$	1,000,000	Female		87		35.7	New York Life Insurance Company		AA+
67	$	10,000,000	Female		87		72.0	West Coast Life Insurance Company		AA-
68	$	2,500,000	Male		87		48.3	Transamerica Life Insurance Company		AA-
69	$	1,000,000	Female		87		51.1	West Coast Life Insurance Company		AA-
70	$	2,000,000	Female		87		51.1	West Coast Life Insurance Company		AA-
71	$	800,000	Male		87		55.7	National Western Life Insurance Company		A
72	$	200,000	Male		87		48.8	Lincoln Benefit Life Company		BBB+
73	$	4,445,467	Male		87		58.9	Penn Mutual Life Insurance Company		A+
74	$	7,500,000	Male		87		50.6	Jefferson-Pilot Life Insurance Company		AA-

46

	Face Amount		Gender	Age (ALB)		LE (mo.)		Insurance Company	S&P Rating
75	$	3,600,000	Female		87		57.9	AXA Equitable Life Insurance Company		A+
76	$	5,000,000	Male		87		81.3	Lincoln National Life Insurance Company		AA-
77	$	1,000,000	Female		87		27.7	John Hancock Life Insurance Company (U.S.A)		AA-
78	$	4,513,823	Female		87		23.4	Aviva Life Insurance Company		A-
79	$	100,000	Female		87		56.9	American General Life Insurance Company		A+
80	$	100,000	Female		87		56.9	American General Life Insurance Company		A+
81	$	2,000,000	Female		87		75.79	U.S. Financial Life Insurance Company		A+
82	$	1,000,000	Male		86		61.1	John Hancock Life Insurance Company (U.S.A)		AA-
83	$	2,000,000	Male		86		61.1	John Hancock Life Insurance Company (U.S.A)		AA-
84	$	5,000,000	Male		86		49.2	Jefferson-Pilot Life Insurance Company		AA-
85	$	1,365,000	Female		86		95.6	Transamerica Life Insurance Company		AA-
86	$	1,000,000	Female		86		84.4	Voya Retirement Insurance and Annuity Company		A
87	$	200,000	Female		86		86.9	Lincoln National Life Insurance Company		AA-
88	$	1,000,000	Male		86		40.1	Massachusetts Mutual Life Insurance Company		AA+
89	$	2,000,000	Male		86		84.6	Transamerica Life Insurance Company		AA-
90	$	8,500,000	Male		86		81.2	Massachusetts Mutual Life Insurance Company		AA+
91	$	1,000,000	Male		86		25.8	Transamerica Life Insurance Company		AA-
92	$	500,000	Male		86		82.0	Metropolitan Life Insurance Company		AA-
93	$	2,000,000	Male		86		61.8	Jefferson-Pilot Life Insurance Company		AA-
94	$	347,211	Male		86		43.9	Prudential Life Insurance Company		AA-
95	$	500,000	Female		86		55.2	Beneficial Life Insurance Company		N/A
96	$	1,800,000	Male		86		53.3	John Hancock Variable Life Insurance Company		AA-
97	$	4,000,000	Male		86		52.8	Metropolitan Life Insurance Company		AA-
98	$	2,000,000	Male		86		96.7	Voya Retirement Insurance and Annuity Company		A
99	$	2,000,000	Male		86		96.7	Voya Retirement Insurance and Annuity Company		A
100	$	2,000,000	Male		86		96.7	Voya Retirement Insurance and Annuity Company		A
101	$	1,500,000	Male		85		49.3	Transamerica Life Insurance Company		AA-
102	$	3,750,000	Male		85		76.4	AXA Equitable Life Insurance Company		A+
103	$	1,000,000	Male		85		60.1	John Hancock Life Insurance Company (U.S.A)		AA-
104	$	2,000,000	Female		85		84.5	AXA Equitable Life Insurance Company		A+
105	$	3,000,000	Female		85		83.3	Sun Life Assurance Company of Canada (U.S.)		AA-
106	$	829,022	Female		85		24.9	Hartford Life and Annuity Insurance Company		BBB+
107	$	1,500,000	Male		85		79.2	AXA Equitable Life Insurance Company		A+
108	$	2,328,547	Male		85		44.6	Metropolitan Life Insurance Company		AA-
109	$	2,000,000	Male		85		44.6	Metropolitan Life Insurance Company		AA-
110	$	5,000,000	Male		85		88.9	Voya Retirement Insurance and Annuity Company		A
111	$	1,500,000	Male		85		49.3	Voya Retirement Insurance and Annuity Company		A
112	$	1,500,000	Male		85		49.3	Voya Retirement Insurance and Annuity Company		A
113	$	3,000,000	Female		85		70.9	Transamerica Life Insurance Company		AA-
114	$	5,000,000	Male		85		73.2	Voya Retirement Insurance and Annuity Company		A
115	$	1,000,000	Male		85		47.4	John Hancock Life Insurance Company (U.S.A)		AA-
116	$	4,000,000	Female		85		50.5	Voya Retirement Insurance and Annuity Company		A
117	$	5,000,000	Female		85		92.2	American General Life Insurance Company		A+
118	$	2,000,000	Male		85		63.8	AXA Equitable Life Insurance Company		A+
119	$	1,750,000	Male		85		63.8	AXA Equitable Life Insurance Company		A+
120	$	2,000,000	Male		85		35.0	Transamerica Life Insurance Company		AA-

47

	Face Amount		Gender	Age (ALB)		LE (mo.)		Insurance Company	S&P Rating
121	$	1,425,000	Male		85		80.31	John Hancock Life Insurance Company (U.S.A)		AA-
122	$	5,000,000	Female		84		100.4	AXA Equitable Life Insurance Company		A+
123	$	1,000,000	Female		84		83.0	John Hancock Life Insurance Company (U.S.A)		AA-
124	$	6,000,000	Female		84		110.3	American General Life Insurance Company		A+
125	$	1,500,000	Female		84		108.4	Lincoln Benefit Life Company		BBB+
126	$	750,000	Male		84		88.91	West Coast Life Insurance Company		AA-
127	$	4,000,000	Male		84		37.2	John Hancock Life Insurance Company (U.S.A)		AA-
128	$	1,000,000	Male		84		78.4	John Hancock Life Insurance Company (U.S.A)		AA-
129	$	2,000,000	Female		84		98.1	Lincoln Benefit Life Company		BBB+
130	$	1,000,000	Male		84		54.2	Voya Retirement Insurance and Annuity Company		A
131	$	5,000,000	Male		84		74.8	Jefferson-Pilot Life Insurance Company		AA-
132	$	2,700,000	Male		84		61.7	John Hancock Life Insurance Company (U.S.A)		AA-
133	$	2,400,000	Male		84		37.9	Genworth Life Insurance Company		BBB-
134	$	7,600,000	Female		84		98.8	Transamerica Life Insurance Company		AA-
135	$	2,500,000	Female		84		64.7	American General Life Insurance Company		A+
136	$	2,500,000	Male		84		59.5	AXA Equitable Life Insurance Company		A+
137	$	3,000,000	Male		84		59.5	Lincoln National Life Insurance Company		AA-
138	$	500,000	Male		84		41.6	Genworth Life Insurance Company		BBB-
139	$	3,000,000	Female		84		43.7	AXA Equitable Life Insurance Company		A+
140	$	1,703,959	Male		84		67.5	Jefferson-Pilot Life Insurance Company		AA-
141	$	500,000	Male		84		18.8	Great Southern Life Insurance Company		N/A
142	$	1,000,000	Male		84		58.1	Hartford Life and Annuity Insurance Company		BBB+
143	$	3,500,000	Female		84		107.2	Lincoln Benefit Life Company		BBB+
144	$	10,000,000	Female		84		59.05	American National Insurance Company		A
145	$	500,000	Male		84		25.82	West Coast Life Insurance Company		AA-
146	$	5,000,000	Male		83		65.9	AXA Equitable Life Insurance Company		A+
147	$	500,000	Male		83		100.7	Metropolitan Life Insurance Company		AA-
148	$	2,000,000	Male		83		40.3	National Life Insurance Company		A
149	$	3,000,000	Male		83		41.3	U.S. Financial Life Insurance Company		A+
150	$	2,147,816	Female		83		120.2	John Hancock Life Insurance Company (U.S.A)		AA-
151	$	4,200,000	Female		83		118.3	Transamerica Life Insurance Company		AA-
152	$	1,900,000	Male		83		66.5	American National Insurance Company		A
153	$	500,000	Male		83		46.6	New York Life Insurance Company		AA+
154	$	500,000	Male		83		46.6	New York Life Insurance Company		AA+
155	$	5,000,000	Male		83		73.7	AXA Equitable Life Insurance Company		A+
156	$	385,000	Male		83		74.6	Metropolitan Life Insurance Company		AA-
157	$	500,000	Male		83		74.6	Metropolitan Life Insurance Company		AA-
158	$	250,000	Male		83		33.1	Jackson National Life Insurance Company		AA
159	$	1,500,000	Male		83		76.5	Jefferson-Pilot Life Insurance Company		AA-
160	$	3,500,000	Female		83		88.6	AXA Equitable Life Insurance Company		A+
161	$	3,000,000	Female		83		93.9	MetLife Investors USA Insurance Company		N/A
162	$	750,000	Male		83		82.39	John Hancock Life Insurance Company (U.S.A)		AA-
163	$	4,500,000	Male		83		74.3	AXA Equitable Life Insurance Company		A+
164	$	250,000	Male		83		52.9	Transamerica Life Insurance Company		AA-

48

	Face Amount		Gender	Age (ALB)		LE (mo.)		Insurance Company	S&P Rating
165	$	2,275,000	Male		83		93.8	Voya Retirement Insurance and Annuity Company		A
166	$	10,000,000	Male		83		79.7	AXA Equitable Life Insurance Company		A+
167	$	2,000,000	Male		83		86.0	Pacific Life Insurance Company		A+
168	$	3,500,000	Male		83		72.9	AXA Equitable Life Insurance Company		A+
169	$	6,217,200	Female		83		106.2	Phoenix Life Insurance Company		B+
170	$	3,000,000	Male		83		61.5	Metropolitan Life Insurance Company		AA-
171	$	1,500,000	Male		83		26.1	Pacific Life Insurance Company		A+
172	$	2,000,000	Female		83		98.0	Jefferson-Pilot Life Insurance Company		AA-
173	$	3,000,000	Male		82		69.2	Protective Life Insurance Company		AA-
174	$	1,500,000	Male		82		69.2	American General Life Insurance Company		A+
175	$	2,000,000	Female		82		117.1	Transamerica Life Insurance Company		AA-
176	$	3,500,000	Female		82		92.6	Jefferson-Pilot Life Insurance Company		AA-
177	$	1,000,000	Male		82		69.4	Lincoln National Life Insurance Company		AA-
178	$	1,500,000	Male		82		58.5	Pacific Life Insurance Company		A+
179	$	5,000,000	Male		82		111.0	American General Life Insurance Company		A+
180	$	250,000	Male		82		150.5	Voya Retirement Insurance and Annuity Company		A
181	$	5,000,000	Female		82		76.6	Sun Life Assurance Company of Canada (U.S.)		AA-
182	$	1,995,000	Female		82		80.9	Transamerica Life Insurance Company		AA-
183	$	4,000,000	Male		82		57.4	Jefferson-Pilot Life Insurance Company		AA-
184	$	1,250,000	Female		82		61.5	Columbus Life Insurance Company		AA
185	$	10,000,000	Male		82		81.9	New York Life Insurance Company		AA+
186	$	2,300,000	Male		82		22.5	American General Life Insurance Company		A+
187	$	2,500,000	Female		82		72.5	Voya Retirement Insurance and Annuity Company		A
188	$	5,000,000	Female		82		57.6	Massachusetts Mutual Life Insurance Company		AA+
189	$	5,000,000	Male		82		76.5	Transamerica Life Insurance Company		AA-
190	$	2,000,000	Male		82		72.2	Ohio National Life Assurance Corporation		AA-
191	$	1,000,000	Male		82		72.2	Ohio National Life Assurance Corporation		AA-
192	$	350,000	Male		82		37.2	Reassure America Life Insurance Company		AA
193	$	5,000,000	Male		82		84.44	Jefferson-Pilot Life Insurance Company		AA-
194	$	5,000,000	Male		81		94.1	AXA Equitable Life Insurance Company		A+
195	$	8,000,000	Male		81		86.7	AXA Equitable Life Insurance Company		A+
196	$	550,000	Male		81		105.8	Genworth Life Insurance Company		BBB-
197	$	1,680,000	Female		81		70.8	AXA Equitable Life Insurance Company		A+
198	$	1,000,000	Female		81		99.0	Jefferson-Pilot Life Insurance Company		AA-
199	$	1,250,000	Male		81		103.2	Metropolitan Life Insurance Company		AA-
200	$	1,000,000	Male		81		68.2	AXA Equitable Life Insurance Company		A+
201	$	1,250,000	Female		81		77.0	Principal Life Insurance Company		A+
202	$	1,000,000	Male		81		59.2	AXA Equitable Life Insurance Company		A+
203	$	3,000,000	Male		81		101.4	John Hancock Life Insurance Company (U.S.A)		AA-
204	$	2,000,000	Male		81		42.8	Jefferson-Pilot Life Insurance Company		AA-
205	$	1,750,000	Male		81		85.7	AXA Equitable Life Insurance Company		A+
206	$	5,000,000	Male		81		75.3	AXA Equitable Life Insurance Company		A+
207	$	300,000	Female		81		76.2	Hartford Life and Annuity Insurance Company		BBB+
208	$	250,000	Male		81		82.8	American General Life Insurance Company		A+
209	$	2,502,000	Male		81		154.5	Transamerica Life Insurance Company		AA-
210	$	10,000,000	Male		81		116.5	John Hancock Life Insurance Company (U.S.A)		AA-

49

	Face Amount		Gender	Age (ALB)		LE (mo.)		Insurance Company	S&P Rating
211	$	1,210,000	Male		81		68.75	Lincoln National Life Insurance Company		AA-
212	$	3,000,000	Female		81		109.1	West Coast Life Insurance Company		AA-
213	$	7,000,000	Male		81		89.53	Genworth Life Insurance Company		BBB-
214	$	3,000,000	Male		80		154.4	Metropolitan Life Insurance Company		AA-
215	$	2,000,000	Male		80		30.4	Metropolitan Life Insurance Company		AA-
216	$	6,000,000	Male		80		127.1	AXA Equitable Life Insurance Company		A+
217	$	320,987	Female		80		109.2	John Hancock Life Insurance Company (U.S.A)		AA-
218	$	130,000	Male		80		54.0	Genworth Life Insurance Company		BBB-
219	$	1,000,000	Male		80		128.1	Empire General Life Assurance Corporation		AA-
220	$	2,000,000	Female		80		92.6	Pacific Life Insurance Company		A+
221	$	2,000,000	Female		80		91.1	Transamerica Life Insurance Company		AA-
222	$	3,000,000	Male		80		114.9	Principal Life Insurance Company		A+
223	$	200,000	Male		80		49.65	Prudential Life Insurance Company		AA-
224	$	500,000	Male		80		51.25	Transamerica Life Insurance Company		AA-
225	$	3,000,000	Male		79		45.9	Pacific Life Insurance Company		A+
226	$	3,000,000	Male		79		45.9	Minnesota Life Insurance Company		A+
227	$	3,000,000	Male		79		45.9	Prudential Life Insurance Company		AA-
228	$	3,000,000	Male		79		94.7	Voya Retirement Insurance and Annuity Company		A
229	$	5,000,000	Male		79		82.6	Pacific Life Insurance Company		A+
230	$	5,000,000	Male		79		82.6	Pacific Life Insurance Company		A+
231	$	4,000,000	Male		79		84.6	Jefferson-Pilot Life Insurance Company		AA-
232	$	3,601,500	Male		79		98.5	Transamerica Life Insurance Company		AA-
233	$	1,000,000	Male		79		100.9	Sun Life Assurance Company of Canada (U.S.)		AA-
234	$	5,000,000	Male		79		134.0	Principal Life Insurance Company		A+
235	$	5,000,000	Male		79		94.8	John Hancock Life Insurance Company (U.S.A)		AA-
236	$	7,000,000	Male		79		90.4	Lincoln Benefit Life Company		BBB+
237	$	476,574	Male		79		76.4	Transamerica Life Insurance Company		AA-
238	$	2,250,000	Male		79		98.9	Massachusetts Mutual Life Insurance Company		AA+
239	$	4,300,000	Female		79		114.2	American National Insurance Company		A
240	$	1,000,000	Female		79		128.6	John Hancock Life Insurance Company (U.S.A)		AA-
241	$	6,000,000	Male		79		111.8	AXA Equitable Life Insurance Company		A+
242	$	5,000,000	Female		79		121.4	Voya Retirement Insurance and Annuity Company		A
243	$	750,000	Male		79		74.0	Lincoln National Life Insurance Company		AA-
244	$	3,000,000	Male		79		100.3	Principal Life Insurance Company		A+
245	$	5,000,000	Male		78		123.5	Jefferson-Pilot Life Insurance Company		AA-
246	$	5,000,000	Male		78		83.1	John Hancock Life Insurance Company (U.S.A)		AA-
247	$	500,000	Male		78		71.4	John Hancock Life Insurance Company (U.S.A)		AA-
248	$	5,000,000	Male		78		93.4	John Hancock Life Insurance Company (U.S.A)		AA-
249	$	1,009,467	Male		78		63.2	John Hancock Life Insurance Company (U.S.A)		AA-
250	$	4,000,000	Male		78		54.0	MetLife Investors USA Insurance Company		N/A
251	$	2,500,000	Male		78		92.5	Massachusetts Mutual Life Insurance Company		AA+
252	$	2,500,000	Male		78		92.5	Massachusetts Mutual Life Insurance Company		AA+
253	$	5,000,000	Male		78		60.8	John Hancock Life Insurance Company (U.S.A)		AA-
254	$	500,000	Female		78		121.3	Columbus Life Insurance Company		AA

50

	Face Amount		Gender	Age (ALB)		LE (mo.)		Insurance Company	S&P Rating
255	$	775,000	Male		78		129.4	Lincoln National Life Insurance Company		AA-
256	$	3,750,000	Male		78		63.2	AXA Equitable Life Insurance Company		A+
257	$	1,000,000	Male		78		115.3	Metropolitan Life Insurance Company		AA-
258	$	5,000,000	Male		78		187.8	West Coast Life Insurance Company		AA-
259	$	2,000,000	Female		78		61.19	Transamerica Life Insurance Company		AA-
260	$	1,000,000	Male		77		119.9	Metropolitan Life Insurance Company		AA-
261	$	2,840,000	Male		77		103.9	Transamerica Life Insurance Company		AA-
262	$	1,000,000	Female		77		80.5	John Hancock Life Insurance Company (U.S.A)		AA-
263	$	1,750,000	Male		77		67.4	John Hancock Life Insurance Company (U.S.A)		AA-
264	$	5,000,000	Male		77		108.9	Transamerica Life Insurance Company		AA-
265	$	600,000	Male		77		89.89	Protective Life Insurance Company		AA-
266	$	3,000,000	Male		76		103.9	Prudential Life Insurance Company		AA-
267	$	3,000,000	Male		76		110.3	Protective Life Insurance Company		AA-
268	$	2,000,000	Female		76		126.3	Aviva Life Insurance Company		A-
269	$	4,000,000	Male		76		73.0	Massachusetts Mutual Life Insurance Company		AA+
270	$	7,000,000	Female		76		129.3	Pacific Life Insurance Company		A+
271	$	2,000,000	Male		76		113.0	Genworth Life Insurance Company		BBB-
272	$	1,000,000	Male		76		89.5	Pacific Life Insurance Company		A+
273	$	2,000,000	Male		76		126.3	Transamerica Life Insurance Company		AA-
274	$	150,000	Male		76		112.5	Genworth Life Insurance Company		BBB-
275	$	490,620	Male		76		92.63	Ameritas Life Insurance Corporation		A+
276	$	5,000,000	Male		76		65.26	West Coast Life Insurance Company		AA-
277	$	5,000,000	Male		75		156.1	Prudential Life Insurance Company		AA-
278	$	3,000,000	Male		75		61.4	Aviva Life Insurance Company		A-
279	$	200,000	Male		75		76.6	Voya Retirement Insurance and Annuity Company		A
280	$	3,000,000	Male		75		121.0	John Hancock Life Insurance Company (U.S.A)		AA-
281	$	5,000,000	Male		75		149.7	Massachusetts Mutual Life Insurance Company		AA+
282	$	5,000,000	Male		75		149.7	Massachusetts Mutual Life Insurance Company		AA+
283	$	8,000,000	Male		75		110.4	Metropolitan Life Insurance Company		AA-
284	$	5,000,000	Male		75		37.7	Lincoln Benefit Life Company		BBB+
285	$	850,000	Male		75		74.0	New York Life Insurance Company		AA+
286	$	4,000,000	Female		74		151.4	American General Life Insurance Company		A+
287	$	300,000	Male		74		21.1	Lincoln National Life Insurance Company		AA-
288	$	2,000,000	Male		74		106.4	American General Life Insurance Company		A+
289	$	10,000,000	Female		74		147.9	Voya Retirement Insurance and Annuity Company		A
290	$	3,000,000	Female		74		123.5	General American Life Insurance Company		AA-
291	$	500,000	Male		73		42.8	Midland National Life Insurance Company		A+
292	$	3,000,000	Male		73		82.3	AXA Equitable Life Insurance Company		A+
293	$	500,000	Male		72		135.4	Ameritas Life Insurance Corporation		A+
294	$	370,000	Male		72		135.4	Ameritas Life Insurance Corporation		A+
295	$	2,500,000	Male		72		106.1	American General Life Insurance Company		A+
296	$	1,167,000	Male		72		33.9	Transamerica Life Insurance Company		AA-
297	$	1,500,000	Male		72		120.9	Metropolitan Life Insurance Company		AA-
298	$	3,000,000	Male		71		84.9	John Hancock Life Insurance Company (U.S.A)		AA-
299	$	2,000,000	Male		71		111.5	New York Life Insurance Company		AA+
300	$	2,000,000	Male		71		111.5	New York Life Insurance Company		AA+

51

	Face Amount		Gender	Age (ALB)		LE (mo.)		Insurance Company	S&P Rating
301	$	2,500,000	Male		71		126.9	Lincoln National Life Insurance Company		AA-
302	$	2,500,000	Male		71		126.9	John Hancock Life Insurance Company (U.S.A)		AA-
303	$	600,000	Male		71		94.9	AXA Equitable Life Insurance Company		A+
304	$	500,000	Male		70		102.6	Transamerica Life Insurance Company		AA-
305	$	500,000	Male		70		102.6	North American Company for Life And Health Insurance		A+
306	$	2,000,000	Male		68		124.2	Transamerica Life Insurance Company		AA-
307	$	1,000,000	Male		68		124.2	Genworth Life Insurance Company		BBB-
308	$	1,000,000	Male		68		71.2	Protective Life Insurance Company		AA-
309	$	2,000,000	Male		68		58.2	MetLife Investors USA Insurance Company		N/A
310	$	2,000,000	Male		68		58.2	MetLife Investors USA Insurance Company		N/A
311	$	156,538	Female		67		117.0	New York Life Insurance Company		AA+
312	$	1,000,000	Male		66		55.5	Lincoln National Life Insurance Company		AA-
313	$	1,000,000	Male		66		89.1	Transamerica Life Insurance Company		AA-
314	$	250,000	Male		66		176.3	Prudential Life Insurance Company		AA-
		806,273,856

(1)	The insured’s age is current as of the measurement date.
(2)	The insured’s life expectancy estimate, other than for a small face value insurance policy benefit, is the average of two life expectancy estimates provided by independent third-party medical actuarial underwriting firms actuarially adjusted through the measurement date.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance the objectives of the control system are met.

As of June 30, 2015, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of our disclosure controls and procedures as such term is defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934, as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with management's evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Securities Exchange Act of 1934 during the period covered by this report that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).  Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only with proper authorizations; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management, under the supervision of and with the participation of the Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of June 30, 2015 based on criteria for effective control over financial reporting set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), 2013 framework in “Internal Control—Integrated Framework.” Based on this assessment, our management concluded that, as of the evaluation date, we maintained effective internal control over financial reporting.

52

PART II.  OTHER INFORMATION

ITEM 6. EXHIBITS

Exhibit
3.1	Bylaws, as amended to and including June 2, 2015 (filed herewith).
10.1	Second Amended and Restated Credit and Security Agreement with DZ Bank AG Deutsche Zentral-Genossenschaftsbank (as agent), and Autobahn Funding Company LLC (as lender), dated effective May 11, 2015 (incorporated by reference to Post-Effective Amendment No. 3 to Form S-1 Registration Statement filed on May 15, 2015 (File No. 333-197227)).
10.2	Amended and Restated Performance Guaranty of GWG Holdings, LLC dated May 11, 2015, delivered in favor of DZ Bank AG Deutsche Zentral-Genossenschaftsbank (as agent), and Autobahn Funding Company LLC (as lender) (incorporated by reference to Post-Effective Amendment No. 3 to Form S-1 Registration Statement filed on May 15, 2015 (File No. 333-197227)).
10.3	GWG Holdings, Inc. 2013 Stock Incentive Plan, amended and restated as of June 1, 2015 (incorporated by reference to Appendix A to our Definitive Proxy Statement for the 2015 Annual Meeting filed on April 30, 2015).
31.1	Section 302 Certification of the Chief Executive Officer (filed herewith).
31.2	Section 302 Certification of the Chief Financial Officer (filed herewith).
32	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ( filed herewith ).
99.1	Letter from Model Actuarial Pricing Systems, dated July 29, 2015 (filed herewith).
101.INS	XBRL Instance Document (filed herewith).
101.SCH	XBRL Schema Document (filed herewith).
101.CAL	XBRL Calculation Linkbase Document (filed herewith).
101.DEF	XBRL Definition Linkbase Document (filed herewith).
101.LAB	XBRL Label Linkbase Document (filed herewith).
101.PRE	XBRL Presentation Linkbase Document (filed herewith).

53

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	GWG HOLDINGS, INC.
Date:  August 13, 2015	By:	/s/ Jon R. Sabes
		Chief Executive Officer
Date:  August 13, 2015	By:	/s/ William B. Acheson
		Chief Financial Officer

54

EX-3.1

Exhibit 3.1

 BYLAWS

of

GWG HOLDINGS, INC.

(a Delaware corporation) 

(as amended to and including June 2, 2015)

Article 1
Certain Definitions

As used in these Bylaws, unless the context otherwise requires, the term:

1.1            “Assistant Secretary” means an Assistant Secretary of the Corporation.

1.2            “Assistant Treasurer” means an Assistant Treasurer of the Corporation.

1.3            “Board” means the Board of Directors of the Corporation.

1.4            “Bylaws” means the these Bylaws of the Corporation, as the same may be amended from time to time.

1.5            “Certificate of Incorporation” means the Certificate of Incorporation of the Corporation, as the same may be amended, supplemented or restated from time to time.

1.6            “Chief Executive Officer” means Chief Executive Officer of the Corporation.

1.7            “Chairman” means the Chairman of the Board of Directors of the Corporation.

1.8            “Corporation” means GWG Holdings, Inc.

1.9            “Directors” means directors of the Corporation.

1.10          “Entire Board” means all then-authorized directors of the Corporation.

1.11          “General Corporation Law” means Title 8, Chapter 1, of the Delaware Statutes (otherwise known as the General Corporation Law of the State of Delaware), as amended from time to time, together with any corresponding provisions of succeeding law.

1.12          “Office of the Corporation” means the principal executive office of the Corporation, anything in Section 131 of the General Corporation Law to the contrary notwithstanding.

1.13          “President” means the President of the Corporation.

1.14          “Secretary” means the Secretary of the Corporation.

1.15          “Stockholders” means stockholders of record of the Corporation.

1.16          “Treasurer” means the Treasurer of the Corporation.

1.17          “Vice President” means a Vice President of the Corporation.

Article 2
Stockholders

2.1           Place of Meetings. Every meeting of Stockholders may be held at such place, within or without the State of Delaware, as may be designated by resolution of the Board from time to time.

2.2           Annual Meeting. If required by applicable law, a meeting of Stockholders shall be held annually for the election of Directors at such date and time as may be designated by resolution of the Board from time to time. Any other business may be transacted at the annual meeting.

2.3           Special Meetings. Unless otherwise prescribed by applicable law, special meetings of Stockholders may be called at any time by the Entire Board, any two or more Directors, or the Chief Executive Officer, and, in addition, shall be called by the Chairman of the Board, the Chief Executive Officer or the Secretary at the request in writing of Stockholders owning not less than ten percent (10%) of the entire capital stock of the Corporation issued and outstanding and entitled to vote. Such request shall state the purposes of the proposed meeting. The officers or Directors shall fix the time and any place, either within or without the State of Delaware, as the place for holding such meeting. Business transacted at any special meeting of Stockholders shall be limited to the purpose stated in the related notice.

2.4           Fixing Record Date. The Board may fix a record date for the purpose of (a) determining the Stockholders entitled (i) to notice of or to vote at any meeting of Stockholders or any adjournment thereof, (ii) unless otherwise provided in the Certificate of Incorporation, to express consent to corporate action in writing without a meeting or (iii) to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock; or (b) any other lawful action. Any such record date shall not precede the date upon which the resolution fixing the record date was adopted by the Board and, unless otherwise required by applicable law, shall not be (x) in the case of clause (a)(i) above, more than 60 nor less than 10 days before the date of such meeting (unless applicable permits such a record date to be less than 10 days before the date of such meeting, in which case the Board may fix a record date in accordance with applicable law), (y) in the case of clause (a)(ii) above, more than 10 days after the date upon which the resolution fixing the record date was adopted by the Board and (z) in the case of clause (a)(iii) or (b) above, more than 60 days prior to such action. If no such record date is fixed, then:

2.4.1            the record date for determining Stockholders entitled to notice of or to vote at a meeting of Stockholders shall be at the close of business on the day immediately prior to the day on which notice is given, or, if notice is waived, at the close of business on the day immediately prior to the day on which the meeting is held;

2

2.4.2            the record date for determining Stockholders entitled to express consent to corporate action in writing without a meeting (unless otherwise provided in the Certificate of Incorporation), when no prior action by the Board is required by applicable law, shall be the first day on which a written consent signed by a Stockholder and setting forth the action taken or proposed to be taken is delivered to the Corporation in accordance with applicable law; and when prior action by the Board is required by applicable law, the record date for determining Stockholders entitled to express consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board adopts the resolution taking such prior action; and

2.4.3            the record date for determining Stockholders for any purpose other than those specified in Sections 2.4.1 and 2.4.2 shall be at the close of business on the day on which the Board adopts the resolution authorizing the subject corporate action. When a determination of Stockholders of record entitled to notice of or to vote at any meeting of Stockholders has been made as provided in this Section 2.4, such determination shall apply to any adjournment thereof unless the Board fixes a new record date for the adjourned meeting.

2.5           Notice of Meetings of Stockholders. Whenever under the provisions of applicable law, the Certificate of Incorporation or these Bylaws, Stockholders are required or permitted to take any action at a meeting, notice shall be given stating the place, if any, date and hour of the meeting, the means of remote communication, if any, by which Stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, notice of any meeting shall be given to each Stockholder entitled to vote at such meeting not less than 10 nor more than 60 days before the date of the meeting. Notice may be mailed or given by electronic transmission. If mailed, such notice shall be deemed to be given when deposited in the United States mail, with postage prepaid, directed to the Stockholder at his, her or its address as it appears on the records of the Corporation. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent of the Corporation that the notice required by this Section 2.5 has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. If sent by electronic transmission, notice to a Stockholder shall be deemed to be given if by (i) telecopy (facsimile), when directed to a number at which the Stockholder has consented to receive notice, (ii) electronic mail, when directed to an electronic mail address at which the Stockholder has consented to receive notice, (iii) a posting on an electronic network together with a separate notice to the Stockholder of the specific posting, upon the later of (A) such posting and (B) the giving of the separate notice (which notice may be given in any of the manners provided above), or (iv) any other form of electronic transmission, when directed to the Stockholder. Any meeting of Stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, and at the adjourned meeting any business may be transacted that might have been transacted at the meeting as originally called. If, however, the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Stockholder of record entitled to vote at the meeting.

3

2.6           Waivers of Notice. Whenever the giving of any notice to Stockholders is required by applicable law, the Certificate of Incorporation or these Bylaws, a waiver thereof, given by the person entitled to said notice, whether before or after the event as to which such notice is required, shall be deemed equivalent to notice. Attendance by a Stockholder at a meeting shall constitute a waiver of notice of such meeting except when the Stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting has not been lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Stockholders need be specified in any waiver of notice unless so required by applicable law, the Certificate of Incorporation or these Bylaws.

2.7           List of Stockholders. The Secretary shall prepare and make, at least 10 days before every meeting of Stockholders, a complete list of the Stockholders entitled to vote at the meeting, and showing the address of each Stockholder and the number of shares registered in the name of each Stockholder. Such list shall be open to the examination of any Stockholder, the Stockholder’s agent, or attorney, at the Stockholder’s expense, for any purpose germane to the meeting, for a period of at least 10 days prior to the meeting, during ordinary business hours at the Office of the Corporation. If the meeting is to be held at a place, the list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any Stockholder who is present. If the meeting is held solely by means of remote communication, the list shall also be open for examination as provided by applicable law. Except as provided by applicable law, the stock ledger shall be the only evidence as to who are the Stockholders entitled to examine the stock ledger, the list of Stockholders or the books of the Corporation, or to vote in person or by proxy at any meeting of Stockholders.

2.8           Quorum of Stockholders; Adjournment. Except as otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, at each meeting of Stockholders, the presence, in person or by proxy, of the holders of a majority in voting power of all outstanding shares of stock entitled to vote at the meeting shall constitute a quorum for the transaction of any business at such meeting. In the absence of a quorum, the holders of a majority in voting power of the shares of stock present in person or represented by proxy at any meeting of Stockholders, including an adjourned meeting, whether or not a quorum is present, may adjourn such meeting to another time and place. Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity.

4

2.9           Voting; Proxies. Unless otherwise provided in the Certificate of Incorporation, every Stockholder entitled to vote at any meeting of Stockholders shall be entitled to one vote for each share of stock held by such Stockholder which has voting power upon the matter in question. At any meeting of Stockholders, all matters (except as otherwise provided by the Certificate of Incorporation, these Bylaws, the rules and regulations of any stock exchange or listing service applicable to the Corporation, applicable law or pursuant to any rules or regulations applicable to the Corporation or its securities) shall be decided by the affirmative vote of a majority in voting power of shares of stock present in person or represented by proxy and entitled to vote thereon; provided, however, that at all meetings of Stockholders for the election of Directors, a plurality of the votes cast shall be sufficient to elect each Director; and provided, further, that at all meetings of Stockholders at which a determination of when, or with what frequency, any votes (advisory or otherwise) may be taken on matters relating to executive compensation, such determination shall be made by reference to a plurality of the votes cast. Each Stockholder entitled to vote at a meeting of Stockholders or to express consent to or dissent from corporate action in writing without a meeting may authorize another person or persons to act for such Stockholder by proxy but no such proxy shall be voted or acted upon after 180 days from its date, unless the proxy is irrevocable. A proxy shall be irrevocable if it expressly states that it is irrevocable and if, and only so long as, it is coupled with an interest sufficient in law to support an irrevocable power. A Stockholder may revoke any proxy that is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary a revocation of the proxy or by delivering a new proxy bearing a later date.

2.10         Voting Procedures and Inspectors of Election at Meetings of Stockholders. The Board, in advance of any meeting of Stockholders, may, and shall if required by applicable law, appoint one or more inspectors, who may be employees of the Corporation, to act at the meeting and make a written report thereof. The Board may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting, the person presiding at the meeting may, and shall if required by applicable law, appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall (a) ascertain the number of shares outstanding and the voting power of each, (b) determine the shares represented at the meeting and the validity of proxies and ballots, (c) count all votes and ballots, (d) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and (e) certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities ito assist the inspectors in the performance of their duties. Unless otherwise provided by the Board, the date and time of the opening and the closing of the polls for each matter upon which the Stockholders will vote at a meeting shall be determined by the person presiding at the meeting and shall be announced at the meeting. No ballot, proxies or votes, or any revocation thereof or change thereto, shall be accepted by the inspectors after the closing of the polls unless state court of the State of Delaware, upon application by a Stockholder, shall determine otherwise. In determining the validity and counting of proxies and ballots cast at any meeting of Stockholders, the inspectors may consider such information as is permitted by applicable law. No person who is a candidate for office at an election may serve as an inspector at such election.

5

2.11         Conduct of Meetings; Organization. Subject to Section 2.12 through 2.14 of these Bylaws, the Board may adopt by resolution such rules and regulations for the conduct of the meeting of Stockholders as it shall deem appropriate. Unless another officer is designated by the Board, at each meeting of Stockholders, the Chief Executive Officer, or in the absence of the Chief Executive Officer, the President, or in the absence of the President, the Chairman, or if there is no Chairman or if there be one and the Chairman is absent, a Vice President, and in case more than one Vice President shall be present, that Vice President designated by the Board (or in the absence of any such designation, the most senior Vice President, based on age, present), shall preside over the meeting. Except to the extent inconsistent with such rules and regulations as adopted by the Board, the person presiding over any meeting of Stockholders shall have the right and authority to convene and to adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such person, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the presiding officer of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting (subject to the requirements of Sections 2.12 and 2.13 of these Bylaws); (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to Stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the person presiding over the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. The presiding officer at any meeting of Stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such presiding officer should so determine, such person shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board or the person presiding over the meeting, meetings of Stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. The Secretary, or in his or her absence, one of the Assistant Secretaries, shall act as secretary of the meeting. In case none of the officers above designated to act as the person presiding over the meeting or as secretary of the meeting, respectively, shall be present, a person presiding over the meeting or a secretary of the meeting, as the case may be, shall be designated by the Board, and in case the Board has not so acted, in the case of the designation of a person to act as secretary of the meeting, designated by the person presiding over the meeting.

2.12         Order of Business. The order of business at all meetings of Stockholders shall be as determined by the person presiding over the meeting, subject, however, to the following provisions:

2.12.1         At any annual meeting of Stockholders, only such nominations of persons for election to the Board shall be made, and only such other business shall be conducted or considered, as shall have been properly brought before the meeting. For nominations to be properly made at an annual meeting, and proposals of other business to be properly brought before an annual meeting, nominations and proposals of other business must be (a) specified in the Corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board, (b) otherwise properly made at the annual meeting, by or at the direction of the Board or (c) otherwise properly requested to be brought before the annual meeting by a Stockholder in accordance with these Bylaws. For nominations of persons for election to the Board or proposals of other business to be properly requested by a Stockholder to be made at an annual meeting, a Stockholder must (i) be a Stockholder of record at the time of giving of notice of such annual meeting by or at the direction of the Board and at the time of the annual meeting, (ii) be entitled to vote at such annual meeting and (iii) comply with the procedures set forth in these Bylaws as to such business or nomination. The immediately preceding sentence shall be the exclusive means for a Stockholder to make nominations or other business proposals (other than matters properly brought under Rule 14a-8 or Rule 14a-11 under the Securities Exchange Act of 1934 (the “Exchange Act”), and included in the Corporation’s notice of meeting) before an annual meeting of Stockholders.

6

2.12.2         At any special meeting of Stockholders, only such business shall be conducted or considered, as shall have been properly brought before the meeting pursuant to the Corporation’s notice of meeting. To be properly brought before a special meeting, proposals of business must be (a) specified in the Corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board or (b) otherwise properly brought before the special meeting, by or at the direction of the Board. In this regard, Nominations of persons for election to the Board may be made at a special meeting of Stockholders at which Directors are to be elected pursuant to the Corporation’s notice of meeting (a) by or at the direction of the Board or (b) provided that the Board has determined that Directors shall be elected at such meeting, by any Stockholder who (i) is a Stockholder of record at the time of giving of notice of such special meeting and at the time of the special meeting, (ii) is entitled to vote at the meeting, and (iii) complies with the procedures set forth in these Bylaws as to such nomination. The immediately preceding sentence shall be the exclusive means for a Stockholder to make nominations or other business proposals before a special meeting of Stockholders (other than matters properly brought under Rule 14a-8 or Rule 14a-11 under the Exchange Act and included in the Corporation’s notice of meeting).

2.12.3         Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the presiding person at the meeting shall have the power to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with these Bylaws and, if any proposed nomination or other business is not in compliance with these Bylaws, to declare that no action shall be taken on such nomination or other proposal and such nomination or other proposal shall be disregarded.

2.13         Advance Notice of Stockholder Business and Nominations.

2.13.1         Without qualification or limitation, but subject to Section 2.13.3(d) of these Bylaws, for any nominations or any other business to be properly brought before an annual meeting by a Stockholder pursuant to Section 2.12.1 of these Bylaws, the Stockholder must have given timely notice thereof (including, in the case of nominations, the completed and signed questionnaire, representation and agreement required by Section 2.14 of these Bylaws) and timely updates and supplements thereof in writing to the Secretary and such other business must otherwise be a proper matter for Stockholder action. To be timely, a Stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the Stockholder must be so delivered not earlier than the close of business on the 120th day prior to the date of such annual meeting and not later than the close of business on the later of the 90th day prior to the date of such annual meeting or, if the first public announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall any adjournment or postponement of an annual meeting, or the public announcement thereof, commence a new time period for the giving of a Stockholder’s notice as described above.

7

Notwithstanding anything in the immediately preceding paragraph to the contrary, in the event that the number of Directors to be elected to the Board is increased by the Board, and there is no public announcement by the Corporation naming all of the nominees for Director or specifying the size of the increased Board at least 100 days prior to the first anniversary of the preceding year’s annual meeting, a Stockholder’s notice required by this Section 2.13.1 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.

In addition, to be timely, a Stockholder’s notice must further be updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting and as of the date that is 10 business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation not later than five business days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than eight business days prior to the date for the meeting, any adjournment or postponement thereof in the case of the update and supplement required to be made as of 10 business days prior to the meeting or any adjournment or postponement thereof.

2.13.2         Subject to Section 2.13.3(d) of these Bylaws, in the event the Corporation calls a special meeting of Stockholders for the purpose of electing one or more Directors to the Board, any Stockholder may nominate a person or persons (as the case may be) for election to such position(s) to be elected as specified in the Corporation’s notice calling the meeting, provided that the Stockholder gives timely notice thereof (including the completed and signed questionnaire, representation and agreement required by Section 2.14 of these Bylaws) and timely updates and supplements thereof in writing to the Secretary. In order to be timely, a Stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day prior to the date of such special meeting and not later than the close of business on the later of the 90th day prior to the date of such special meeting or, if the first public announcement of the date of such special meeting is less than 100 days prior to the date of such special meeting, the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting. In no event shall any adjournment or postponement of a special meeting, or the public announcement thereof, commence a new time period for the giving of a Stockholder’s notice as described above.

8

In addition, to be timely, a Stockholder’s notice must further be updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting and as of the date that is 10 business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation not later than five business days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than eight business days prior to the date for the meeting, any adjournment or postponement thereof in the case of the update and supplement required to be made as of 10 business days prior to the meeting or any adjournment or postponement thereof.

2.13.3         To be in proper form, a Stockholder’s notice (whether given pursuant to Section 2.12.1 or 2.12.2 of these Bylaws) to the Secretary must include the following, as applicable.

(a)         As to the Stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, a Stockholder’s notice must set forth: (i) the name and address of such Stockholder, as they appear on the Corporation’s books, of such beneficial owner, if any, and of their respective affiliates or associates or others acting in concert therewith, (ii) (A) the class or series and number of shares of the Corporation which are, directly or indirectly, owned beneficially and of record by such Stockholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith, (B) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, or any derivative or synthetic arrangement having the characteristics of a long position in any class or series of shares of the Corporation, or any contract, derivative, swap or other transaction or series of transactions designed to produce economic benefits and risks that correspond substantially to the ownership of any class or series of shares of the Corporation, including due to the fact that the value of such contract, derivative, swap or other transaction or series of transactions is determined by reference to the price, value or volatility of any class or series of shares of the Corporation, whether or not such instrument, contract or right shall be subject to settlement in the underlying class or series of shares of the Corporation, through the delivery of cash or other property, or otherwise, and without regard of whether the Stockholder of record, the beneficial owner, if any, or any affiliates or associates or others acting in concert therewith, may have entered into transactions that hedge or mitigate the economic effect of such instrument, contract or right or any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation (any of the foregoing, a “Derivative Instrument”) directly or indirectly owned beneficially by such Stockholder, the beneficial owner, if any, or any affiliates or associates or others acting in concert therewith, (C) any proxy, contract, arrangement, understanding, or relationship pursuant to which such Stockholder has a right to vote any class or series of shares of the Corporation, (D) any agreement, arrangement, understanding, relationship or otherwise, including any repurchase or similar so-called “stock borrowing” agreement or arrangement, engaged in, directly or indirectly, by such Stockholder, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of any class or series of the shares of the Corporation by, manage the risk of share price changes for, or increase or decrease the voting power of, such Stockholder with respect to any class or series of the shares of the Corporation, or which provides, directly or indirectly, the opportunity to profit or share in any profit derived from any decrease in the price or value of any class or series of the shares of the Corporation (any of the foregoing, “Short Interests”), (E) any rights to dividends on the shares of the Corporation owned beneficially by such Stockholder that are separated or separable from the underlying shares of the Corporation, (F) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such Stockholder is a general partner or, directly or indirectly, beneficially owns an interest in a general partner of such general or limited partnership, (G) any performance-related fees (other than an asset-based fee) that such Stockholder is entitled to based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, including without limitation any such interests held by members of such Stockholder’s immediate family sharing the same household, (H) any significant equity interests or any Derivative Instruments or Short Interests in any principal competitor of the Corporation held by such Stockholder, and (I) any direct or indirect interest of such Stockholder in any contract with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement), and (iii) any other information relating to such Stockholder and beneficial owner, if any, that would be required to be disclosed in a proxy statement and form of proxy or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of Directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder;

9

(b)         If the notice relates to any business other than a nomination of a Director or Directors that the Stockholder proposes to bring before the meeting, a Stockholder’s notice must, in addition to the matters set forth in paragraph (a) above, also set forth: (i) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest of such Stockholder and beneficial owner, if any, in such business, (ii) the text of the proposal or business (including the text of any resolutions proposed for consideration), and (iii) a description of all agreements, arrangements and understandings between such Stockholder and beneficial owner, if any, and any other person or persons (including their names) in connection with the proposal of such business by such Stockholder;

(c)         As to each person, if any, whom the Stockholder proposes to nominate for election or reelection to the Board, a Stockholder’s notice must, in addition to the matters set forth in paragraph (a) above, also set forth: (i) all information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of Directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a Director if elected) and (ii) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such Stockholder and beneficial owner, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the Stockholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant; and

10

(d)         With respect to each person, if any, whom the Stockholder proposes to nominate for election or reelection to the Board, a Stockholder’s notice must, in addition to the matters set forth in paragraphs (a) and (c) above, also include a completed and signed questionnaire, representation and agreement required by Section 2.14 of these Bylaws. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent Director of the Corporation or that could be material to a reasonable Stockholder’s understanding of the independence, or lack thereof, of such nominee.

(e)         For purposes of these Bylaws, “public announcement” shall mean disclosure in a press release reported by a regional or national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.

(f)         Notwithstanding the provisions of these Bylaws, a Stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in these Bylaws; provided, however, that any references in these Bylaws to the Exchange Act or the rules promulgated thereunder are not intended to and shall not limit the requirements applicable to nominations or proposals as to any other business to be considered pursuant to Section 2.12 of these Bylaws.

(g)         Nothing in these Bylaws shall be deemed to affect any rights (i) of Stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act, (ii) of Stockholders to request inclusion of nominees in the Corporation’s proxy statement pursuant to Rule 14a-11 under the Exchange Act or (iii) of the holders of any series of preferred stock if and to the extent provided for under law, the Certificate of Incorporation or these Bylaws. Subject to Rule 14a-8 and Rule 14a-11 under the Exchange Act, nothing in these Bylaws shall be construed to permit any Stockholder, or give any Stockholder the right, to include or have disseminated or described in the Corporation’s proxy statement any nomination of Director or Directors or any other business proposal.

11

2.14         Submission of Ouestionnaire, Representation and Agreement. To be eligible to be a nominee for election or reelection as a Director of the Corporation (or, in the case of a nomination brought under Rule 14a-11 of the Exchange Act, to serve as a Director of the Corporation), a person must deliver (in accordance with the time periods prescribed for delivery of notice under Section 2.13 of these Bylaws or, in the case of a nomination brought under Rule 14a-11 of the Exchange Act, prior to the time such person is to begin service as a Director) to the Secretary at the principal executive offices of the Corporation a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written request), and a written representation and agreement (in the form provided by the Secretary upon written request) that such person (A) is not and will not become a party to (1) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a Director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (2) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a Director of the Corporation, with such person’s fiduciary duties under applicable law, (B) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a Director that has not been disclosed therein, and (C) in such person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a Director of the Corporation, and will comply with all applicable corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation publicly disclosed from time to time.

2.15         Written Consent of Stockholders Without a Meeting. Unless otherwise provided in the Certificate of Incorporation, any action required by the General Corporation Law to be taken at any annual or special meeting of Stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered (by hand or by certified or registered mail, return receipt requested, or by electronic or remote communication) to the Office of the Corporation, or to an officer or agent of the Corporation having custody of the book in which proceedings of meetings of Stockholders are recorded, or to any other officer or agent designated by the Board. Every written consent shall bear the date of signature of each Stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated consent delivered in the manner required by this Section 2.13, written consents signed by a sufficient number of holders to take action are delivered to the Corporation as aforesaid. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall, to the extent required by applicable law, be given to those Stockholders who have not consented in writing, and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Corporation.

12

Article 3
Directors

3.1           General Powers. Except as otherwise provided in the Certificate of Incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board. The Board may adopt such rules and regulations, not inconsistent with the Certificate of Incorporation or these Bylaws or applicable law, as it may deem proper for the conduct of its meetings and the management of the Corporation.

3.2           Number; Qualification; Term of Office. The Board shall consist of at least three Directors and up to seven Directors, the precise number thereof to be determined from time to time by resolution of the Board. Except as provided in Section 3.3, Directors shall be elected at the annual meeting of Stockholders by a plurality of the votes cast in the applicable election, and each Director shall hold office until his or her successor is elected and qualified, or until the Director’s earlier death, resignation, disqualification or removal. Directors need not be Stockholders, and need not be residents of the State of Delaware.

3.3           Newly Created Directorships and Vacancies. Unless otherwise provided by applicable law or the Certificate of Incorporation, any newly created directorships resulting from an increase in the authorized number of Directors and any vacancies occurring in the Board for any cause may be filled by the affirmative vote of a majority of the remaining members of the Board, although less than a quorum, or by a sole remaining Director, or may be elected by a plurality of the votes cast by Directors at a Board meeting. A Director so elected shall hold office until the expiration of the term of office of the Director whom he or she has replaced, if applicable, or until a successor is elected and qualified, or until the Director’s earlier death, resignation or removal.

3.4           Resignation and Removal. Any Director may resign at any time by notice given in writing to the Corporation. Such resignation shall take effect at the time therein specified, and, unless otherwise specified in such resignation, the acceptance of such resignation shall not be necessary to make it effective. Any Director or the Entire Board may be removed at any time, but only by the affirmative vote of the holders of two-thirds or more of the outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of Directors (considered for this purpose as one class) cast at a meeting of the Stockholders called for that purpose.

3.5           Regular Meetings. Regular meetings of the Board may be held without notice at such times and at such places within or without the State of Delaware as may be determined from time to time by resolution of the Board.

13

3.6           Special Meetings. Special meetings of the Board may be held at such times and at such places within or without the State of Delaware whenever called by the Chairman, the Chief Executive Officer or the Secretary, or by any two or more Directors on at least 24 hours’ notice to each Director given by one of the means specified in Section 3.9 hereof other than by mail, or on at least three days’ notice if given by mail. Special meetings shall be called by the Chairman, Chief Executive Officer or Secretary in like manner and on like notice on the written request of any two or more of the Directors then serving as Directors.

3.7           Telephone Meetings. Directors or members of any committee designated by the Board may participate in a meeting of the Board or of such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 3.7 shall constitute presence in person at such meeting.

3.8           Adjourned Meetings. A majority of the Directors present at any meeting of the Board, including an adjourned meeting, whether or not a quorum is present, may adjourn such meeting to another time and place. At least 24 hours’ notice of any adjourned meeting of the Board shall be given to each Director whether or not present at the time of the adjournment, if such notice shall be given by one of the means specified in Section 3.9 hereof other than by mail, or at least three days’ notice if by mail. Any business may be transacted at an adjourned meeting that might have been transacted at the meeting as originally called.

3.9           Notice Procedure. Subject to Sections 3.6 and 3.10 hereof, whenever under applicable law, the Certificate of Incorporation or these Bylaws, notice is required to be given to any Director, such notice shall be deemed given effectively if given in person or by telephone, by mail addressed to such Director at such Director’s address as it appears on the records of the Corporation, with postage thereon prepaid, or by telegram, telecopy (facsimile) or by other means of electronic transmission such as electronic mail.

3.10         Waiver of Notice. Whenever the giving of any notice to Directors is required by applicable law, the Certificate of Incorporation or these Bylaws, a waiver thereof, given by the Director entitled to said notice, whether before or after the event as to which such notice is required, shall be deemed equivalent to notice. Attendance by a Director at a meeting shall constitute a waiver of notice of such meeting except when the Director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting has not been lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Directors or a committee of Directors need be specified in any waiver of notice unless so required by applicable law, the Certificate of Incorporation or these Bylaws.

3.11         Organization. At each meeting of the Board, the Chairman, or in the absence of the Chairman, the Chief Executive Officer, or in the absence of the Chief Executive Officer, the President, or in the absence of the President, a chairman chosen by a majority of the Directors present, shall preside. If present, the Secretary shall act as secretary at each meeting of the Board. In case the Secretary shall be absent from any meeting of the Board, an Assistant Secretary shall perform the duties of secretary at such meeting; and in the absence from any such meeting of the Secretary and all Assistant Secretaries, the person presiding at the meeting may appoint any person to act as secretary of the meeting.

14

3.12         Quorum of Directors. The presence in person of a majority of the Entire Board shall be necessary and sufficient to constitute a quorum for the transaction of business at any meeting of the Board.

3.13         Action by Majority Vote. Except as otherwise expressly required by applicable law, the Certificate of Incorporation or these Bylaws, the vote of a majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board.

3.14         Action Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if all Directors or members of such committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee.

Article 4
Committees of the Board

The Board may, by resolution, designate one or more committees, each committee to consist of one or more of the Directors of the Corporation. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. If a member of a committee shall be absent from any meeting, or disqualified from voting thereat, the remaining member or members present at the meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may, by a unanimous vote, appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent permitted by applicable law and to the extent provided in the resolution of the Board designating such committee, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it. Unless otherwise specified in the resolution of the Board designating a committee, at all meetings of such committee, a majority of the then authorized members of the committee shall constitute a quorum for the transaction of business, and the vote of a majority of the members of the committee present at any meeting at which there is a quorum shall be the act of the committee. Each committee shall keep regular minutes of its meetings. Unless the Board otherwise provides, each committee designated by the Board may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article 3 of these Bylaws.

15

Article 5
Officers

5.1           Positions. The officers of the Corporation shall include a Chief Executive Officer, a Secretary, a Treasurer and such other officers as the Board may elect, including a Chairman, President, one or more Vice Presidents and one or more Assistant Secretaries and Assistant Treasurers, who shall exercise such powers and perform such duties as shall be determined from time to time by resolution of the Board. The Board may elect one or more Vice Presidents as Executive Vice Presidents and may use descriptive words or phrases to designate the standing, seniority or areas of special competence of the Vice Presidents elected or appointed by it. Any number of offices may be held by the same person unless the Certificate of Incorporation or these Bylaws otherwise provide.

5.2           Election. The officers of the Corporation shall be elected by the Board at its annual meeting or at such other time or times as the Board shall determine.

5.3           Term of Office. Each officer of the Corporation shall hold office for the term for which he or she is elected and until such officer’s successor is elected and qualifies or until such officer’s earlier death, resignation or removal. Any officer may resign at any time upon written notice to the Corporation. Such resignation shall take effect at the date of receipt of such notice or at such later time as is therein specified, and, unless otherwise specified, the acceptance of such resignation shall not be necessary to make it effective. The resignation of an officer shall be without prejudice to the contractual rights of the Corporation, if any. Any officer may be removed at any time, with or without cause by the Board. Any vacancy occurring in any office of the Corporation may be filled by the Board. The removal of an officer with or without cause shall be without prejudice to the officer’s contract rights, if any. The election or appointment of an officer shall not of itself create contractual rights in favor of such officer.

5.4           Fidelity Bonds. The Corporation may secure the fidelity of any or all of its officers or agents by bond or otherwise.

5.5           Chairman. The Chairman, if one shall have been appointed, shall preside at all meetings of the Board and shall exercise such powers and perform such other duties as shall be determined from time to time by resolution of the Board.

5.6           Chief Executive Officer. The Chief Executive Officer of the Corporation and shall have general supervision over the business of the Corporation, subject, however, to the control of the Board and of any duly authorized committee of the Board. Except as otherwise provided in Section 2.11, the Chief Executive Officer shall preside at all meetings of the Stockholders and shall also, if a Director, preside at all meetings of the Board at which the Chairman (if there be one) is not present. The Chief Executive Officer may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts and other instruments, except in cases in which the signing and execution thereof shall be expressly delegated by resolution of the Board or by these Bylaws to some other officer or agent of the Corporation, or shall be required by applicable law otherwise to be signed or executed and, in general, the Chief Executive Officer shall perform all duties incident to the office of a Chief Executive Officer or President of a corporation and such other duties as may from time to time be assigned to the Chief Executive Officer by resolution of the Board.

16

5.7           President. The President, if any, shall have such powers and perform such duties as may be specified in these bylaws or prescribed by the Board. If the Chief Executive Officer is absent or disabled, the President shall succeed to the Chief Executive Officer’s powers and duties.

5.8           Vice Presidents. At the request of the Chief Executive Officer or the President, or, in the absence of both the Chief Executive Officer and President, at the request of the Board, the Vice Presidents shall (in such order as may be designated by the Board, or, in the absence of any such designation, in order of seniority based on age) perform all of the duties of the Chief Executive Officer and, in so performing, shall have all the powers of, and be subject to all restrictions upon, the Chief Executive Officer. Any Vice President may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts or other instruments, except in cases in which the signing and execution thereof shall be expressly delegated by resolution of the Board or by these Bylaws to some other officer or agent of the Corporation, or shall be required by applicable law otherwise to be signed or executed, and each Vice President shall perform such other duties as from time to time may be assigned to such Vice President by resolution of the Board or by the Chief Executive Officer or President.

5.9           Secretary. The Secretary shall attend all meetings of the Board and of the Stockholders and shall record all the proceedings of the meetings of the Board and of the Stockholders in a book to be kept for that purpose, and shall perform like duties for committees of the Board, when required. The Secretary shall give, or cause to be given, notice of all special meetings of the Board and of the Stockholders and shall perform such other duties as may be prescribed by the Board or by the Chief Executive Officer, under whose supervision the Secretary shall be. The Secretary shall have custody of the corporate seal of the Corporation, if any, and the Secretary, or an Assistant Secretary, shall have authority to affix the same on any instrument requiring it, and when so affixed, the seal may be attested by the signature of the Secretary or by the signature of such Assistant Secretary. The Board may, by resolution, give general authority to any other officer to affix the seal of the Corporation and to attest the same by such officer’s signature. The Secretary or an Assistant Secretary may also attest all instruments signed by the Chief Executive Officer, President or any Vice President. The Secretary shall have charge of all the books, records and papers of the Corporation relating to its organization and management, shall see that the reports, statements and other documents required by applicable law are properly kept and filed and, in general, shall perform all duties incident to the office of Secretary of a corporation and such other duties as may from time to time be assigned to the Secretary by resolution of the Board or by the Chief Executive Officer or President.

5.10         Treasurer. The Treasurer, who may also be the Chief Financial Officer, shall have charge and custody of, and be responsible for, all funds, securities and notes of the Corporation; receive and give receipts for moneys due and payable to the Corporation from any sources whatsoever; deposit all such moneys and valuable effects in the name and to the credit of the Corporation in such depositaries as may be designated by the Board; against proper vouchers, cause such funds to be disbursed by checks or drafts on the authorized depositaries of the Corporation signed in such manner as shall be determined by the Board and be responsible for the accuracy of the amounts of all moneys so disbursed; regularly enter or cause to be entered in books or other records maintained for the purpose full and adequate account of all moneys received or paid for the account of the Corporation; have the right to require from time to time reports or statements giving such information as the Treasurer may desire with respect to any and all financial transactions of the Corporation from the officers or agents transacting the same; render to the Chief Executive Officer or the Board, whenever the Chief Executive Officer or the Board shall require the Treasurer so to do, an account of the financial condition of the Corporation and of all financial transactions of the Corporation; disburse the funds of the Corporation as ordered by the Board; and, in general, perform all duties incident to the office of Treasurer of a corporation and such other duties as may from time to time be assigned to the Treasurer by resolution of the Board or by the Chief Executive Officer.

17

5.11         Assistant Secretaries and Assistant Treasurers. Assistant Secretaries and Assistant Treasurers shall perform such duties as shall be assigned to them by the Secretary or by the Treasurer, respectively, or by resolution of the Board or by the Chief Executive Officer.

Article 6
Indemnification

6.1           Right to Indemnification. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (a “Covered Person”) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a Director or officer of the Corporation or, while a Director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity (an “Other Entity”), including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Covered Person. Notwithstanding the preceding sentence, except as otherwise provided in Section 6.3, the Corporation shall be required to indemnify a Covered Person in connection with a Proceeding (or part thereof) commenced by such Covered Person only if the commencement of such Proceeding (or part thereof) by the Covered Person was authorized by the Board.

6.2           Prepayment of Expenses. The Corporation shall pay the expenses (including attorneys’ fees) incurred by a Covered Person in defending any Proceeding in advance of its final disposition, provided, however, that, to the extent required by applicable law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Covered Person to repay all amounts advanced if it should be ultimately determined that the Covered Person is not entitled to be indemnified under this Article 6 or otherwise.

6.3           Actions by or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation. No indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged by a court of competent jurisdiction to be liable to the Corporation or for amounts paid in settlement to the Corporation, unless and only to the extent that the court in which such action or suit was brought or other court of competent jurisdiction shall determine upon application that in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper. A person entitled to indemnification under this Section shall also be considered a “Covered Person” for all purposes of these Bylaws.

18

6.4           Claims. If a claim for indemnification or advancement of expenses under this Article 6 is not paid in full within 30 days after a written claim therefor by the Covered Person has been received by the Corporation, the Covered Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the Covered Person is not entitled to the requested indemnification or advancement of expenses under applicable law.

6.5           Nonexclusivity of Rights. The rights conferred on any Covered Person by this Article 6 shall not be exclusive of any other rights that such Covered Person may have or hereafter acquire under any statute, provision of this Certificate of Incorporation, the Bylaws, agreement, vote of Stockholders or disinterested Directors or otherwise.

6.6           Other Sources. The Corporation’s obligation, if any, to indemnify or to advance expenses to any Covered Person who was or is serving at its request as a director, officer, employee or agent of an Other Entity shall be reduced by any amount such Covered Person may collect as indemnification or advancement of expenses from such Other Entity.

6.7           Amendment or Repeal. Any repeal or modification of the foregoing provisions of this Article 6 shall not adversely affect any right or protection hereunder of any Covered Person in respect of any act or omission occurring prior to the time of such repeal or modification.

6.8           Other Indemnification and Prepayment of Expenses. This Article 6 shall not limit the right of the Corporation, to the extent and in the manner permitted by applicable law, to indemnify and to advance expenses to persons other than Covered Persons when and as authorized by appropriate corporate action.

Article 7
Certain Litigation Matters

Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article 7.

7.1           Exclusive Forum. Unless the Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for any claim or counterclaim, including without limitation (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s Stockholders, (iii) any action asserting a claim arising pursuant to any provision of the General Corporation Law, or (iv) any action asserting a claim governed by the internal affairs doctrine, shall be a state or federal court located within the State of Delaware, in all cases subject to the court having personal jurisdiction over the indispensable parties named as defendants.

19

Article 8
General Provisions

8.1           Certificates Representing Shares. Shares of the Corporation’s stock may be certificated or uncertificated, as provided under applicable law. Every holder of stock represented by certificates, and upon request every holder of uncertificated shares, shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman, if any, or the Chief Executive Officer, President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, certifying the number of shares owned by such Stockholder in the Corporation. Any or all of the signatures upon a certificate may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon any certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.

8.2           Transfer and Registry Agents. The Corporation may from time to time maintain one or more transfer offices or agents and registry offices or agents at such place or places as may be determined from time to time by the Board.

8.3           Lost, Stolen or Destroyed Certificates. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

8.4           Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or by means of, or be in the form of, any information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to applicable law.

8.5           Certain Acquisitions by Fiduciaries. The provisions of Sections 78.378 to 78.3793 of the General Corporation Law do not apply to (i) an acquisition by a person acting in a fiduciary capacity from another person acting in a fiduciary capacity for the same beneficiaries (and pursuant to the same instrument) or (ii) an acquisition by the spouse of a person acting in a fiduciary capacity or by a relative of such fiduciary within the first, second or third degree of consanguinity, provided that such acquisition is pursuant to the instrument creating such fiduciary relationship. For purposes of this section, “acquisition” has the meaning set forth in Section 78.3783 of the General Corporation Law, and the term “fiduciary” has the meaning set forth in the Uniform Fiduciaries Act as adopted in the State of Delaware.

20

8.6           Counting Time. For all purposes of these Bylaws, whenever reference is made herein to a “day” or “days,” such reference shall mean a calendar day. In addition, unless the General Corporation Law specifically requires otherwise, any and all weekend days shall also be considered days for purposes of these Bylaws. Notwithstanding the foregoing, if a due date for a particular action or a date for a meeting of the Board or members would otherwise fall on a federal holiday or weekend day, such due date or date for such meeting shall instead fall on the next business day.

8.7           Seal. The Board may provide for a corporate seal, in which case such corporate seal shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced.

8.8           Fiscal Year. The fiscal year of the Corporation shall be determined by resolution of the Board and may be changed by the Board.

8.9           Amendments. These Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the Board, but the Stockholders may make additional Bylaws and may alter and repeal any Bylaws whether adopted by them or otherwise.

21

EX-31.1

Exhibit 31.1

SECTION 302 CERTIFICATION

I, Jon R. Sabes, certify that:

1. I have reviewed this quarterly report on Form 10-Q of GWG Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2015	/s/ Jon R. Sabes
	Chief Executive Officer

EX-31.2

Exhibit 31.2

SECTION 302 CERTIFICATION

I, William B. Acheson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of GWG Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2015	/s/ William B. Acheson
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of GWG Holdings, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jon R. Sabes, Chief Executive Officer of the Company, and I, William B. Acheson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 13, 2015	/s/ Jon R. Sabes
	Jon R. Sabes
	Chief Executive Officer
Date: August 13, 2015	/s/ William B. Acheson
	William B. Acheson
	Chief Financial Officer

EX-99.1

Exhibit 99.1

1232 W. Northwest Hwy
Palatine, IL 60067
+1 (847) 483-9402

July 29, 2015

Steven Sabes

Chief Operating Officer

GWG Life

220 South Sixth Street, Suite 1200

Minneapolis, MN 55402

Steven:

You have asked that we prepare a quarterly valuation of a GWG portfolio of life insurance settlements. The valuations were prepared under the assumptions described below, which you provided in phone conversations and e-mails. We utilized the revised policy portfolio data you provided on 7/21/2015 to project potential cash flows monthly following the 6/30/2015 valuation date, based on the premiums and other values in the policy records provided.

Data Reliance

In preparing these valuations, we relied upon:

● Policy Data – We have relied on the portfolio data file as provided to us by GWG Life. This file and the policy data contained in it are assumed to have been prepared accurately and reflect current company supported product performance. The 6/30/2015 file had 314 policies with total face amounts of $806,273,856, a net increase of 21 policies and net increase of $51,331,621 in face amount over the prior quarter. The 3/31/2015 file had 293 policies with total face amounts of $754,942,235.

● Future Premiums Data – We have relied on GWG Life’s data regarding the future premiums to be paid on each policy. It is our understanding that GWG Life uses the MAPS software package along with data gathered from the actual premium payments to the life insurance carriers for each policy for projecting future minimum premium streams.

● Life Expectancy, Values, plus any adjustments – We have relied on the life expectancy values provided by GWG Life. It is our understanding that GWG Life obtained these LE values using the following industry experts: 21^st Services, AVS Underwriting, EMSI, Fasano Associates, and/or ISC Services.

Results

Using the assumptions stated below, we calculated the net present values as of the valuation dates using the specified discount rates of 11.19% and 6.98%. These results will be e-mailed to you in the Excel reports generated, including a Portfolio Summary and List of Policies, from the MAPS Portfolio valuation model.

	GWG Portfolio as of 6/30/2015
Number of Policies		314
Total Net Death Benefit ($)		806,273,856
Discount Rate		11.19	%	6.98	%	12.00	%	15.00	%
Expected Net Present Value ($)		301,498,527		369,936,697		290,841,012		256,647,652
Stochastic Analysis – 10,000 Scenarios
95th Percentile Net Present Value ($)		272,334,442		340,510,516		261,799,863		227,953,636
95% CTE Net Present Value ($)		265,116,950		333,008,328		254,629,617		221,182,278

The Expected Net Present Value is the probabilistic average value of the portfolio. These values are calculated actuarially; assuming that the amount of premiums paid and death benefits received are proportional to the probabilities of survival. Since death will occur at an unknown discrete point in time, the actual return for a policy, and a portfolio of policies, may vary significantly from the Expected Value.

Model Actuarial Pricing Systems, LP

1232 W. Northwest Hwy
Palatine, IL 60067
+1 (847) 483-9402

The Stochastic analysis can return information about the range of values that might be achieved along with probabilities that the results might be better or worse than the Expected or a specified level. The Stochastic analysis creates random scenarios where a discrete date of death is independently projected for each life based on its mortality curve. The net present value of the portfolio for each scenario is calculated as the present value of projected death benefits minus the present value of projected premiums. The scenarios are ranked by value. The 95th Percentile Net Present Value is the portfolio value exceeded by 95% of the stochastic scenarios. The 95% CTE is the Contingent Tail Expectation for the 95^th percentile, and is the average of the 5% of scenarios with the lowest net present value.

The valuations (1) do not include premiums paid before the valuation date, and (2) assume that the insured remains alive at the valuation date. The valuations also assume that the policy COIs and policy expense charges remain at current levels in the future. If these charges are increased, the projected values would decrease. The above values do not consider any federal income or other taxes.

Summary of MAPS Model Settings and Assumptions

We used the following assumptions as discussed with you:

● Insurance Policy Characteristics: Per portfolio data file as provided.

● Policy Issue Date: Per portfolio data file as provided.

● Insured Date of Birth and Gender: Per portfolio data file as provided.

● Extended Death Benefit After Policy Maturity Age: Per portfolio data file as provided.

● Optimized Premium Levels and Timing: Monthly premiums unadjusted per the portfolio data file as provided.

● Per Policy and Portfolio Administrative Expenses: None, per the portfolio data file as provided.

● Collection of Death Benefit Delay: 0 months, with 0.00% statutory interest credited.

● Mortality: 2008 VBT Select & Ultimate Primary tables, by Age, Sex, and Tobacco Use.

● Age Basis: Age Nearest Birthday.

● Mortality Improvement: None.

● Life Expectancy: One blended LE and corresponding UW effective date per life in the portfolio data file as provided.

● Adjustment Applied to Stated LE: None.

● Improvement Used by Underwriters: No.

● Valuation Discount Interest Rates: 11.19% and 6.98% as specified, plus 12% and 15%.

● Number of Stochastic Scenarios: 10,000.

● Stochastic Random Seed input: 1234567

● Stochastic Percentile Ranks and Contingent Tail Expectations: 95%, with additional reporting at 75%, 85%, 90%, 97%, and 99%.

Notice on Mortality and Volatility

Parties engaged in life settlements commonly obtain and use "life expectancies" in their considerations. While life expectancies are provided for individuals, they are developed from expected patterns of mortality of large groups of similar individuals. No one knows exactly when any one individual will die, nor is a life expectancy intended to suggest the time until death will be near the life expectancy. Any one individual may live much longer than his or her estimated life expectancy or that projected by applying a mortality rating to any particular mortality table. Even for a large group of lives, the actual mortality for the group may be less than expected for a variety of reasons (such as improvements in medical technology, unanticipated general mortality improvement, or incorrect estimation of the life expectancy). Stochastic simulation and sensitivity testing can help to quantify these risks, but such tests should not be interpreted as a guarantee of any particular financial outcome. Investors will earn less than expected on the policy of any individual who lives longer than his life expectancy.

Model Actuarial Pricing Systems, LP

1232 W. Northwest Hwy
Palatine, IL 60067
+1 (847) 483-9402

Background

Model Actuarial Pricing Systems, LP is a subsidiary of Cantor Fitzgerald (a leading global financial services firm) providing life settlement software and services worldwide to a variety of customers including life settlement brokers, providers, consultants and investors.

Since its inception in late 1990s, the MAPS Single Policy Valuation Model has been the industry standard life settlement valuation model for both single life and joint life insurance contracts. Incorporating sophisticated analysis and valuation algorithms, the MAPS Model transformed the life settlements industry by providing actuarially correct valuation of the premium and death benefit cash flows associated with a life settlement transaction.

Very truly yours,

/s/ Brad McGee

Brad McGee

Model Actuarial Pricing Systems, LP

Model Actuarial Pricing Systems, LP

XML

Fair Value Definition and Hierarchy (Details) - Life insurance policies [Member] - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Summary of reconciliation of investments in life insurance policies
Beginning balance	$ 278,395,000	$ 254,504,000	$ 282,883,000	$ 234,673,000
Purchases	9,208,000	2,608,000	10,225,000	11,080,000
Maturities (cash in excess of carrying value)	(132,000)	(68,000)	(3,743,000)	(68,000)
Net change in fair value	14,028,000	10,852,000	12,134,000	22,211,000
Ending balance (June 30)	$ 301,499,000	$ 267,896,000	$ 301,499,000	$ 267,896,000

XML

Stock Incentive Plan (Details Textual) - USD ($)		1 Months Ended	6 Months Ended
	Mar. 27, 2013	Sep. 30, 2014	Jun. 30, 2015
Stock Incentive Plan (Textual)
Number of shares issued to employees, officers and directors			245,800
Options vesting period			3 years
Forfeited during the year			(50,333)
Compensation expense related to un-vested options not yet recognized			$ 642,000
Compensation expense related to un-vested options, period of recognition			3 years
Ownership Percentage			10.00%
Compensation Expense in 2015			$ 185,000
Compensation Expense in 2016			229,000
Compensation Expense in 2017			189,000
Compensation Expense in 2018			$ 39,000
Exercised during the year			(27,667)
Maximum [Member]
Stock Incentive Plan (Textual)
Exercise Price			$ 10.18
Minimum [Member]
Stock Incentive Plan (Textual)
Exercise Price			$ 8.20
Common Stock [Member]
Stock Incentive Plan (Textual)
Number of shares issued to employees, officers and directors			991,401
Number of options vested			443,381
Others [Member] | Maximum [Member]
Stock Incentive Plan (Textual)
Exercise Price			$ 10.25
Others [Member] | Minimum [Member]
Stock Incentive Plan (Textual)
Exercise Price			$ 6.73
2013 Stock Incentive Plan [Member]
Stock Incentive Plan (Textual)
Number of shares issuable	2,000,000
Stock based compensation, Method used			The annual volatility rate is based on the standard deviation of the average continuously compounded rate of return of five selected comparable companies over the previous 52 weeks.
Expected volatility rate			17.03%
2013 Stock Incentive Plan [Member] | Maximum [Member]
Stock Incentive Plan (Textual)
Stock option period	10 years
2013 Stock Incentive Plan [Member] | Employee Stock Option [Member]
Stock Incentive Plan (Textual)
Maximum number of shares for an employee		53,000
Employee granting right purchase of common stock		318,000
Number of options vested		159,000
Exercise Price		$ 12.50
Options vesting period		1 year
2013 Stock Incentive Plan [Member] | Common Stock [Member]
Stock Incentive Plan (Textual)
Maximum number of shares for an employee	400,000
Forfeited during the year			113,499
Forfeited during the year, Percent			15.00%
Exercised during the year			28,001

XML

L Bonds (Formerly Renewable Secured Debentures) (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Jan. 09, 2015	Dec. 31, 2014
Renewable Secured Debentures (Textual)
Debentures offer for sale	$ 251,038,000		$ 251,038,000
Weighted average market interest rate of secured notes payable	7.08%		7.08%
Renewable Secured Debentures [Member]
Renewable Secured Debentures (Textual)
Debentures offer for sale	$ 250,000,000		$ 250,000,000		$ 1,000,000,000
Interest rates, minimum			4.25%
Interest rates, maximum			9.50%
Description of interest payment			Interest is payable monthly, annually or at maturity depending on the terms of the debenture.
Weighted average market interest rate of secured notes payable	7.27%		7.27%			7.45%
Amount outstanding under L Bonds	$ 226,310,000		$ 226,310,000			$ 186,377,000
Amortization of deferred issuance costs	$ 1,366,000	$ 908,000	2,340,000	$ 1,755,000
Future expected amortization of deferred financing costs			$ 6,312,000
Maturity period of debentures, Minimum			6 months
Maturity period of debentures, Maximum			7 years
Conditions for proceed from issuance of debenture			(1) payment of commissions on sales of L Bonds, (2) payment of offering expenses, (3) purchase of life insurance policies, (4) payment of premiums on life insurance policies, (5) payment of principal and interest on L Bonds, (6) payment of portfolio operations expenses, and (7) general working capital.
Publicly registered L Bond offering			$ 1,000,000,000
Minimum increments			$ 25,000

XML

Commitments (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2015 USD ($) ft²	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($) ft²	Jun. 30, 2014 USD ($)
Commitments (Textual)
Office space in square feet | ft²	11,695		11,695
Rent expenses	$ 55,000	$ 49,000	$ 122,000	$ 101,000
Minimum lease payments			$ 70,000

XML

Series I Secured Notes (Details Textual) - USD ($)		3 Months Ended		6 Months Ended
	Jun. 14, 2011	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Series I Secured Notes Payable (Textual)
Weighted average market interest rate of Secured notes payable		7.08%		7.08%
Amortization of deferred financing and issuance costs		$ 300,000	$ 89,000	$ 300,000	$ 179,000
Series I Secured Notes Payable [Member]
Series I Secured Notes Payable (Textual)
Interest rate on secured notes, Minimum	5.65%
Interest rate on secured notes, Maximum	9.55%
Description of interest payment				Interest is payable monthly, quarterly, annually or at maturity depending on the terms of the note.
Weighted average market interest rate of Secured notes payable		8.49%		8.49%		8.37%
Principal amount outstanding under Series I Secured notes		$ 24,728,000		$ 24,728,000		$ 28,047,000
Amortization of deferred financing and issuance costs		$ 81,000	$ 134,000	211,000	$ 301,000
Future expected amortization of deferred financing costs				$ 390,000
Minimum maturity period of secured notes	6 months
Maximum maturity period of secured notes	7 years
Amortizatoin period of deferred financing cost				6 years
Conditions for proceed from issuance of debenture				(1) payment of commissions on sales of L Bonds, (2) payment of offering expenses, (3) purchase of life insurance policies, (4) payment of premiums on life insurance policies, (5) payment of principal and interest on L Bonds, (6) payment of portfolio operations expenses, and (7) general working capital.

XML

Nature of Business and Summary of Significant Accounting Policies (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Nature Of Business And Summary Of Significant Accounting Policies
Deposits and direct cost advances	$ 222,000		$ 222,000		$ 27,000
Amortization of deferred financing costs	300,000	$ 89,000	300,000	$ 179,000
Future amortization expected	1,500,000		$ 1,500,000
Redemption period for amortization of discount related to financing cost			3 years
Debt issuance costs in financial statement	$ 3,629,000		$ 3,629,000

XML

Guarantees of Secured Debt (Details) - USD ($)	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013
ASSETS
Cash and cash equivalents	$ 38,198,189	$ 36,190,527	$ 30,662,704	$ 23,059,955	$ 28,083,299	$ 33,449,793
Restricted cash	7,923,190		4,296,053
Policy benefits receivable	2,500,000		1,750,000
Investment in life settlements, at fair value	301,498,527		282,883,010
Other assets	$ 6,623,561		$ 3,478,762
Investment in subsidiaries
TOTAL ASSETS	$ 356,743,467		$ 323,070,529
LIABILITIES
Revolving credit facility	65,011,048		72,161,048
Series I Secured notes	24,347,531		27,616,578
L Bonds	223,118,514		182,782,884
Interest payable	11,593,220		11,128,519
Accounts payable and other accrued expenses	2,071,879		1,718,009
Deferred taxes, net	6,525,336		5,273,555
TOTAL LIABILITIES	$ 332,667,528		$ 300,680,593
STOCKHOLDERS' EQUITY (DEFICIT)
Member capital
Convertible preferred stock	$ 20,559,823		$ 20,527,866
Common stock	5,933		5,870
Additional paid-in capital	16,900,193		16,257,686
Accumulated deficit	(13,390,010)		(14,401,486)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	24,075,939		22,389,936
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	356,743,467		323,070,529
Parent [Member]
ASSETS
Cash and cash equivalents	$ 37,814,528	34,762,097	$ 30,446,473	22,305,910	26,466,468	32,711,636
Restricted cash
Policy benefits receivable
Investment in life settlements, at fair value
Other assets	$ 2,688,215		$ 1,673,728
Investment in subsidiaries	222,479,390		185,636,417
TOTAL ASSETS	$ 262,982,133		$ 217,756,618
LIABILITIES
Revolving credit facility
Series I Secured notes
L Bonds	$ 223,118,514		$ 182,782,884
Interest payable	7,967,900		6,598,250
Accounts payable and other accrued expenses	1,294,444		711,993
Deferred taxes, net	6,525,336		5,273,555
TOTAL LIABILITIES	$ 238,906,194		$ 195,366,682
STOCKHOLDERS' EQUITY (DEFICIT)
Member capital
Convertible preferred stock	$ 20,559,823		$ 20,527,866
Common stock	5,933		5,870
Additional paid-in capital	16,900,193		16,257,686
Accumulated deficit	(13,390,010)		(14,401,486)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	24,075,939		22,389,936
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	262,982,133		217,756,618
Guarantor Sub [Member]
ASSETS
Cash and cash equivalents	233,553	1,278,378	216,231	$ 754,045	$ 1,616,831	$ 738,157
Restricted cash	$ 185,000		$ 82,500
Policy benefits receivable
Investment in life settlements, at fair value			$ 0
Other assets	$ 1,730,651		1,777,534
Investment in subsidiaries	248,566,916		215,124,779
TOTAL ASSETS	$ 250,716,120		$ 217,201,044
LIABILITIES
Revolving credit facility
Series I Secured notes	$ 24,347,531		$ 27,616,578
L Bonds
Interest payable	$ 3,374,563		$ 3,513,615
Accounts payable and other accrued expenses	$ 664,744		$ 434,433
Deferred taxes, net
TOTAL LIABILITIES	$ 28,386,838		$ 31,564,626
STOCKHOLDERS' EQUITY (DEFICIT)
Member capital	$ 222,329,282		$ 185,636,418
Convertible preferred stock
Common stock
Additional paid-in capital
Accumulated deficit
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	$ 222,329,282		$ 185,636,418
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	250,716,120		$ 217,201,044
Non-Guarantor Sub [Member]
ASSETS
Cash and cash equivalents	150,108	$ 150,052
Restricted cash	7,738,190		$ 4,213,553
Policy benefits receivable	2,500,000		1,750,000
Investment in life settlements, at fair value	301,498,527		282,883,010
Other assets	$ 2,204,695		$ 27,500
Investment in subsidiaries
TOTAL ASSETS	$ 314,091,520		$ 288,874,063
LIABILITIES
Revolving credit facility	$ 65,011,048		$ 72,161,048
Series I Secured notes
L Bonds
Interest payable	$ 250,757		$ 1,016,654
Accounts payable and other accrued expenses	$ 112,691		$ 571,583
Deferred taxes, net
TOTAL LIABILITIES	$ 65,374,496		$ 73,749,285
STOCKHOLDERS' EQUITY (DEFICIT)
Member capital	$ 248,717,024		$ 215,124,778
Convertible preferred stock
Common stock
Additional paid-in capital
Accumulated deficit
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	$ 248,717,024		$ 215,124,778
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$ 314,091,520		$ 288,874,063
Eliminations [Member]
ASSETS
Cash and cash equivalents
Restricted cash
Policy benefits receivable
Investment in life settlements, at fair value
Other assets
Investment in subsidiaries	$ (471,046,306)		$ (400,761,196)
TOTAL ASSETS	$ (471,046,306)		$ (400,761,196)
LIABILITIES
Revolving credit facility
Series I Secured notes
L Bonds
Interest payable
Accounts payable and other accrued expenses
Deferred taxes, net
TOTAL LIABILITIES
STOCKHOLDERS' EQUITY (DEFICIT)
Member capital	$ (471,046,306)		$ (400,761,196)
Convertible preferred stock
Common stock
Additional paid-in capital
Accumulated deficit
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	$ (471,046,306)		$ (400,761,196)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$ (471,046,306)		$ (400,761,196)

XML

Investment in Life Insurance Policies (Tables)

6 Months Ended

Jun. 30, 2015

Investment in Life Insurance Policies [Abstract]

Summary of life insurance policies, under the fair value method and estimated maturity dates, based on remaining life expectancy

	As of June 30, 2015						As of December 31, 2014
Years Ending December 31,	Number of Contracts		Estimated Fair Value		Face Value		Number of Contracts		Estimated Fair Value		Face Value
2015		-	$	-	$	-		3	$	5,063,000	$	6,000,000
2016		5		7,198,000		8,500,000		7		8,144,000		11,550,000
2017		16		17,063,000		23,857,000		17		21,916,000		35,542,000
2018		30		42,478,000		72,171,000		30		41,994,000		76,206,000
2019		48		53,052,000		109,810,000		45		47,303,000		106,973,000
2020		43		46,597,000		101,574,000		41		43,429,000		102,614,000
2021		42		34,486,000		96,956,000		36		29,789,000		90,921,000
Thereafter		130		100,625,000		393,406,000		112		85,245,000		349,293,000
Totals		314		301,499,000		806,274,000		291	$	282,883,000	$	779,099,000

Reconciliation of gain on life settlements

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2012
Change in fair value	$	14,028,000		$	10,852,000		$	12,134,000		$	22,211,000
Premiums and other annual fees		(6,172,000	)		(5,599,000	)		(12,509,000	)		(11,442,000	)
Policy maturities		618,000			232,000			25,632,000			232,000
Gain on life settlements, net	$	8,474,000		$	5,485,000		$	25,257,000		$	11,001,000

Estimated expected premium payments to maintain the above life insurance policies assuming no mortalities

Years Ending December 31,	Premiums		Servicing		Premiums and Servicing Fees
Six months ending December 31 ,2015	$	13,292,000	$	377,000	$	13,669,000
2016		27,985,000		377,000		28,362,000
2017		31,333,000		377,000		31,710,000
2018		34,191,000		377,000		34,568,000
2019		38,001,000		377,000		38,378,000
2020		42,158,000		377,000		42,535,000
	$	186,960,000	$	2,262,000	$	189,222,000

XML

Income Taxes (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Current:
Federal	$ (182,000)		$ 141,000
State	(64,000)		40,000
Total current tax expense (benefit)	(246,000)		181,000
Deferred:
Federal	(670,000)	$ (1,106,000)	984,000	$ (1,909,000)
State	(261,000)	(211,000)	268,000	(363,000)
Total deferred tax expense (benefit)	(931,000)	(1,317,000)	1,252,000	(2,272,000)
Total income tax expense (benefit)	$ (1,176,643)	$ (1,316,712)	$ 1,432,728	$ (2,271,570)

XML

Fair value definition and hierarchy (Details 3) - 6 months ended Jun. 30, 2015 - Level 3 [Member] - $ / shares	Total
Warrants Level 3 instruments and measured at fair value upon issuance
Warrants issued	431,954
December 2011 [Member]
Warrants Level 3 instruments and measured at fair value upon issuance
Month issued	Dec. 31, 2011
Warrants issued	68,937
Fair value per share	$ 0.22
Risk free rate	0.42%
Volatility	25.25%
Term	5 years
March 2012 [Member]
Warrants Level 3 instruments and measured at fair value upon issuance
Month issued	Mar. 31, 2012
Warrants issued	38,130
Fair value per share	$ 0.52
Risk free rate	0.38%
Volatility	36.20%
Term	5 years
June 2012 [Member]
Warrants Level 3 instruments and measured at fair value upon issuance
Month issued	Jun. 30, 2012
Warrants issued	161,840
Fair value per share	$ 1.16
Risk free rate	0.41%
Volatility	47.36%
Term	5 years
July 2012 [Member]
Warrants Level 3 instruments and measured at fair value upon issuance
Month issued	Jul. 31, 2012
Warrants issued	144,547
Fair value per share	$ 1.16
Risk free rate	0.41%
Volatility	47.36%
Term	5 years
September 2012 [Member]
Warrants Level 3 instruments and measured at fair value upon issuance
Month issued	Sep. 30, 2012
Warrants issued	2,500
Fair value per share	$ 0.72
Risk free rate	0.31%
Volatility	40.49%
Term	5 years
September 2014 [Member]
Warrants Level 3 instruments and measured at fair value upon issuance
Month issued	Sep. 30, 2014
Warrants issued	16,000
Fair value per share	$ 1.26
Risk free rate	1.85%
Volatility	17.03%
Term	5 years

XML

Investment in Life Insurance Policies(Details 2)	Jun. 30, 2015 USD ($)
Summary of estimated expected premium payments to maintain the above life insurance policies assuming no mortalities
Six months ending December 31 ,2015	$ 13,669,000
2016	28,362,000
2017	31,710,000
2018	34,568,000
2019	38,378,000
2020	42,535,000
Estimated expected premium payments	189,222,000
Premiums [Member]
Summary of estimated expected premium payments to maintain the above life insurance policies assuming no mortalities
Six months ending December 31 ,2015	13,292,000
2016	27,985,000
2017	31,333,000
2018	34,191,000
2019	38,001,000
2020	42,158,000
Estimated expected premium payments	186,960,000
Servicing [Member]
Summary of estimated expected premium payments to maintain the above life insurance policies assuming no mortalities
Six months ending December 31 ,2015	377,000
2016	377,000
2017	377,000
2018	377,000
2019	377,000
2020	377,000
Estimated expected premium payments	$ 2,262,000

XML

Common Stock (Details) - USD ($) $ / shares in Units, $ in Millions			1 Months Ended
	Jun. 23, 2015	Sep. 24, 2014	Jun. 24, 2014	Jun. 30, 2015	Dec. 31, 2014
Common Stock (Textual)
Common stock, par value				$ 0.001	$ 0.001
Reverse stock split			The company shall enact a reverse split of the common stock such that for every two (2) shares of common stock issued and outstanding immediately prior to the effective date shall, automatically and without any action on the part of the respective holders thereof, be combined and converted into one (1) share of common stock.
GWG (Member)
Common Stock (Textual)
Restricted Common stock issued	60,000	800,000
Common stock, par value	$ 9.70	$ 12.50
Net proceeds		$ 8.6

XML

Concentrations (Details)	Jun. 30, 2015	Dec. 31, 2014
AXA Equitable [Member]
Summary of the face value of insurance contracts with specific life insurance companies
Face value percentage of insurance contracts with specific life insurance companies	14.06%	14.55%
John Hancock [Member]
Summary of the face value of insurance contracts with specific life insurance companies
Face value percentage of insurance contracts with specific life insurance companies	11.90%	11.48%

XML

L Bonds (Formerly Renewable Secured Debentures)) (Details) - Renewable Secured Debentures [Member]	Jun. 30, 2015 USD ($)
Summary of future contractual maturities of L Bonds
2015	$ 48,082,000
2016	67,120,000
2017	43,051,000
2018	31,012,000
2019	14,342,000
Thereafter	22,703,000
Total	226,310,000
Summary of amortization of deferred financing costs of L Bonds
2015	243,000
2016	1,229,000
2017	1,520,000
2018	1,450,000
2019	612,000
Thereafter	1,258,000
Total	$ 6,312,000

XML

Investment in Life Insurance Policies

6 Months Ended

Jun. 30, 2015

Investment in Life Insurance Policies [Abstract]

Investment in life insurance policies

(3) Investment in life insurance policies

The life insurance policies (Level 3 fair value measurements) are valued based on unobservable inputs that are significant to the overall fair value measurement. Changes in the fair value of these instruments are recorded in gain or loss on life insurance policies in the consolidated statements of operations (net of the cash premiums paid on the policies). The fair value is determined on a discounted cash flow basis that incorporates life expectancy assumptions. Life expectancy reports have been obtained from widely accepted life expectancy providers. The discount rate incorporates current information about market interest rates, the credit exposure to the insurance company that issued the life insurance policy and our estimate of the risk premium an investor in the policy would require. As a result of management’s analysis, discount rates of 11.19% and 11.38% were applied to the portfolio as of June 30, 2015 and December 31, 2014.

A summary of the Company’s life insurance policies accounted for under the fair value method and their estimated maturity dates, based on remaining life expectancy is as follows:

	As of June 30, 2015						As of December 31, 2014
Years Ending December 31,	Number of Contracts		Estimated Fair Value		Face Value		Number of Contracts		Estimated Fair Value		Face Value
2015		-	$	-	$	-		3	$	5,063,000	$	6,000,000
2016		5		7,198,000		8,500,000		7		8,144,000		11,550,000
2017		16		17,063,000		23,857,000		17		21,916,000		35,542,000
2018		30		42,478,000		72,171,000		30		41,994,000		76,206,000
2019		48		53,052,000		109,810,000		45		47,303,000		106,973,000
2020		43		46,597,000		101,574,000		41		43,429,000		102,614,000
2021		42		34,486,000		96,956,000		36		29,789,000		90,921,000
Thereafter		130		100,625,000		393,406,000		112		85,245,000		349,293,000
Totals		314		301,499,000		806,274,000		291	$	282,883,000	$	779,099,000

The Company recognized policy benefits of $750,000 and $300,000 during the three-month periods ended June 30, 2015 and 2014, respectively, related to policies with a carrying value of $132,000 and $68,000, respectively. The Company recorded realized gains of $618,000 and $232,000 on such policies. The Company recognized policy benefits of $29,375,000 and $300,000 during the six-month periods ended June 30, 2015 and 2014, respectively, related to policies with carrying value of $3,743,000 and $68,000, respectively. The company recorded realized gains of $25,632,000 and $232,000, respectively on such policies.

Reconciliation of gain on life settlements:

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2012
Change in fair value	$	14,028,000		$	10,852,000		$	12,134,000		$	22,211,000
Premiums and other annual fees		(6,172,000	)		(5,599,000	)		(12,509,000	)		(11,442,000	)
Policy maturities		618,000			232,000			25,632,000			232,000
Gain on life settlements, net	$	8,474,000		$	5,485,000		$	25,257,000		$	11,001,000

The estimated expected premium payments to maintain the above life insurance policies in force through 2020, assuming no mortalities, are as follows:

Years Ending December 31,	Premiums		Servicing		Premiums and Servicing Fees
Six months ending December 31 ,2015	$	13,292,000	$	377,000	$	13,669,000
2016		27,985,000		377,000		28,362,000
2017		31,333,000		377,000		31,710,000
2018		34,191,000		377,000		34,568,000
2019		38,001,000		377,000		38,378,000
2020		42,158,000		377,000		42,535,000
	$	186,960,000	$	2,262,000	$	189,222,000

Management anticipates funding the estimated premium payments as noted above with proceeds from the DZ Bank revolving credit facility and through additional debt and equity financing as well as from cash proceeds from maturities of life insurance policies. The proceeds of these capital sources are also intended to be used for the purchase, financing, and maintenance of additional life insurance policies.

XML

Concentrations (Details 1)	Jun. 30, 2015	Dec. 31, 2014
California [Member]
Summary of the number of insurance contracts held in specific states exceeding 10% of the total face value held by the Company
Percentage of insurance contracts held in specific states	27.07%	28.87%
Florida [Member]
Summary of the number of insurance contracts held in specific states exceeding 10% of the total face value held by the Company
Percentage of insurance contracts held in specific states	19.43%	18.56%

XML

Fair Value Definition and Hierarchy (Details Textual) - Jun. 30, 2015 - USD ($)	Total
Fair Value Definition and Hierarchy (Textual)
Estimated fair value of series I secured notes payable	$ 253,263,000
Weighted average market interest rate of secured notes payable	7.08%
Face value of notes	$ 251,038,000
Description for change in discount factor	If the life expectancy estimates were increased or decreased by four and eight months on each outstanding policy and the discount factors were increased or decreased by 1% and 2%, while all other variables are held constant.
Increase decrease in life expectancy	Four and eight months
Increase decrease in discount rate	1% and 2

XML

Income Taxes (Tables)

6 Months Ended

Jun. 30, 2015

Income Taxes [Abstract]

Components of deferred income tax expense

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,		June 30,
	2015			2014			2015		2014
Income tax provision (benefit):
Current:
Federal	$	(182,000	)	$	-		$	141,000	$	-
State	$	(64,000	)	$	-		$	40,000	$	-
Total current tax expense (benefit)		(246,000	)		-			181,000		-
Deferred:
Federal	$	(670,000	)	$	(1,106,000	)	$	984,000	$	(1,909,000	)
State	$	(261,000	)	$	(211,000	)	$	268,000	$	(363,000	)
Total deferred tax expense (benefit)		(931,000	)		(1,317,000	)		1,252,000		(2,272,000	)
Total income tax expense (benefit)		(1,177,000	)		(1,317,000	)		1,433,000		(2,272,000	)

XML

L Bonds (Formerly Renewable Secured Debentures) (Tables)

6 Months Ended

Jun. 30, 2015

Credit Facilities / Series I Secured Notes / L Bonds (formerly Renewable Secured Debentures) [Abstract]

Schedule of future contractual maturities of L Bonds

Years Ending December 31,	Contractual Maturities		Amortization of Deferred Financing Costs
Six months ending December 31 ,2015	$	48,082,000	$	243,000
2016		67,120,000		1,229,000
2017		43,051,000		1,520,000
2018		31,012,000		1,450,000
2019		14,342,000		612,000
Thereafter		22,703,000		1,258,000
	$	226,310,000	$	6,312,000

XML

Contingencies (Details) - Jun. 30, 2015 - USD ($)	Total
Contingencies (Textual)
Loaned to Opportunity Finance, LLC	$ 1,000,000
Repayments of loan	$ 177,000

XML

Credit Facilities (Details) - USD ($)			3 Months Ended		6 Months Ended
	Jan. 29, 2013	Jul. 15, 2008	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Credit Facilities (Textual)
Maximum borrowing amount under line of credit facility		$ 100,000,000
Expiry date of line of credit		Jul. 15, 2013
Amount outstanding under line of credit facility			$ 65,011,000		$ 65,011,000		$ 72,161,000
Effective rate of interest			5.41%		5.41%		6.24%
Total funds available for additional borrowings under the borrowing base formula criteria			$ 33,409,000		$ 33,409,000		$ 20,585,000
Extended date of line of credit facility	Dec. 31, 2014
Weighted average effective interest rate			5.37%	6.20%	6.00%	6.21%
Minimum tangible net worth to be maintained by company					$ 45,000,000
Minimum cash and eligible investments					15,000,000
Consolidated net income under credit and security agreement					44,503,000
Consolidated tangible net worth under credit and security agreement					$ 101,427,000
Credit facility, Description		Lender's cost of borrowing plus 4.25 percent, which is 1.75 percent less than under the previous Credit and Security Agreement executed on January 25, 2013.
Credit facility up to limit		$ 105,000,000

XML

Stock Incentive Plan (Tables)

6 Months Ended

Jun. 30, 2015

Stock Incentive Plan [Abstract]

Schedule of outstanding stock options

	Vested			Un-vested			Total
Balance as of December 31, 2014		314,288			685,813			1,000,101
Granted during the year		53,500			192,300			245,800
Vested during the year		44,592			(44,592	)		-
Exercised during the year		(27,667	)		-			(27,667	)
Forfeited during the year		(2,250	)		(48,083	)		(50,333	)
Balance as of June 30, 2015		382,463			785,438			1,167,901

XML

Guarantees of Secured Debt (Tables)

6 Months Ended

Jun. 30, 2015

Guarantees of Secured Debt [Abstract]

Condensed consolidating balance sheets

June 30, 2015	Parent			Guarantor Sub		Non-Guarantor Sub		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	37,814,528		$	233,553	$	150,108	$	-		$	38,198,189
Restricted cash		-			185,000		7,738,190		-			7,923,190
Policy benefits receivable		-			-		2,500,000		-			2,500,000
Investment in life settlements, at fair value		-			-		301,498,527		-			301,498,527
Other assets		2,688,215			1,730,651		2,204,695		-			6,623,561
Investment in subsidiaries		222,479,390			248,566,916		-		(471,046,306	)		-
TOTAL ASSETS	$	262,982,133		$	250,716,120	$	314,091,520	$	(471,046,306	)	$	356,743,467
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Revolving credit facility	$	-		$	-	$	65,011,048	$	-		$	65,011,048
Series I Secured notes		-			24,347,531		-		-			24,347,531
L Bonds		223,118,514			-		-		-			223,118,514
Interest payable		7,967,900			3,374,563		250,757		-			11,593,220
Accounts payable and other accrued expenses		1,294,444			664,744		112,691		-			2,071,879
Deferred taxes, net		6,525,336			-		-		-			6,525,336
TOTAL LIABILITIES		238,906,194			28,386,838		65,374,496		-			332,667,528
STOCKHOLDERS’ EQUITY (DEFICIT)
Member capital		-			222,329,282		248,717,024		(471,046,306	)		-
Convertible preferred stock		20,559,823										20,559,823
Common stock		5,933			-		-		-			5,933
Additional paid-in capital		16,900,193			-		-		-			16,900,193
Accumulated deficit		(13,390,010	)		-		-		-			(13,390,010	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		24,075,939			222,329,282		248,717,024		(471,046,306	)		24,075,939
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	262,982,133		$	250,716,120	$	314,091,520	$	(471,046,306	)	$	356,743,467

December 31, 2014	Parent			Guarantor Subsidiary		Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	30,446,473		$	216,231	$	-	$	-		$	30,662,704
Restricted cash		-			82,500		4,213,553		-			4,296,053
Policy benefits receivable		-			-		1,750,000		-			1,750,000
Investment in life settlements, at fair value		-			-		282,883,010		-			282,883,010
Other assets		1,673,728			1,777,534		27,500		-			3,478,762
Investment in subsidiaries		185,636,417			215,124,779		-		(400,761,196	)		-
TOTAL ASSETS	$	217,756,618		$	217,201,044	$	288,874,063	$	(400,761,196	)	$	323,070,529
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Revolving credit facility	$	-		$	-	$	72,161,048	$	-		$	72,161,048
Series I Secured notes		-			27,616,578		-		-			27,616,578
L Bonds		182,782,884			-		-		-			182,782,884
Interest payable		6,598,250			3,513,615		1,016,654		-			11,128,519
Accounts payable and other accrued expenses		711,993			434,433		571,583		-			1,718,009
Deferred taxes, net		5,273,555			-		-		-			5,273,555
TOTAL LIABILITIES		195,366,682			31,564,626		73,749,285		-			300,680,593
STOCKHOLDERS’ EQUITY (DEFICIT)
Member capital		-			185,636,418		215,124,778		(400,761,196	)		-
Convertible preferred stock		20,527,866			-		-		-			20,527,866
Common stock		5,870			-		-		-			5,870
Additional paid-in capital		16,257,686			-		-		-			16,257,686
Accumulated deficit		(14,401,486	)		-		-		-			(14,401,486	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		22,389,936			185,636,418		215,124,778		(400,761,196	)		22,389,936
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	217,756,618		$	217,201,044	$	288,874,063	$	(400,761,196	)	$	323,070,529

Condensed consolidating statements of operations

For the six months ended June 30, 2015	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Origination and servicing income	$	-		$	1,018,750		$	-	$	(1,018,750	)	$	-
Gain on life settlements, net		-			-			25,257,295		-			25,257,295
Interest and other income		25,023			6,880			107,773		-			139,676
TOTAL REVENUE		25,023			1,025,630			25,365,068		(1,018,750	)		25,396,971
EXPENSES
Origination and servicing fees		-			-			1,018,750		(1,018,750	)		-
Employee compensation and benefits		2,911,596			961,046			-		-			3,872,642
Legal and professional fees		828,858			337,326			-		-			1,166,184
Interest expense		11,031,758			1,458,965			2,008,158		-			14,498,881
Other expenses		2,056,188			1,302,036			56,836		-			3,415,060
TOTAL EXPENSES		16,828,400			4,059,373			3,083,744		(1,018,750	)		22,952,767
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(16,803,377	)		(3,033,743	)		22,281,324		-			2,444,204
EQUITY IN INCOME OF SUBSIDIARY		19,247,581			22,281,217			-		(41,528,798	)		-
NET INCOME BEFORE INCOME TAXES		2,444,204			19,247,474			22,281,324		(41,528,798	)		2,444,204
INCOME TAX EXPENSE		1,432,728			-			-		-			1,432,728
NET LOSS	$	1,011,476		$	19,247,474		$	22,281,324	$	(41,528,798	)	$	1,011,476

For the six months ended June 30, 2014	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Origination and servicing income	$	-		$	1,308,906		$	-	$	(1,308,906	)	$	-
Gain on life settlements, net		-			-			11,001,094		-			11,001,094
Interest and other income		12,929			169,976			63		(169,221	)		13,747
TOTAL REVENUE		12,929			1,478,882			11,001,157		(1,478,127	)		11,014,841
EXPENSES
Origination and servicing fees		-			-			1,308,906		(1,308,906	)		-
Employee compensation and benefits		1,255,079			892,485			-		-			2,147,564
Legal and professional fees		723,106			103,233			-		-			826,339
Interest expense		8,691,989			1,572,269			2,670,333		-			12,934,591
Other expenses		1,106,635			734,138			194,232		(169,221	)		1,865,784
TOTAL EXPENSES		11,776,809			3,302,125			4,173,471		(1,478,127	)		17,774,278
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(11,763,880	)		(1,823,243	)		6,827,686		-			(6,759,437	)
EQUITY IN INCOME OF SUBSIDIARY		5,004,443			6,827,686			-		(11,832,129	)		-
NET INCOME BEFORE INCOME TAXES		(6,759,437	)		5,004,443			6,827,686		(11,832,129	)		(6,759,437	)
INCOME TAX BENEFIT		(2,271,570	)		-			-		-			(2,271,570	)
NET LOSS	$	(4,487,867	)	$	5,004,443		$	6,827,686	$	(11,832,129	)	$	(4,487,867	)

For the three months ended June 30, 2015	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Origination and servicing income	$	-		$	661,264		$	-	$	(661,264	)	$	-
Gain on life settlements, net		-			-			8,473,886		-			8,473,886
Interest and other income		17,480			430			72,470		-			90,380
TOTAL REVENUE		17,480			661,694			8,546,356		(661,264	)		8,564,266
EXPENSES
Origination and servicing fees		-			-			661,264		(661,264	)		-
Employee compensation and benefits		1,605,795			538,930			-		-			2,144,725
Legal and professional fees		351,507			291,424			-		-			642,931
Interest expense		5,781,796			684,879			855,672		-			7,322,347
Other expenses		1,104,826			732,243			44,252		-			1,881,321
TOTAL EXPENSES		8,843,924			2,247,476			1,561,188		(661,264	)		11,991,324
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(8,826,444	)		(1,585,782	)		6,985,168		-			(3,427,058	)
EQUITY IN INCOME OF SUBSIDIARY		5,399,386			6,985,112			-		(12,384,498	)		-
NET INCOME BEFORE INCOME TAXES		(3,427,058	)		5,399,330			6,985,168		(12,384,498	)		(3,427,058	)
INCOME TAX BENEFIT		(1,176,643	)		-			-		-			(1,176,643	)
NET LOSS	$	(2,250,415	)	$	5,399,330		$	6,985,168	$	(12,384,498	)	$	(2,250,415	)

For the three months ended June 30, 2014	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Origination and servicing income	$	-		$	342,850		$	-	$	(342,850	)	$	-
Gain on life settlements, net		-			-			5,484,889		-			5,484,889
Interest and other income		6,000			362			18		-			6,380
TOTAL REVENUE		6,000			343,212			5,484,907		(342,850	)		5,491,269
EXPENSES
Origination and servicing fees		-			-			342,850		(342,850	)		-
Employee compensation and benefits		664,495			514,324			-		-			1,178,819
Legal and professional fees		375,243			44,094			-		-			419,337
Interest expense		4,475,461			793,702			1,338,880		-			6,608,043
Other expenses		767,096			408,883			12,500		-			1,188,479
TOTAL EXPENSES		6,282,295			1,761,003			1,694,230		(342,850	)		9,394,678
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(6,276,295	)		(1,417,791	)		3,790,667		-			(3,903,409	)
EQUITY IN INCOME OF SUBSIDIARY		2,372,886			3,790,667			-		(6,163,563	)		-
NET INCOME BEFORE INCOME TAXES		(3,903,409	)		2,372,886			3,790,667		(6,163,563	)		(3,903,409	)
INCOME TAX BENEFIT		(1,316,712	)		-			-		-			(1,316,712	)
NET LOSS	$	(2,586,697	)	$	2,372,886		$	3,790,667	$	(6,163,563	)	$	(2,586,697	)

Condensed consolidating statements of cash flows

Condensed Consolidating Statements of Cash Flows

For the six months ended June 30, 2015	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,011,476		$	19,247,474		$	22,281,324		$	(41,528,798	)	$	1,011,476
Adjustments to reconcile net income to net cash flows from operating activities:
(Equity) of subsidiaries		(19,247,582	)		(22,281,216	)		-			41,528,798			-
Gain on life settlements		-			-			(12,134,482	)		-			(12,134,482	)
Amortization of deferred financing and issuance costs		1,729,175			211,116			(1,982,295	)		-			(42,004	)
Deferred income taxes		1,251,781			-			-			-			1,251,781
Convertible, redeemable preferred stock issued for dividends		335,232			-			-			-			335,232
(Increase) in operating assets:
Policy benefits receivable		-			-			(750,000	)					(750,000	)
Other assets		(17,998,823	)		(11,114,039	)		-			28,756,313			(356,549	)
Increase in operating liabilities:
Accounts payable and accrued expenses		2,493,495			228,640			(1,419,689	)		-			1,302,446
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(30,425,246	)		(13,708,025	)		(5,994,858	)		28,756,313			(9,382,100	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(10,224,018	)		-			(10,224,018	)
Proceeds from settlement of life settlements		-			-			3,742,983			-			3,742,983
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(6,481,035	)		-			(6,481,035	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of revolving credit facility		-			-			(7,150,000	)		-			(7,150,000	)
Payments for redemption of Series I Secured notes		-			(3,617,544	)		-			-			(3,617,544	)
Proceeds from issuance of L Bonds		50,498,356			-			-			-			50,498,356
Payments for redemption and issuance of L Bonds		(13,013,057	)		-			-			-			(13,013,057	)
Proceeds from restricted cash		-			(102,500	)		(3,524,637	)		-			(3,627,137	)
Issuance of common stock		582,000			-			-			-			582,000
Redemptions of convertible, redeemable preferred stock		(273,998	)		-			-			-			(273,998	)
Issuance of member capital		-			17,445,391			11,310,922			(28,756,313	)		-
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		37,793,301			13,725,347			636,285			(28,756,313	)		23,398,620
NET INCREASE IN CASH AND CASH EQUIVALENTS		7,368,055			17,322			150,108			-			7,535,485
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		30,446,473			216,231			-			-			30,662,704
END OF THE PERIOD	$	37,814,528		$	233,553		$	150,108		$	-		$	38,198,189

Consolidating Statements of Cash Flows (continued)

For the six months ended June 30, 2014	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(4,487,867	)	$	5,004,443		$	6,827,686		$	(11,832,129	)	$	(4,487,867	)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
(Equity) of subsidiaries		(5,004,443	)		(6,827,686	)		-			11,832,129			-
Life settlements – change in fair value		-			-			(22,211,338	)		-			(22,211,338	)
Amortization of deferred financing and issuance costs		1,727,610			301,104			(321,050	)					1,707,664
Deferred income taxes		(2,271,570	)		-			-						(2,271,570	)
Convertible, redeemable preferred stock dividends payable		389,331			-			-			-			389,331
(Increase) in operating assets:
Policy benefits receivable		-			-			(300,000	)		-			(300,000	)
Other assets		(26,622,350	)		(24,654,818	)		-			50,328,249			(948,919	)
Increase in operating liabilities:
Accounts payable and accrued expenses		1,971,543			302,402			894,218			-			3,168,163
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(34,297,746	)		(25,874,555	)		(15,110,484	)		50,328,249			(24,954,536	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(10,879,435	)		-			(10,879,435	)
Proceeds from settlement of life settlements		-			-			68,500			-			68,500
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(10,810,935	)		-			(10,810,935	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for redemption of Series I Secured notes		-			(1,538,924	)		-			-			(1,538,924	)
Proceeds from issuance of L Bonds		33,234,487			-			-			-			33,234,487
Payments for redemption and issuance of L Bonds		(9,322,411	)		-			-			-			(9,322,411	)
Proceeds from restricted cash		-			855,000			2,167,537			-			3,022,537
Redemptions of convertible, redeemable preferred stock		(20,056	)		-			-			-			(20,056	)
Issuance of member capital		-			26,574,367			23,753,882			(50,328,249	)		-
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		23,892,020			25,890,443			25,921,419			(50,328,249	)		25,375,633
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(10,405,723	)		15,888			-			-			(10,389,838	)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		32,711,636			738,157			-			-			33,449,793
END OF THE PERIOD	$	22,305,910		$	754,045		$	-		$	-		$	23,059,955

For the three months ended June 30, 2015	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(2,250,415	)	$	5,399,330		$	6,985,168		$	(12,384,498	)	$	(2,250,415	)
Adjustments to reconcile net loss to net cash flows from operating activities:
(Equity) of subsidiaries		(5,399,386	)		(6,985,112	)		-			12,384,498			-
Gain on life settlements		-			-			(14,028,327	)		-			(14,028,327	)
Amortization of deferred financing and issuance costs		1,685,700			80,928			(1,259,602	)		-			507,026
Deferred income taxes		(930,470	)		-			-			-			(930,470	)
Convertible, redeemable preferred stock dividends payable		146,420			-			-			-			146,420
(Increase) in operating assets:
Policy benefits receivable		-			-			17,140,000			-			17,140,000
Other assets		(7,124,387	)		(5,236,604	)		-			12,135,615			(225,376	)
Increase (decrease) in operating liabilities:
Accounts payable and other accrued expenses		213,843			(509,444	)		(1,037,640	)		-			(1,333,241	)
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(13,658,695	)		(7,250,902	)		7,799,599			12,135,615			(974,383	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(7,777,541	)		-			(7,777,541	)
Proceeds from settlement of life settlements		-			-			132,388			-			132,388
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(7,645,153	)		-			(7,645,153	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of revolving credit facility		-			-			(7,150,000	)					(7,150,000	)
Payments for redemption of Series I Secured notes		-			(2,344,355	)		-			-			(2,344,355	)
Proceeds from issuance of L Bonds		22,538,059			-			-			-			22,538,059
Payments for redemption and issuance of L Bonds		(6,134,935	)		-			-			-			(6,134,935	)
Proceeds from restricted cash		-			1,677,500			1,732,927			-			3,410,427
Issuance of member capital		-			6,872,932			5,262,683			(12,135,615	)		-
Issuance of common stock		582,000			-			-			-			582,000
Redemptions of convertible, redeemable preferred stock		(273,998	)		-			-			-			(273,998	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		16,711,126			6,206,077			(154,390	)		(12,135,615	)		10,627,198
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		3,052,431			(1,044,825	)		56			-			2,007,662
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		34,762,097			1,278,378			150,052			-			36,190,527
END OF THE PERIOD	$	37,814,528		$	233,553		$	150,108		$	-		$	38,198,189

For the three months ended June 30, 2014	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(2,586,697	)	$	2,372,886		$	3,790,677		$	(6,163,563	)	$	(2,586,697	)
Adjustments to reconcile net loss to cash:
(Equity) of subsidiaries		(2,372,886	)		(3,790,677	)		-			6,163,563			-
Gain on life settlements		-			-			(10,852,425	)		-			(10,852,425	)
Amortization of deferred financing and issuance costs		880,374			134,158			339,475			-			1,354,007
Deferred income taxes		(1,316,712	)		-			-			-			(1,316,712	)
Convertible, redeemable preferred stock dividends payable		196,991			-			-			-			196,991
(Increase) in operating assets:
Policy benefits receivable		-			-			(300,000	)		-			(300,000	)
Other assets		(10,674,637	)		(9,406,461	)		-			19,384,025			(697,073	)
Increase in operating liabilities:
Accounts payable and accrued expenses		1,257,758			72,959			559,620			-			1,890,337
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(14,615,809	)		(10,617,135	)		(6,462,653	)		19,384,025			(12,311,572	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(2,608,232	)		-			(2,608,232	)
Proceeds from settlement of life settlements		-			-			68,500			-			68,500
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(2,539,732	)		-			(2,539,732	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for redemption of Series I Secured notes		-			(670,621	)		-			-			(670,621	)
Proceeds from issuance of L Bonds		14,868,830			-			-			-			14,868,830
Payments for redemption and issuance of L Bonds		(4,393,523	)		-			-			-			(4,393,523	)
Proceeds from restricted cash		-			(215,000	)		258,330			-			43,330
Issuance of member capital		-			10,639,970			8,744,055			(19,384,025	)		-
Redemptions of convertible, redeemable preferred stock		(20,056	)		-			-			-			(20,056	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		10,455,251			9,754,349			9,002,385			(19,384,025	)		9,827,960
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(4,160,558	)		(862,786	)		-			-			(5,023,344	)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		26,466,468			1,616,831			-			-			28,083,299
END OF THE PERIOD	$	22,305,910		$	754,045		$	-		$	-		$	23,059,955

XML

Restrictions on Cash

6 Months Ended

Jun. 30, 2015

Restrictions on Cash [Abstract]

Restrictions on cash

(2) Restrictions on cash

The Company is required by its lenders to maintain collection and escrow accounts. These accounts are used to fund the acquisition, pay annual premiums of insurance policies, pay interest and other charges under the revolving credit facility, and collect policy benefits. DZ Bank AG, as agent for Autobahn Funding Company, LLC, the lender for the revolving credit facility as described in note 6, authorizes the disbursements from these accounts. At June 30, 2015 and December 31, 2014 there was a balance of $7,923,000, and $4,296,000, respectively, maintained in these restricted cash accounts.

XML

Concentrations (Tables)

6 Months Ended

Jun. 30, 2015

Concentrations [Abstract]

Summary of the face value of insurance contracts

	June 30,		December 31,
	2015		2014
Life insurance company	%		%
AXA Equitable		14.06		14.55
John Hancock		11.90		11.48

Summary of the number of insurance contracts

	June 30,		December 31,
	2015		2014
State of residence	%		%
California		27.07		28.87
Florida		19.43		18.56

XML

Fair Value Definition and Hierarchy (Details 1) - Life insurance policies [Member] - USD ($)		6 Months Ended	12 Months Ended
		Jun. 30, 2015	Dec. 31, 2014
Summary of inputs utilized in estimating the fair value
Weighted average age of insured		82 years 10 months 24 days	82 years 9 months 18 days
Weighted average life expectancy, months*	[1]	78 years 8 months 12 days	78 years 4 months 24 days
Average face amount per policy		$ 2,568,000	$ 2,677,000
Discount rate		11.19%	11.43%

[1] * Standard life expectancy as adjusted for insured's specific circumstances.

XML

Stock Incentive Plan (Details)	6 Months Ended
	Jun. 30, 2015 shares
Outstanding stock options
Beginning Balance	1,000,101
Granted during the year	245,800
Vested during the year
Exercised during the year	(27,667)
Forfeited during the year	(50,333)
Ending Balance	1,167,901
Vested [Member]
Outstanding stock options
Beginning Balance	314,288
Granted during the year	53,500
Vested during the year	44,592
Exercised during the year	(27,667)
Forfeited during the year	(2,250)
Ending Balance	382,463
Un-vested [Member]
Outstanding stock options
Beginning Balance	685,813
Granted during the year	192,300
Vested during the year	(44,592)
Exercised during the year
Forfeited during the year	(48,083)
Ending Balance	785,438

XML

Condensed Consolidated Balance Sheets - USD ($)	Jun. 30, 2015	Dec. 31, 2014
ASSETS
Cash and cash equivalents	$ 38,198,189	$ 30,662,704
Restricted cash	7,923,190	4,296,053
Policy benefits receivable	2,500,000	1,750,000
Investment in life settlements, at fair value	301,498,527	282,883,010
Other assets	6,623,561	3,478,762
TOTAL ASSETS	356,743,467	323,070,529
LIABILITIES
Revolving credit facility	65,011,048	72,161,048
Series I Secured notes	24,347,531	27,616,578
L Bonds	223,118,514	182,782,884
Interest payable	11,593,220	11,128,519
Accounts payable and accrued expenses	2,071,879	1,718,009
Deferred taxes, net	6,525,336	5,273,555
TOTAL LIABILITIES	332,667,528	300,680,593
STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK (par value $0.001; shares authorized 40,000,000; shares outstanding 2,746,412 and 2,738,966; liquidation preference of $20,598,000 and $20,542,000, respectively)	20,559,823	20,527,866
COMMON STOCK Common stock (par value $0.001: shares authorized 210,000,000; shares issued and outstanding is 5,933,041 and 5,870,193 on June 30, 2015 and December 31, 2014, respectively)	5,933	5,870
Additional paid-in capital	16,900,193	16,257,686
Accumulated deficit	(13,390,010)	(14,401,486)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	24,075,939	22,389,936
TOTAL LIABILITIES & EQUITY (DEFICIT)	$ 356,743,467	$ 323,070,529

XML

Series I Secured Notes (Details) - Series I Secured Notes Payable [Member]	Jun. 30, 2015 USD ($)
Summary of future contractual maturities of notes payable
2015	$ 5,085,000
2016	10,964,000
2017	6,164,000
2018	1,127,000
2019	347,000
Thereafter	1,041,000
Total	24,728,000
Summary of amortization of deferred financing costs of notes payable
2015	20,000
2016	144,000
2017	149,000
2018	36,000
2019	7,000
Thereafter	34,000
Total	$ 390,000

XML

Condensed Consolidated Statement of Stockholders' Equity - USD ($)		Total	Preferred Stock	Common Stock	Additional Paid-in Capital	Accumulated Deficit
Beginning balance at Dec. 31, 2013		$ (5,492,015)		$ 4,562	$ 2,942,000	$ (8,438,577)
Begining balance, Shares at Dec. 31, 2013				4,562,000
Net income (loss)		(5,962,909)				$ (5,962,909)
Issuance of common stock		8,643,790		$ 800	$ 8,642,990
Issuance of common stock, Share				800,000
Series A Preferred Stock conversion to common stock		4,957,099		$ 508	$ 4,956,591
Series A Preferred Stock conversion to common stock, Shares				508,193
Issuance of preferred stock		201,261	$ 201,261
Issuance of preferred stock, Shares			28,752
Issuance of stock options		122,412			$ 122,412
Reclassification of preferred stock from temporary equity to permanent equity due to initial public offering (*)	[1]	20,326,605	$ 20,326,605
Reclassification of preferred stock from temporary equity to permanent equity due to initial public offering (*), Shares	[1]		2,710,214
Extension of warrants		47,120			$ 47,120
Accretion of preferred stock to liquidation value		(453,427)			(453,427)
Ending balance at Dec. 31, 2014		22,389,936	$ 20,527,866	$ 5,870	$ 16,257,686	$ (14,401,486)
Ending balance, Shares at Dec. 31, 2014			2,738,966	5,870,193
Net income (loss)		1,011,476				$ 1,011,476
Issuance of common stock		$ 582,000		$ 60	$ 581,940
Issuance of common stock, Share				60,000
Series A Preferred Stock conversion to common stock			$ (28,478)	$ 3	$ 28,475
Series A Preferred Stock conversion to common stock, Shares			(3,797)	2,848
Issuance of preferred stock		$ 60,435	$ 60,435
Issuance of preferred stock, Shares			11,243
Issuance of stock options		32,092			$ 32,092
Ending balance at Jun. 30, 2015		$ 24,075,939	$ 20,559,823	$ 5,933	$ 16,900,193	$ (13,390,010)
Ending balance, Shares at Jun. 30, 2015			2,746,412	5,933,041

[1] Subject to the terms of the Certificate of Designation for Series A Convertible Preferred Stock, the listing of our common stock on The Nasdaq Capital Market on September 25, 2014 resulted in the termination of a redemption right in favor of the holders of such preferred stock. Preferred stock that is not redeemable by a shareholder is treated as stockholders' equity as shown in the table above.

XML

Guarantees of Secured Debt (Details 2) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$ (2,250,415)	$ (2,586,697)	$ 1,011,476	$ (4,487,867)	$ (5,962,909)
Adjustments to reconcile net income to net cash flows from operating activities:
(Equity) of subsidiaries
Gain on life settlements	$ 14,028,327	$ 10,852,425	$ 12,134,482	$ 22,211,338
Amortization of deferred financing and issuance costs	507,026	1,354,007	(42,004)	1,707,664
Deferred income taxes	(930,470)	(1,316,712)	1,251,781	(2,271,570)
Convertible, redeemable preferred stock issued for dividends	146,420	196,991	335,232	389,331
(Increase) in operating assets:
Policy benefits receivable	17,140,000	(300,000)	(750,000)	(300,000)
Other assets	225,376	697,073	356,549	948,919
Increase in operating liabilities:
Accounts payable and other accrued expenses	(1,333,241)	1,890,337	1,302,446	3,168,163
NET CASH FLOWS USED IN OPERATING ACTIVITIES	(974,383)	(12,311,572)	(9,382,100)	(24,954,536)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements	7,777,541	2,608,232	10,224,018	10,879,435
Proceeds from settlement of life settlements	132,388	68,500	3,742,983	68,500
NET CASH FLOWS USED IN INVESTING ACTIVITIES	(7,645,153)	$ (2,539,732)	(6,481,035)	$ (10,810,935)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of revolving credit facility	(7,150,000)		(7,150,000)
Payments for redemption of Series I Secured notes	2,344,355	$ 670,621	3,617,544	$ 1,538,924
Proceeds from issuance of L Bonds	22,538,059	14,868,830	50,498,356	33,234,487
Payments for redemption and issuance of L Bonds	(6,134,935)	(4,393,523)	(13,013,057)	(9,322,411)
Proceeds from restricted cash	3,410,427	$ 43,330	(3,627,137)	$ 3,022,537
Issuance of common stock	(582,000)		(582,000)
Redemptions of convertible, redeemable preferred stock	$ (273,998)	$ (20,056)	$ (273,998)	$ (20,056)
Issuance of member capital
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES	$ 10,627,198	$ 9,827,960	$ 23,398,620	$ 25,375,633
NET INCREASE IN CASH AND CASH EQUIVALENTS	2,007,662	(5,023,344)	7,535,485	(10,389,838)
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD	36,190,527	28,083,299	30,662,704	33,449,793	33,449,793
END OF PERIOD	38,198,189	23,059,955	38,198,189	23,059,955	30,662,704
Parent [Member]
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	(2,250,415)	(2,586,697)	1,011,476	(4,487,867)
Adjustments to reconcile net income to net cash flows from operating activities:
(Equity) of subsidiaries	$ (5,399,386)	$ 2,372,886	$ (19,247,582)	$ 5,004,443
Gain on life settlements
Amortization of deferred financing and issuance costs	$ 1,685,700	$ 880,374	$ 1,729,175	$ 1,727,610
Deferred income taxes	(930,470)	(1,316,712)	1,251,781	(2,271,570)
Convertible, redeemable preferred stock issued for dividends	$ 146,420	$ 196,991	$ 335,232	$ 389,331
(Increase) in operating assets:
Policy benefits receivable
Other assets	$ (7,124,387)	$ (10,674,637)	$ (17,998,823)	$ (26,622,350)
Increase in operating liabilities:
Accounts payable and other accrued expenses	213,843	1,257,758	2,493,495	1,971,543
NET CASH FLOWS USED IN OPERATING ACTIVITIES	$ (13,658,695)	$ (14,615,809)	$ (30,425,246)	$ (34,297,746)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements
Proceeds from settlement of life settlements
NET CASH FLOWS USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of revolving credit facility
Payments for redemption of Series I Secured notes
Proceeds from issuance of L Bonds	$ 22,538,059	$ 14,868,830	$ 50,498,356	$ 33,234,487
Payments for redemption and issuance of L Bonds	$ (6,134,935)	$ (4,393,523)	$ (13,013,057)	$ (9,322,411)
Proceeds from restricted cash
Issuance of common stock	$ 582,000		$ 582,000
Redemptions of convertible, redeemable preferred stock	$ (273,998)	$ (20,056)	$ (273,998)	$ (20,056)
Issuance of member capital
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES	$ 16,711,126	$ 10,455,251	$ 37,793,301	$ 23,892,020
NET INCREASE IN CASH AND CASH EQUIVALENTS	3,052,431	(4,160,558)	7,368,055	(10,405,723)
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD	34,762,097	26,466,468	30,446,473	32,711,636	32,711,636
END OF PERIOD	37,814,528	22,305,910	37,814,528	22,305,910	30,446,473
Guarantor Subsidiary [Member]
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	5,399,330	2,372,886	19,247,474	5,004,443
Adjustments to reconcile net income to net cash flows from operating activities:
(Equity) of subsidiaries	$ (6,985,112)	$ 3,790,677	$ (22,281,216)	$ 6,827,686
Gain on life settlements
Amortization of deferred financing and issuance costs	$ 80,928	$ 134,158	$ 211,116	$ 301,104
Deferred income taxes
Convertible, redeemable preferred stock issued for dividends
(Increase) in operating assets:
Policy benefits receivable
Other assets	$ (5,236,604)	$ (9,406,461)	$ (11,114,039)	$ (24,654,818)
Increase in operating liabilities:
Accounts payable and other accrued expenses	(509,444)	72,959	228,640	302,402
NET CASH FLOWS USED IN OPERATING ACTIVITIES	$ (7,250,902)	$ (10,617,135)	$ (13,708,025)	$ (25,874,555)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements
Proceeds from settlement of life settlements
NET CASH FLOWS USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of revolving credit facility
Payments for redemption of Series I Secured notes	$ (2,344,355)	$ (670,621)	$ (3,617,544)	$ (1,538,924)
Proceeds from issuance of L Bonds
Payments for redemption and issuance of L Bonds
Proceeds from restricted cash	$ 1,677,500	$ (215,000)	$ (102,500)	$ 855,000
Issuance of common stock
Redemptions of convertible, redeemable preferred stock
Issuance of member capital	$ 6,872,932	$ 10,639,970	$ 17,445,391	$ 26,574,367
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES	6,206,077	9,754,349	13,725,347	25,890,443
NET INCREASE IN CASH AND CASH EQUIVALENTS	(1,044,825)	(862,786)	17,322	15,888
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD	1,278,378	1,616,831	216,231	738,157	738,157
END OF PERIOD	233,553	754,045	233,553	754,045	$ 216,231
Non-Guarantor Subsidiaries [Member]
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$ 6,985,168	$ 3,790,667	$ 22,281,324	$ 6,827,686
Adjustments to reconcile net income to net cash flows from operating activities:
(Equity) of subsidiaries
Gain on life settlements	$ (14,028,327)	$ (10,852,425)	$ (12,134,482)	$ (22,211,338)
Amortization of deferred financing and issuance costs	$ (1,259,602)	$ 339,475	$ (1,982,295)	$ (321,050)
Deferred income taxes
Convertible, redeemable preferred stock issued for dividends
(Increase) in operating assets:
Policy benefits receivable	$ 17,140,000	$ (300,000)	$ (750,000)	$ (300,000)
Other assets
Increase in operating liabilities:
Accounts payable and other accrued expenses	$ (1,037,640)	$ 559,620	$ (1,419,689)	$ 894,218
NET CASH FLOWS USED IN OPERATING ACTIVITIES	7,799,599	(6,462,653)	(5,994,858)	(15,110,484)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements	(7,777,541)	(2,608,232)	(10,224,018)	(10,879,435)
Proceeds from settlement of life settlements	132,388	68,500	3,742,983	68,500
NET CASH FLOWS USED IN INVESTING ACTIVITIES	(7,645,153)	$ (2,539,732)	(6,481,035)	$ (10,810,935)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of revolving credit facility	$ (7,150,000)		$ (7,150,000)
Payments for redemption of Series I Secured notes
Proceeds from issuance of L Bonds
Payments for redemption and issuance of L Bonds
Proceeds from restricted cash	$ 1,732,927	$ 258,330	$ (3,524,637)	$ 2,167,537
Issuance of common stock
Redemptions of convertible, redeemable preferred stock
Issuance of member capital	$ 5,262,683	$ 8,744,055	$ 11,310,922	$ 23,753,882
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES	(154,390)	$ 9,002,385	636,285	$ 25,921,419
NET INCREASE IN CASH AND CASH EQUIVALENTS	56		$ 150,108
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD	150,052
END OF PERIOD	150,108		$ 150,108
Eliminations [Member]
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	(12,384,498)	$ (6,163,563)	(41,528,798)	$ (11,832,129)
Adjustments to reconcile net income to net cash flows from operating activities:
(Equity) of subsidiaries	$ 12,384,498	$ 6,163,563	$ 41,528,798	$ 11,832,129
Gain on life settlements
Amortization of deferred financing and issuance costs
Deferred income taxes
Convertible, redeemable preferred stock issued for dividends
(Increase) in operating assets:
Policy benefits receivable
Other assets	$ 12,135,615	$ 19,384,025	$ 28,756,313	$ 50,328,249
Increase in operating liabilities:
Accounts payable and other accrued expenses
NET CASH FLOWS USED IN OPERATING ACTIVITIES	$ 12,135,615	$ 19,384,025	$ 28,756,313	$ 50,328,249
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements
Proceeds from settlement of life settlements
NET CASH FLOWS USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of revolving credit facility
Payments for redemption of Series I Secured notes
Proceeds from issuance of L Bonds
Payments for redemption and issuance of L Bonds
Proceeds from restricted cash
Issuance of common stock
Redemptions of convertible, redeemable preferred stock
Issuance of member capital	$ (12,135,615)	$ (19,384,025)	$ (28,756,313)	$ (50,328,249)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES	$ (12,135,615)	$ (19,384,025)	$ (28,756,313)	$ (50,328,249)
NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD
END OF PERIOD

XML

Investment in Life Insurance Policies (Details)	Jun. 30, 2015 USD ($) Contract	Dec. 31, 2014 USD ($) Contract
Summary of Company's life insurance policies accounted for under fair value method and their estimated maturity dates, based on remaining life expectancy
Number of Contracts, 2015 | Contract		3
Number of Contracts, 2016 | Contract	5	7
Number of Contracts, 2017 | Contract	16	17
Number of Contracts, 2018 | Contract	30	30
Number of Contracts, 2019 | Contract	48	45
Number of Contracts, 2020 | Contract	43	41
Number of Contracts, 2021 | Contract	42	36
Number of Contracts, Thereafter | Contract	130	112
Life Settlement Contracts, Number of Contracts, Total | Contract	314	291
Estimated Fair Value, 2015		$ 5,063,000
Estimated Fair Value, 2016	$ 7,198,000	8,144,000
Estimated Fair Value, 2017	17,063,000	21,916,000
Estimated Fair Value, 2018	42,478,000	41,994,000
Estimated Fair Value, 2019	53,052,000	47,303,000
Estimated Fair Value, 2020	46,597,000	43,429,000
Estimated Fair Value, 2021	34,486,000	29,789,000
Estimated Fair Value, Thereafter	100,625,000	85,245,000
Life Settlement Contracts, Estimated Fair Value, Total	$ 301,499,000	282,883,000
Face Value, 2015		6,000,000
Face Value, 2016	$ 8,500,000	11,550,000
Face Value, 2017	23,857,000	35,542,000
Face Value, 2018	72,171,000	76,206,000
Face Value, 2019	109,810,000	106,973,000
Face Value, 2020	101,574,000	102,614,000
Face Value, 2021	96,956,000	90,921,000
Face Value, Thereafter	393,406,000	349,293,000
Life Settlement Contracts, Face Value, Total	$ 806,274,000	$ 779,099,000

XML

Concentrations

6 Months Ended

Jun. 30, 2015

Concentrations [Abstract]

Concentrations

(16) Concentrations

GWG purchases life insurance policies written by life insurance companies having investment grade ratings by independent rating agencies.  As a result there may be certain concentrations of contracts with life insurance companies.  The following summarizes the face value of insurance contracts with specific life insurance companies exceeding 10% of the total face value held by the Company.

	June 30,		December 31,
	2015		2014
Life insurance company	%		%
AXA Equitable		14.06		14.55
John Hancock		11.90		11.48

The following summarizes the number of insurance contracts held in specific states exceeding 10% of the total face value held by the Company:

	June 30,		December 31,
	2015		2014
State of residence	%		%
California		27.07		28.87
Florida		19.43		18.56

XML

Investment in Life Insurance Policies (Details 1) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Summary of reconciliation of gain on life settlements
Change in fair value	$ 14,028,000	$ 10,852,000	$ 12,134,000	$ 22,211,000
Premiums and other annual fees	(6,172,000)	(5,599,000)	(12,509,000)	(11,442,000)
Policy maturities	618,000	232,000	25,632,000	232,000
Gain on life settlements, net	$ 8,474,000	$ 5,485,000	$ 25,257,000	$ 11,001,000

XML

Nature of Business and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2015

Nature of Business and Summary of Significant Accounting Policies [Abstract]

Use of estimates

Use of estimates - The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The most significant estimates with regard to these consolidated financial statements relates to (1) the determination of the assumptions used in estimating the fair value of the investment in life insurance policies, and (2) the value of deferred tax assets and liabilities.

Cash and cash equivalents

Cash and cash equivalents - The Company considers cash in demand deposit accounts and temporary investments purchased with an original maturity of three months or less to be cash equivalents. The Company maintains its cash and cash equivalents with highly rated financial institutions. From time to time, the Company’s balances in its bank accounts exceed Federal Deposit Insurance Corporation limits. The Company periodically evaluates the risk of exceeding insured levels and may transfer funds as it deems appropriate. The Company has not experienced any losses with regards to balances in excess of insured limits or as a result of other concentrations of credit risk.

Life settlements

Life settlements - ASC 325-30, Investments in Insurance Contracts, allows a reporting entity the election to account for its investments in life settlements using either the investment method or the fair value method. The election shall be made on an instrument-by-instrument basis and is irrevocable. Under the investment method, an investor shall recognize the initial investment at the purchase price plus all initial direct costs. Continuing costs (policy premiums and direct external costs, if any) to keep the policy in force shall be capitalized. Under the fair value method, an investor shall recognize the initial investment at the purchase price. In subsequent periods, the investor shall re-measure the investment at fair value in its entirety at each reporting period and shall recognize the change in fair value in current period income net of premiums paid. The Company uses the fair value method to account for all life settlements.

The Company recognizes realized gains (revenue) from life settlement contracts upon one of the two following events:

1)	Receipt of death notice or verified obituary of insured
2)	Sale of policy and filing of change of ownership forms and receipt of payment

The Company recognizes the difference between the death benefits and carrying values of the policy when an insured event has occurred and the Company determines that settlement and ultimate collection of the death benefits is realizable and reasonably assured. Revenue from a transaction must meet both criteria in order to be recognized. In an event of a sale of a policy, the Company recognizes gain or loss as the difference between the sale price and the carrying value of the policy on the date of the receipt of payment on such sale.

Deposits and initial direct costs advanced on unsettled policy acquisitions are recorded as other assets until policy ownership has been transferred to the Company. Such deposits and direct cost advances were $222,000 and $27,000 at June 30, 2015 and December 31, 2014, respectively.

Deferred financing and issuance costs

Deferred financing and issuance costs – Costs incurred to obtain financing under the revolving credit facility, as described in note 5, have been capitalized and are amortized using the straight-line method over the term of the revolving credit facility. Amortization of deferred financing costs was $300,000 and $89,000 for the three-month periods ended June 30, 2015 and 2014, and $300,000 and $179,000 for the six-month periods ended June 30, 2015 and 2014, respectively. The future amortization is expected to be $1,500,000 for the next ten months ending April 30, 2016. The Series I Secured notes, as described in note 6, are reported net of issuance costs, sales commissions and other direct expenses, which are amortized using the interest method over the term of each respective borrowing. The L Bonds, as described in note 7, are reported net of issuance costs, sales commissions and other direct expenses, which are amortized using the interest method over the term of each respective borrowing. The Series A preferred stock, as described in note 8, was also reported net of issuance costs, sales commissions, including the fair value of warrants issued, and other direct expenses, which were amortized using the interest method as interest expense over the three-year redemption period. As of December 31, 2014 those costs were fully amortized.

Earnings (loss) per share

Earnings (loss) per share - Basic per share earnings (loss) attributable to non-redeemable interests is calculated using the weighted-average number of shares outstanding during the period. Diluted earnings per share is calculated based on the potential dilutive impact, if any, of the Company’s convertible, redeemable preferred stock, and outstanding warrants, and stock options.

Subsequent events

Subsequent events - Subsequent events are events or transactions that occur after the balance sheet date but before consolidated financial statements are issued. The Company recognizes in the consolidated financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing the consolidated financial statements. The Company’s consolidated financial statements do not recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date and before the consolidated financial statements are available to be issued. The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the consolidated financial statements are filed for potential recognition or disclosure.

Recently adopted pronouncements

Recently adopted pronouncements - On April 7, 2015 the FASB issued Accounting Standards Update (ASU) No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” as part of its simplification initiative. The ASU changes the presentation of debt issuance costs in financial statements. Under the ASU, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. For public business entities, the guidance in the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. For entities other than public business entities, the guidance is effective for fiscal years beginning after December 15, 2015, and interim periods beginning after December 15, 2016. Early adoption is allowed for all entities for financial statements that have not been previously issued. Entities would apply the new guidance retrospectively to all prior periods (i.e., the balance sheet for each period is adjusted). The impact of the new ASU on the Company’s balance sheet would be a reduction of approximately $4,532,000 to assets and the corresponding reduction to liabilities. There would be no impact on the Company’s statements of operations.

XML

Nature of Business and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2015

Nature of Business and Summary of Significant Accounting Policies [Abstract]

Nature of business and summary of significant accounting policies

(1) Nature of business and summary of significant accounting policies

Nature of business - GWG Holdings, Inc. (GWG Holdings) and subsidiaries, located in Minneapolis, Minnesota, facilitates the purchase of life insurance policies for its own investment portfolio through its wholly owned subsidiaries, GWG Life, LLC (GWG Life), and GWG Life USA, LLC (GWG Life USA), and GWG Life’s own subsidiaries, GWG Trust (Trust), GWG DLP Funding II, LLC (DLP II) and its wholly owned subsidiary, GWG DLP Master Trust II (the Trust II), and GWG DLP Funding III, LLC (DLP III). All of these entities are legally organized in Delaware. Unless the context otherwise requires or we specifically so indicate, all references in this report to "we", "us", "our", "our Company", "GWG", or the "Company" refer to these entities collectively. References to particular entities, such as “GWG Holdings” or “GWG Life”, are meant to refer only to the particular entity referenced.

Use of estimates - The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The most significant estimates with regard to these consolidated financial statements relates to (1) the determination of the assumptions used in estimating the fair value of the investment in life insurance policies, and (2) the value of deferred tax assets and liabilities.

Cash and cash equivalents - The Company considers cash in demand deposit accounts and temporary investments purchased with an original maturity of three months or less to be cash equivalents. The Company maintains its cash and cash equivalents with highly rated financial institutions. From time to time, the Company’s balances in its bank accounts exceed Federal Deposit Insurance Corporation limits. The Company periodically evaluates the risk of exceeding insured levels and may transfer funds as it deems appropriate. The Company has not experienced any losses with regards to balances in excess of insured limits or as a result of other concentrations of credit risk.

Life settlements - ASC 325-30, Investments in Insurance Contracts, allows a reporting entity the election to account for its investments in life settlements using either the investment method or the fair value method. The election shall be made on an instrument-by-instrument basis and is irrevocable. Under the investment method, an investor shall recognize the initial investment at the purchase price plus all initial direct costs. Continuing costs (policy premiums and direct external costs, if any) to keep the policy in force shall be capitalized. Under the fair value method, an investor shall recognize the initial investment at the purchase price. In subsequent periods, the investor shall re-measure the investment at fair value in its entirety at each reporting period and shall recognize the change in fair value in current period income net of premiums paid. The Company uses the fair value method to account for all life settlements.

The Company recognizes realized gains (revenue) from life settlement contracts upon one of the two following events:

1)	Receipt of death notice or verified obituary of insured
2)	Sale of policy and filing of change of ownership forms and receipt of payment

The Company recognizes the difference between the death benefits and carrying values of the policy when an insured event has occurred and the Company determines that settlement and ultimate collection of the death benefits is realizable and reasonably assured. Revenue from a transaction must meet both criteria in order to be recognized. In an event of a sale of a policy, the Company recognizes gain or loss as the difference between the sale price and the carrying value of the policy on the date of the receipt of payment on such sale.

Deposits and initial direct costs advanced on unsettled policy acquisitions are recorded as other assets until policy ownership has been transferred to the Company. Such deposits and direct cost advances were $222,000 and $27,000 at June 30, 2015 and December 31, 2014, respectively.

Deferred financing and issuance costs – Costs incurred to obtain financing under the revolving credit facility, as described in note 5, have been capitalized and are amortized using the straight-line method over the term of the revolving credit facility. Amortization of deferred financing costs was $300,000 and $89,000 for the three-month periods ended June 30, 2015 and 2014, and $300,000 and $179,000 for the six-month periods ended June 30, 2015 and 2014, respectively. The future amortization is expected to be $1,500,000 for the next ten months ending April 30, 2016. The Series I Secured notes, as described in note 6, are reported net of issuance costs, sales commissions and other direct expenses, which are amortized using the interest method over the term of each respective borrowing. The L Bonds, as described in note 7, are reported net of issuance costs, sales commissions and other direct expenses, which are amortized using the interest method over the term of each respective borrowing. The Series A preferred stock, as described in note 8, was also reported net of issuance costs, sales commissions, including the fair value of warrants issued, and other direct expenses, which were amortized using the interest method as interest expense over the three-year redemption period. As of December 31, 2014 those costs were fully amortized.

Earnings (loss) per share - Basic per share earnings (loss) attributable to non-redeemable interests is calculated using the weighted-average number of shares outstanding during the period. Diluted earnings per share is calculated based on the potential dilutive impact, if any, of the Company’s convertible, redeemable preferred stock, and outstanding warrants, and stock options.

Subsequent events - Subsequent events are events or transactions that occur after the balance sheet date but before consolidated financial statements are issued. The Company recognizes in the consolidated financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing the consolidated financial statements. The Company’s consolidated financial statements do not recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date and before the consolidated financial statements are available to be issued. The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the consolidated financial statements are filed for potential recognition or disclosure.

Recently adopted pronouncements - On April 7, 2015 the FASB issued Accounting Standards Update (ASU) No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” as part of its simplification initiative. The ASU changes the presentation of debt issuance costs in financial statements. Under the ASU, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. For public business entities, the guidance in the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. For entities other than public business entities, the guidance is effective for fiscal years beginning after December 15, 2015, and interim periods beginning after December 15, 2016. Early adoption is allowed for all entities for financial statements that have not been previously issued. Entities would apply the new guidance retrospectively to all prior periods (i.e., the balance sheet for each period is adjusted). The impact of the new ASU on the Company’s balance sheet would be a reduction of approximately $3,629,000 to assets and the corresponding reduction to liabilities. There would be no impact on the Company’s statements of operations.

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Convertible preferred stock, par value	$ 0.001	$ 0.001
Convertible preferred stock, shares authorized	40,000,000	40,000,000
Convertible preferred stock, shares outstanding	2,746,412	2,738,966
Convertible preferred stock, liquidation preference	$ 20,598,000	$ 20,542,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	210,000,000	210,000,000
Common stock, shares issued	5,933,041	5,870,193
Common stock, shares outstanding	5,933,041	5,870,193

XML

Stock Incentive Plan

6 Months Ended

Jun. 30, 2015

Stock Incentive Plan [Abstract]

Stock Incentive Plan

(11) Stock Incentive Plan

The Company adopted the GWG Holdings, Inc. 2013 Stock Incentive Plan on March 27, 2013. On April 23, 2015 the Board of Directors approved amendments to the plan which were subsequently approved by a majority of the Company’s stockholders at the annual meeting of stockholders on June 1, 2015. The plan is administered by Compensation Committee of the Board of Directors of the Company. The Company’s Chief Executive Officer may, on a discretionary basis and without committee review or approval, grant incentives to new employees of the Company who are not officers of the Company. Incentives under the plan may be granted in one or a combination of the following forms: (a) incentive stock options and non-statutory stock options; (b) stock appreciation rights; (c) stock awards; (d) restricted stock; (e) restricted stock units; and (f) performance shares. Eligible participants include officers and employees of the company, members of the Board of Directors, and consultants or other independent contractors. 2,000,000 shares are issuable under the plan. No person shall receive grants of stock options and SARs under the plan that exceed, in the aggregate 400,000 shares of common stock in any one year. The term of each stock option shall be determined by the committee but shall not exceed ten years. Vested stock options may be exercised in whole or part by the holder giving notice to the Company. The holder of the option may provide payment for the exercise price or surrender shares equal to the exercise price.

The Company issued stock options for 991,401 shares of common stock to employees, officers, and directors of the Company through June 30, 2015. Options for 443,381 shares have vested, and the remaining options will vest over three years. The options were issued with an exercise price between $8.20 and $10.18 for those owning more than 10% of the Company’s stock and between $6.73 and $10.25 for others, which is equal to the estimated market price of the shares on the date of grant valued using Black-Scholes binomial option pricing model. The expected volatility used in the Black-Scholes model valuation of options issued during the year was 17.03% annualized. The annual volatility rate is based on the standard deviation of the average continuously compounded rate of return of five selected comparable companies over the previous 52 weeks. Forfeiture rate of 15% is based on historical Company information and expected future trend. As of June 30, 2015, stock options for 113,499 shares were forfeited and stock options for 28,001 shares were exercised.

In September 2014, we entered into a stock option agreement (the Agreement) with a new management employee (the Employee) granting the Employee the right to purchase up to 318,000 of the Company’s common stock at an exercise price of $12.50. The grant of such rights to purchase the Company’s common stock was treated as an inducement grant and was issued outside the GWG Holdings Inc. 2013 Stock Incentive Plan. The Agreement specifies that, among other things, options to purchase 159,000 shares of the Company’s common stock will vest with the Employee ratably on the first, second and third anniversary of the date of the Agreement. The remaining 159,000 options will vest quarterly using a formula based upon the closing price of the Company’s common stock on the last business day of such quarter. The maximum number of these remaining options that will vest with the Employee is 53,000 in each successive one-year period beginning on the date of the Agreement.

Outstanding stock options:

	Vested			Un-vested			Total
Balance as of December 31, 2014		314,288			685,813			1,000,101
Granted during the year		53,500			192,300			245,800
Vested during the year		44,592			(44,592	)		-
Exercised during the year		(27,667	)		-			(27,667	)
Forfeited during the year		(2,250	)		(48,083	)		(50,333	)
Balance as of June 30, 2015		382,463			785,438			1,167,901

Compensation expense related to un-vested options not yet recognized is $642,000. We expect to recognize this compensation expense over the next three years ($185,000 in 2015, $229,000 in 2016, $189,000 in 2017, and 39,000 in 2018). The Company issues new common stock for options exercised.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Aug. 13, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	GWG Holdings, Inc.
Entity Central Index Key	0001522690
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		5,933,041

XML

Net Loss Per Common Share

6 Months Ended

Jun. 30, 2015

Net loss per common share [Abstract]

Net loss per common share

(12) Net loss per common share

The Company began issuing Series A Preferred Stock on September 1, 2011, as described in note 8. The Series A Preferred Stock and vested stock options are dilutive to the net income/loss per common share calculation for the six-month period ended June 30, 2015 and anti-dilutive for the three-month period ended June 30, 2015. The Series A Preferred Stock and vested stock options are anti-dilutive for both three and six-month periods ended June 30, 2014. The Company has also issued warrants to purchase common stock in conjunction with the sale of convertible preferred stock, discussed in note 8. The warrants are anti-dilutive for all described three and six-month periods of 2015 and 2014 and have not been included in the fully diluted net income/loss per common share calculation.

XML

Condensed Consolidated Statements of Operations (unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
REVENUE
Gain on life settlements, net	$ 8,473,886	$ 5,484,889	$ 25,257,295	$ 11,001,094
Interest and other income	90,380	6,380	139,676	13,747
TOTAL REVENUE	8,564,266	5,491,269	25,396,971	11,014,841
EXPENSES
Employee compensation and benefits	2,144,725	1,178,819	3,872,642	2,147,564
Legal and professional fees	642,931	419,337	1,166,184	826,339
Interest expense	7,322,347	6,608,043	14,498,881	12,934,591
Other expenses	1,881,321	1,188,479	3,415,060	1,865,784
TOTAL EXPENSES	11,991,324	9,394,678	22,952,767	17,774,278
INCOME (LOSS) BEFORE INCOME TAXES	(3,427,058)	(3,903,409)	2,444,204	(6,759,437)
INCOME TAX EXPENSE (BENEFIT)	(1,176,643)	(1,316,712)	1,432,728	(2,271,570)
NET INCOME (LOSS)	(2,250,415)	(2,586,697)	1,011,476	(4,487,867)
(Income) loss attributable to preferred shareholders	344,847	(101,271)	698,003	(226,984)
INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS	$ (1,905,568)	$ (2,687,968)	$ 1,709,479	$ (4,714,851)
NET INCOME (LOSS) PER SHARE
Basic	$ (0.32)	$ (0.59)	$ 0.29	$ (1.03)
Diluted	$ (0.32)	$ (0.59)	$ 0.21	$ (1.03)
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic	5,876,618	4,562,000	5,873,423	4,562,000
Diluted	5,876,618	4,562,000	7,987,923	4,562,000

XML

Series I Secured Notes

6 Months Ended

Jun. 30, 2015

Credit Facilities / Series I Secured Notes / L Bonds (formerly Renewable Secured Debentures) [Abstract]

Series I Secured notes payable

(6) Series I Secured notes

Series I Secured Notes are secured by assets of GWG Life and are subordinate to our revolving credit facility (see note 5). On June 14, 2011, the Company closed the offering to additional investors; however, existing investors may elect to continue advancing amounts outstanding upon maturity subject to the Company’s option to repay such notes. Series I Secured Notes have maturity dates ranging from six months to seven years with fixed interest rates varying from 5.65% to 9.55% depending on the term of the note. Interest is payable monthly, quarterly, annually or at maturity depending on the terms of the note. At June 30, 2015 and December 31, 2014, the weighted-average interest rate of Series I Secured Notes was 8.49% and 8.37%, respectively. The notes are secured by assets of GWG Life. The principal amount outstanding under these Series I Secured Notes was $24,728,000 and $28,047,000 at June 30, 2015 and December 31, 2014, respectively. The difference between the amount outstanding on the Series I Secured Notes and the carrying amount on the consolidated balance sheet is due to netting of unamortized deferred issuance costs. Overall, interest expense includes amortization of deferred financing and issuance costs of $81,000 and $211,000 for the three and six months ended June 30, 2015, respectively, and $134,000 and $301,000 for the three and six months ended June 30, 2014, respectively. Future expected amortization of deferred financing costs is $390,000 over the next six years.

The use of proceeds from the issuances of L Bonds is limited to the following: (1) payment of commissions on sales of L Bonds, (2) payment of offering expenses, (3) purchase of life insurance policies, (4) payment of premiums on life insurance policies, (5) payment of principal and interest on L Bonds, (6) payment of portfolio operations expenses, and (7) general working capital.

Future contractual maturities of Series I Secured notes at June 30, 2015 are as follows:

Years Ending December 31,	Contractual Maturities		Amortization of Deferred Financing Costs
Six months ending December 31, 2015	$	5,085,000	$	20,000
2016		10,964,000		144,000
2017		6,164,000		149,000
2018		1,127,000		36,000
2019		347,000		7,000
Thereafter		1,041,000		34,000
	$	24,728,000	$	390,000

XML

Credit Facilities

6 Months Ended

Jun. 30, 2015

Credit Facilities / Series I Secured Notes / L Bonds (formerly Renewable Secured Debentures) [Abstract]

Credit facilities

(5) Credit facilities

Revolving credit facility – Autobahn Funding Company LLC

On July 15, 2008, DLP II and United Lending entered into a revolving credit facility pursuant to a Credit and Security Agreement (Agreement) with Autobahn Funding Company LLC (Autobahn), providing the Company with a maximum borrowing amount of $100,000,000. Autobahn is a commercial paper conduit that issues commercial paper to investors in order to provide funding to DLP II. DZ Bank AG Deutsche Zentral-Genossenschaftsbank (DZ Bank) acts as the agent for Autobahn. The original Agreement was to expire on July 15, 2013. On January 29, 2013, GWG Holdings, together with GWG Life and DLP II, entered into an Amended and Restated Credit and Security Agreement with Autobahn, extending the facility expiration date to December 31, 2014. On May 29, 2014, GWG Holdings, together with GWG Life and DLP II, entered into an Amendment No. 1 to Amended and Restated Credit and Security Agreement with Autobahn and DZ Bank (as committed lender and Agent). The amendment was entered into for the purpose of extending the maturity date for borrowings under the Agreement to December 31, 2016.Effective May 11, 2015, GWG Holdings, together with certain of its subsidiaries, entered into a Second Amended and Restated Credit and Security Agreement with Autobahn Funding Company LLC, as the conduit lender, and DZ Bank AG Deutsche Zentral-Genossenschaftsbank, as the committed lender and as the agent on behalf of secured parties under such agreement. The Second Amended and Restated Credit and Security Agreement extends the maturity date of borrowings made by the Company’s subsidiaries, GWG DLP Funding II, LLC and GWG DLP Funding III, LLC, to June 30, 2018. Advances under the credit facility made after May 11, 2015 will bear interest at the commercial paper rate of the lender at the time of the advance, or at the lender’s cost of borrowing plus 4.25 percent, which is 1.75 percent less than under the previous Credit and Security Agreement executed on January 25, 2013. In addition to the extended term and decreased interest rate and borrowing cost, the Second Amended and Restated Credit and Security Agreement also removes the requirement that the Company maintain a reserve for certain projected expenditures (including anticipated premium payments required to service its life insurance portfolio), thereby allowing for the Company’s full use of the credit facility up to its limit of $105,000,000.

In connection with the Second Amended and Restated Credit and Security Agreement, GWG Holdings and its subsidiaries entered into certain other agreements and amendments and restatements of earlier agreements entered into in connection with the original and renewal Credit and Security Agreements. Included among these other agreements was an Amended and Restated Performance Guaranty affirming the performance guaranty that GWG Holdings earlier provided in connection with the original and first amended and restated Credit and Security Agreements to DZ Bank AG Deutsche Zentral-Genossenschaftsbank, as agent. The amount outstanding under this facility was $65,011,000 and $72,161,000 at June 30, 2015 and December 31, 2014, respectively.

The Agreement requires DLP II to pay, on a monthly basis, interest at the commercial paper rate plus an applicable margin, as defined in the Agreement. The effective rate was 5.41% at June 30, 2015 and 6.24% at December 31, 2014. The Agreement also requires payment of an unused line fee on the unfunded amount under the revolving credit facility. The weighted-average effective interest rate (excluding the unused line fee) was 5.37% and 6.20% for the three months ended June 30, 2015 and 2014, respectively, and 6.00% and 6.21% for the six months ended June 30, 2015 and 2014, respectively. The note is secured by substantially all of DLP II’s and DLP III’s assets, which consist primarily of life insurance policies.

The Agreement has certain financial and nonfinancial covenants. The Company was in compliance with these covenants at June 30, 2015 and December 31, 2014. The Agreement generally prohibits the Company from:

● changing its corporate name, offices, and jurisdiction of incorporation

● changing any deposit accounts or payment instructions to insurers;

● changing any operating policies and practices such that it would be reasonably likely to adversely affect the collectability of any asset in any material respect;

● merging or consolidating with, or selling all or substantially all of its assets to, any third party;

● selling any collateral or creating or permitting to exist any adverse claim upon any collateral;

● engaging in any other business or activity than that contemplated by the Agreement;

● incurring or guaranteeing any debt for borrowed money;

● amending the Company’s certificate of incorporation or bylaws, making any loans or advances to, investments in, or paying any dividends to, any person unless both before and after any such loan, advance, investment or dividend there exists no actual event of default, potential event of default or termination event;

● removing an independent director on the board of directors except for cause or with the consent of the lender; or

● making payment on or issuing any subsidiary secured notes or debentures, or amending any agreements respecting such notes or debentures, if an event of default, potential event of default or termination event exists or would arise from any such action.

In addition, the Company has agreed to maintain (i) a positive consolidated net income on a non-GAAP basis (as defined and calculated under the Agreement) for each complete fiscal year and (ii) a tangible net worth on a non-GAAP basis (again, as defined and calculated under the Agreement) of not less than $45 million, and (iii) maintain cash and eligible investments at $15 million or above.

Consolidated tangible net worth and net income as of and for the four quarters ended June 30, 2015, as calculated on non-GAAP basis under the agreement, was $101,427,000 and $44,503,000, respectively.

Advances under the Agreement are subject to a borrowing base formula, which limits the availability of advances on the borrowing base calculation based on attributes of policies pledged to the facility. Over-concentration of policies by insurance carrier, over-concentration of policies by insurance carriers with ratings below a AA- rating, and the premiums and facility fees reserve are the three primary factors with the potential of limiting availability of funds on the facility. Total funds available for additional borrowings under the borrowing base formula criteria at June 30, 2015 and December 31, 2014, were $33,409,000 and $20,585,000 respectively.

On July 15, 2008, Holdings delivered a performance guaranty in favor of Autobahn pursuant to which it guaranteed the obligations of GWG Life, in its capacity as the seller and master servicer, under the Credit and Security Agreement and related documents. On January 29, 2014 and in connection with the Amended and Restated Credit and Security Agreement, Holdings delivered a reaffirmation of its performance guaranty. The obligations of Holdings under the performance guaranty and subsequent reaffirmation do not extend to the principal and interest owed by DLP II and DLP III as the borrower under the credit facility.

XML

Subsequent Events

6 Months Ended

Jun. 30, 2015

Subsequent Events [Abstract]

Subsequent events

(17) Subsequent events

Subsequent to June 30, 2015, the Company has issued approximately an additional $11.1 million in principal amount of L Bonds.

XML

Commitments

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies [Abstract]

Commitments

(13) Commitments

The Company entered into an office lease with U.S. Bank National Association as the landlord. The lease was effective April 22, 2012 with a term through August 31, 2015. The lease is for 11,695 square feet of office space located at 220 South Sixth Street, Minneapolis, Minnesota. The Company is obligated to pay base rent plus common area maintenance and a share of the building operating costs. Rent expenses under this agreement were $122,000 and $101,000 during the six-month periods ended June 30, 2015 and 2014, respectively, and $55,000 and $49,000 during the three-month periods ended June 30, 2015 and 2014, respectively. The minimum lease payments for 2015 under the lease agreement are $70,000.

XML

Income Taxes

6 Months Ended

Jun. 30, 2015

Income Taxes [Abstract]

Income taxes

(9) Income taxes

The Company has a $181,000 and $0 of current income tax liability as of June 30, 2015 and December 31, 2014. The components of current and deferred income tax expense (benefit) for the three and six months ended June 30, 2015 and income tax benefit for the three month ended June 30, 2014, consisted of the following:

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,		June 30,
	2015			2014			2015		2014
Income tax provision (benefit):
Current:
Federal	$	(182,000	)	$	-		$	141,000	$	-
State	$	(64,000	)	$	-		$	40,000	$	-
Total current tax expense (benefit)		(246,000	)		-			181,000		-
Deferred:
Federal	$	(670,000	)	$	(1,106,000	)	$	984,000	$	(1,909,000	)
State	$	(261,000	)	$	(211,000	)	$	268,000	$	(363,000	)
Total deferred tax expense (benefit)		(931,000	)		(1,317,000	)		1,252,000		(2,272,000	)
Total income tax expense (benefit)		(1,177,000	)		(1,317,000	)		1,433,000		(2,272,000	)

The primary differences between the Company’s June 30, 2015 effective tax rate and the statutory federal rate are the accrual of nondeductible preferred stock dividend expense of $514,000 state taxes, and other non-deductible expenses. The most significant temporary differences between GAAP net income and taxable net income are the treatment of interest costs with respect to the acquisition of the life insurance policies and revenue recognition with respect to the mark-to-market of life insurance portfolio.

XML

Guarantees of Secured Debt (Details Textual) - USD ($)	6 Months Ended
	Jun. 30, 2015	Jan. 09, 2015
Guarantees of L Bonds (Textual)
Debentures offer for sale	$ 251,038,000
Maximum rate of return on equity fund amount	18.00%
Guarantees of L Bonds [Member]
Guarantees of L Bonds (Textual)
Debentures offer for sale	$ 250,000,000	$ 1,000,000,000

XML

L Bonds (Formerly Renewable Secured Debentures)

6 Months Ended

Jun. 30, 2015

Credit Facilities / Series I Secured Notes / L Bonds (formerly Renewable Secured Debentures) [Abstract]

L Bonds (formerly Renewable Secured Debentures)

(7) L Bonds (formerly Renewable Secured Debentures)

The Company registered with the SEC, effective January of 2012, the offer and sale of $250,000,000 of Renewable Secured Debentures (subsequently renamed “L Bonds”). The debentures are secured by assets of GWG Holdings and GWG Life and are subordinate to our revolving credit facility (see note 5). L Bonds have maturity dates ranging from six months to seven years with fixed interest rates varying from 4.25% to 9.50% depending on the term of the note. Interest is payable monthly, annually or at maturity depending on the terms of the debenture. Effective January 9, 2015, The Company launched a $1 billion follow-on to our publicly registered L Bond offering. The Company is offering L Bonds on a continuous basis and there is no minimum amount of L Bonds that must be sold before The Company can use proceeds from the sale of L Bonds. The Company plans to use the net proceeds from the offering of the L Bonds primarily to purchase and finance additional life insurance assets, and to service and retire other outstanding debt obligations. Emerson Equity LLC is serving as the managing broker-dealer for the offering, which is being sold through a network of participating dealers and licensed financial advisors and representatives in minimum increments of $25,000. At June 30, 2015 and December 31, 2014, the weighted-average interest rate of L Bonds was 7.27% and 7.45%, respectively. The amount outstanding under these L Bonds was $226,310,000 and $186,377,000 at June 30, 2015 and December 31, 2014, respectively. The difference between the amount outstanding on the L Bonds and the carrying amount on the consolidated balance sheets is due to netting of unamortized deferred issuance costs and cash receipts for new issuances in process. Amortization of deferred issuance costs was $1,366,000 and $2,340,000 for the three and six months ended June 30, 2015, respectively, and $908,000 and $1,755,000 for the three and six months ended June 30, 2014, respectively. Future expected amortization of deferred financing costs as of June 30, 2015 is $6,312,000 in total over the next seven years.

The use of proceeds from the issuances of L Bonds is limited to the following: (1) payment of commissions on sales of L Bonds, (2) payment of offering expenses, (3) purchase of life insurance policies, (4) payment of premiums on life insurance policies, (5) payment of principal and interest on L Bonds, (6) payment of portfolio operations expenses, and (7) general working capital.

Future contractual maturities of L Bonds and future amortization of their deferred financing costs at June 30, 2015 are as follows:

Years Ending December 31,	Contractual Maturities		Amortization of Deferred Financing Costs
Six months ending December 31 ,2015	$	48,082,000	$	243,000
2016		67,120,000		1,229,000
2017		43,051,000		1,520,000
2018		31,012,000		1,450,000
2019		14,342,000		612,000
Thereafter		22,703,000		1,258,000
	$	226,310,000	$	6,312,000

The Company entered into an Indenture effective October 19, 2011 with Holdings as obligor, GWG Life as guarantor, and Bank of Utah as trustee for the benefit of the debenture holders.  The Indenture has certain financial and nonfinancial covenants.  The Company was in compliance with these covenants at June 30, 2015 and December 31, 2014.

XML

Convertible, Redeemable Preferred Stock

6 Months Ended

Jun. 30, 2015

Convertible Redeemable Preferred Stock [Abstract]

Convertible, redeemable preferred stock

(8) Convertible, redeemable preferred stock

The Company offered 3,333,333 shares of convertible redeemable preferred stock (Series A Preferred Stock) for sale to accredited investors in a private placement on July 31, 2011. The offering of Series A Preferred Stock concluded on September 2, 2012 and resulted in 3,278,000 shares being issued for gross consideration of $24,582,000. As of June 30, 2015, 324,000 shares have been issued as a result of the payment of $2,271,000 in dividends in the form of shares of Series A Preferred Stock and 678,000 shares have been converted to 508,000 shares of the Company’s common stock. The Series A Preferred Stock was sold at an offering price of $7.50 per share. Series A Preferred Stock has a preferred yield of 10% per annum, and each share has the right to convert into 0.75 shares of the Company’s common stock. Series A preferred shareholders also received three-year warrants to purchase, at an exercise price per share of $12.50, one share of common stock for every 40 shares of Series A Preferred Stock purchased. The warrants are exercisable immediately. Upon their original issuance, these warrants had a three-year exercise period. Effective August 1, 2014, the Board of Directors authorized the extension of the warrant exercise period for an additional two years. In the Certificate of Designations for the Series A Preferred Stock dated July 31, 2011, the Company agreed to permit preferred shareholders to sell their shares back to the Company for the stated value of $7.50 per share, plus accrued dividends, according to the following schedule:

● Up to 33% of the holder’s unredeemed shares one year after issuance:

● Up to 66% of the holder’s unredeemed shares two years after issuance; and

● Up to 100% of the holder’s unredeemed shares three years after issuance.

The Company’s obligation to redeem its Series A Preferred Stock terminated upon the Company completing a registration of its common stock with the SEC which occurred on September 24, 2014 (See Note 10). As such, the convertible redeemable preferred stock was reclassified from temporary equity to permanent equity. The Company may redeem the Series A preferred shares at a price equal to 110% of their liquidation preference ($7.50 per share) at any time. As of June 30, 2015, the Company had redeemed an aggregate of 182,000 shares of Series A Preferred Stock.The Series A Preferred Stock shares (i) were convertible, at the election of the Company, into common stock of the Company in the event of either a registered offering of the Company’s common stock with the SEC aggregating gross proceeds of at least $5.0 million and at a price equal to or greater than $11.00 per share; (ii) remain convertible at the option of each holder; and (iii) are required to be converted upon the consent of shareholders holding at least a majority of the then-outstanding Series A Preferred Stock. In connection with the Company’s initial public offering, the Company elected to cause the conversion of 678,000 shares of preferred stock into 508,000 shares of common stock. As of June 30, 2015, the Company had 2,746,000 shares of Series A Preferred Stock outstanding with gross consideration of $20,560,000 (including cash proceeds, conversion of Series I Secured Notes and accrued interest on Series I, and conversion of preferred dividends payable). The Company incurred Series A Preferred Stock issuance costs of $2,838,000, all of which was included as a component of additional paid in capital as of December 31, 2014.

The Company determined that the grant date fair value of the outstanding warrants attached to the Series A Preferred Stock was $428,000 for warrants outstanding as of June 30, 2015. The Company may redeem outstanding warrants prior to their expiration, at a price of $0.01 per share upon 30 days written notice to the investors at any time after (i) the Company has completed a registration of its common stock with the SEC and (ii) the volume of weighted-average sale price per share of common stock equals or exceeds $14.00 per share for ten consecutive trading days ending on the third business day prior to proper notice of such redemption.

Total warrants outstanding as of both June 30, 2015 and December 31, 2014, were 431,954 with a weighted-average remaining life of 1.93 and 2.43 years, respectively. As of June 30, 2015, none of these warrants have been exercised.

Dividends on the Series A preferred stock may be paid in either cash or additional shares of Series A preferred stock at the election of the holder and approval of the Company. The dividends are reported as an expense and included in the caption interest expense in the consolidated statements of operations. The Company declared and accrued dividends of $495,000 and $638,000 during the three months ended June 30, 2015 and 2014, respectively, and $1,032,000 and $1,276,000 during the six months ended June 30, 2015 and 2014, respectively, pursuant to a board resolution declaring the dividend. 21,000 and 28,000 shares of Series A preferred stock were issued in lieu of cash dividends in the three month periods ended June 30, 2015 and 2014, and 48,000 and 54,000 shares of Series A preferred stock were issued in lieu of cash dividends in the six month periods ended June 30, 2015 and 2014, respectively. The shares issued in lieu of cash dividends were issued at $7.00 per share.  As of June 30, 2015, Holdings has $514,000 of accrued preferred dividends which were paid or converted to shares of Series A preferred stock on July 15, 2015.

XML

Common Stock

6 Months Ended

Jun. 30, 2015

Common Stock [Abstract]

Common Stock

(10) Common Stock

On September 24, 2014, GWG consummated an initial public offering of its common stock which resulted in the sale of 800,000 shares of common stock at $12.50 per share. The sale resulted in net proceeds of approximately $8.6 million after the deduction of underwriting commissions, discounts and expense reimbursements. In connection with this offering, the Company listed its common stock on The NASDAQ Capital Market under the ticker symbol “GWGH” effective September 25, 2014. The Company used the net proceeds from the offering to promote and advertise the opportunities for consumers owning life insurance and investors to profit from participating in the secondary market for life insurance policies, purchase additional life insurance policies in the secondary market, pay premiums on the Company’s life insurance policy assets, fund its portfolio operations, and for working capital purposes.

Stock split — On June 24, 2014, the Company’s Board of Directors and majority stockholders approved a joint resolution to effect an amendment to the Company’s Certificate of Incorporation in the state of Delaware whereby the company shall enact a reverse split of the common stock such that for every two (2) shares of common stock issued and outstanding immediately prior to the effective date shall, automatically and without any action on the part of the respective holders thereof, be combined and converted into one (1) share of common stock. The effective date of the amendment and reverse stock split is June 24, 2014. In lieu of fractional shares, stockholders received cash payments in an amount equal to the fraction to which the stockholder would otherwise be entitled multiplied by the price of the common stock, as determined by the Board of Directors of the Company, but adjusted so as to give effect to the reverse stock split. The par value of the common stock remained at $0.001 per share.

On June 23, 2015 GWG issued 60,000 shares of restricted common stock at $9.70 per share determined by closing market price, to a vendor as a form of payment for the services the vendor will provide to the Company in the next three years. The cost of the issued shares will be amortized over the next 12 months.

XML

Subsequent Events (Details) $ in Millions	6 Months Ended
	Jun. 30, 2015 USD ($)
Subsequent Events (Textual)
Additional principal amount of L bonds	$ 11.1

XML

Concentrations (Details Textual)	6 Months Ended
	Jun. 30, 2015
Concentration (Textual)
Description of issuance contracts with specific life insurance companies and contracts held in specific states	Exceeding 10% of the total face value

XML

Restrictions on Cash (Details) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Restrictions on Cash (Textual)
Restricted cash	$ 7,923,000	$ 4,296,000

XML

Income Taxes (Detail Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income Taxes (Textual)
Federal net operating loss carryforwards	$ 537,000		$ 537,000
Current income taxes	$ (246,000)		$ 181,000

XML

Guarantees of Secured Debt

6 Months Ended

Jun. 30, 2015

Guarantees of Secured Debt [Abstract]

Guarantees of secured debt

(15) Guarantees of secured debt

GWG Holdings has registered with the SEC the offer and sale $250,000,000 of L Bonds, and effective January 9, 2015, launched a $1 billion follow-on to its publicly registered L Bond offering as described in note 7. The L Bonds are secured by the assets of Holdings as described in note 7 and a pledge of all the common stock held by the largest individual shareholders. Obligations under the L Bonds are guaranteed by GWG Life. This guarantee involves the grant of a security interest in all the assets of GWG Life. The payment of principal and interest on the L Bonds is fully and unconditional guaranteed by GWG Life. Substantially all of the Company’s life insurance policies are held by DLP II, DLP III and the Trust. The policies held by DLP II are not collateral for the L Bond obligations as such policies serve as collateral for the credit facility.

The consolidating financial statements are presented in lieu of separate financial statements and other related disclosures of the subsidiary guarantors and issuer because management does not believe that separate financial statements and related disclosures would be material to investors. There are currently no significant restrictions on the ability of Holdings or GWG Life, the guarantor subsidiary, to obtain funds from its subsidiaries by dividend or loan, except as follows. DLP II and DLP III are borrowers under a credit agreement with Autobahn, with DZ Bank AG as agent, as described in note 5. The significant majority of insurance policies owned by the Company are subject to a collateral arrangement with DZ Bank AG described in notes 2 and 5. Under this arrangement, collection and escrow accounts are used to fund premiums of the insurance policies and to pay interest and other charges under the revolving credit facility. DZ Bank AG and Autobahn must authorize all disbursements from these accounts, including any distributions to GWG Life. Distributions are limited to an amount that would result in the borrowers (DLP II, DLP III, GWG Life and Holdings) realizing an annualized rate of return on the equity funded amount for such assets of not more than 18%, as determined by DZ Bank AG. After such amount is reached, the credit agreement requires that excess funds be used for repayments of borrowings before any additional distributions may be made.

The following represents consolidating financial information as of June 30, 2015 and December 31, 2014, with respect to the financial position, and for the three and six months ended June 30, 2015 and 2014 with respect to results of operations and cash flows of Holdings and its subsidiaries. The parent column presents the financial information of Holdings, the primary obligor of the L Bonds. The guarantor subsidiary column presents the financial information of GWG Life, the guarantor subsidiary of the L Bonds, presenting its investment in DLP II, DLP III and Trust under the equity method. The non-guarantor subsidiaries column presents the financial information of all non-guarantor subsidiaries including DLP II, DLP III and Trust.

Condensed Consolidating Balance Sheets

June 30, 2015	Parent			Guarantor Sub		Non-Guarantor Sub		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	37,814,528		$	233,553	$	150,108	$	-		$	38,198,189
Restricted cash		-			185,000		7,738,190		-			7,923,190
Policy benefits receivable		-			-		2,500,000		-			2,500,000
Investment in life settlements, at fair value		-			-		301,498,527		-			301,498,527
Other assets		2,688,215			1,730,651		2,204,695		-			6,623,561
Investment in subsidiaries		222,479,390			248,566,916		-		(471,046,306	)		-
TOTAL ASSETS	$	262,982,133		$	250,716,120	$	314,091,520	$	(471,046,306	)	$	356,743,467
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Revolving credit facility	$	-		$	-	$	65,011,048	$	-		$	65,011,048
Series I Secured notes		-			24,347,531		-		-			24,347,531
L Bonds		223,118,514			-		-		-			223,118,514
Interest payable		7,967,900			3,374,563		250,757		-			11,593,220
Accounts payable and other accrued expenses		1,294,444			664,744		112,691		-			2,071,879
Deferred taxes, net		6,525,336			-		-		-			6,525,336
TOTAL LIABILITIES		238,906,194			28,386,838		65,374,496		-			332,667,528
STOCKHOLDERS’ EQUITY (DEFICIT)
Member capital		-			222,329,282		248,717,024		(471,046,306	)		-
Convertible preferred stock		20,559,823										20,559,823
Common stock		5,933			-		-		-			5,933
Additional paid-in capital		16,900,193			-		-		-			16,900,193
Accumulated deficit		(13,390,010	)		-		-		-			(13,390,010	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		24,075,939			222,329,282		248,717,024		(471,046,306	)		24,075,939
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	262,982,133		$	250,716,120	$	314,091,520	$	(471,046,306	)	$	356,743,467

December 31, 2014	Parent			Guarantor Subsidiary		Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	30,446,473		$	216,231	$	-	$	-		$	30,662,704
Restricted cash		-			82,500		4,213,553		-			4,296,053
Policy benefits receivable		-			-		1,750,000		-			1,750,000
Investment in life settlements, at fair value		-			-		282,883,010		-			282,883,010
Other assets		1,673,728			1,777,534		27,500		-			3,478,762
Investment in subsidiaries		185,636,417			215,124,779		-		(400,761,196	)		-
TOTAL ASSETS	$	217,756,618		$	217,201,044	$	288,874,063	$	(400,761,196	)	$	323,070,529
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Revolving credit facility	$	-		$	-	$	72,161,048	$	-		$	72,161,048
Series I Secured notes		-			27,616,578		-		-			27,616,578
L Bonds		182,782,884			-		-		-			182,782,884
Interest payable		6,598,250			3,513,615		1,016,654		-			11,128,519
Accounts payable and other accrued expenses		711,993			434,433		571,583		-			1,718,009
Deferred taxes, net		5,273,555			-		-		-			5,273,555
TOTAL LIABILITIES		195,366,682			31,564,626		73,749,285		-			300,680,593
STOCKHOLDERS’ EQUITY (DEFICIT)
Member capital		-			185,636,418		215,124,778		(400,761,196	)		-
Convertible preferred stock		20,527,866			-		-		-			20,527,866
Common stock		5,870			-		-		-			5,870
Additional paid-in capital		16,257,686			-		-		-			16,257,686
Accumulated deficit		(14,401,486	)		-		-		-			(14,401,486	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		22,389,936			185,636,418		215,124,778		(400,761,196	)		22,389,936
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	217,756,618		$	217,201,044	$	288,874,063	$	(400,761,196	)	$	323,070,529

Condensed Consolidating Statements of Operations

For the six months ended June 30, 2015	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Origination and servicing income	$	-		$	1,018,750		$	-	$	(1,018,750	)	$	-
Gain on life settlements, net		-			-			25,257,295		-			25,257,295
Interest and other income		25,023			6,880			107,773		-			139,676
TOTAL REVENUE		25,023			1,025,630			25,365,068		(1,018,750	)		25,396,971
EXPENSES
Origination and servicing fees		-			-			1,018,750		(1,018,750	)		-
Employee compensation and benefits		2,911,596			961,046			-		-			3,872,642
Legal and professional fees		828,858			337,326			-		-			1,166,184
Interest expense		11,031,758			1,458,965			2,008,158		-			14,498,881
Other expenses		2,056,188			1,302,036			56,836		-			3,415,060
TOTAL EXPENSES		16,828,400			4,059,373			3,083,744		(1,018,750	)		22,952,767
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(16,803,377	)		(3,033,743	)		22,281,324		-			2,444,204
EQUITY IN INCOME OF SUBSIDIARY		19,247,581			22,281,217			-		(41,528,798	)		-
NET INCOME BEFORE INCOME TAXES		2,444,204			19,247,474			22,281,324		(41,528,798	)		2,444,204
INCOME TAX EXPENSE		1,432,728			-			-		-			1,432,728
NET LOSS	$	1,011,476		$	19,247,474		$	22,281,324	$	(41,528,798	)	$	1,011,476

For the six months ended June 30, 2014	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Origination and servicing income	$	-		$	1,308,906		$	-	$	(1,308,906	)	$	-
Gain on life settlements, net		-			-			11,001,094		-			11,001,094
Interest and other income		12,929			169,976			63		(169,221	)		13,747
TOTAL REVENUE		12,929			1,478,882			11,001,157		(1,478,127	)		11,014,841
EXPENSES
Origination and servicing fees		-			-			1,308,906		(1,308,906	)		-
Employee compensation and benefits		1,255,079			892,485			-		-			2,147,564
Legal and professional fees		723,106			103,233			-		-			826,339
Interest expense		8,691,989			1,572,269			2,670,333		-			12,934,591
Other expenses		1,106,635			734,138			194,232		(169,221	)		1,865,784
TOTAL EXPENSES		11,776,809			3,302,125			4,173,471		(1,478,127	)		17,774,278
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(11,763,880	)		(1,823,243	)		6,827,686		-			(6,759,437	)
EQUITY IN INCOME OF SUBSIDIARY		5,004,443			6,827,686			-		(11,832,129	)		-
NET INCOME BEFORE INCOME TAXES		(6,759,437	)		5,004,443			6,827,686		(11,832,129	)		(6,759,437	)
INCOME TAX BENEFIT		(2,271,570	)		-			-		-			(2,271,570	)
NET LOSS	$	(4,487,867	)	$	5,004,443		$	6,827,686	$	(11,832,129	)	$	(4,487,867	)

For the three months ended June 30, 2015	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Origination and servicing income	$	-		$	661,264		$	-	$	(661,264	)	$	-
Gain on life settlements, net		-			-			8,473,886		-			8,473,886
Interest and other income		17,480			430			72,470		-			90,380
TOTAL REVENUE		17,480			661,694			8,546,356		(661,264	)		8,564,266
EXPENSES
Origination and servicing fees		-			-			661,264		(661,264	)		-
Employee compensation and benefits		1,605,795			538,930			-		-			2,144,725
Legal and professional fees		351,507			291,424			-		-			642,931
Interest expense		5,781,796			684,879			855,672		-			7,322,347
Other expenses		1,104,826			732,243			44,252		-			1,881,321
TOTAL EXPENSES		8,843,924			2,247,476			1,561,188		(661,264	)		11,991,324
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(8,826,444	)		(1,585,782	)		6,985,168		-			(3,427,058	)
EQUITY IN INCOME OF SUBSIDIARY		5,399,386			6,985,112			-		(12,384,498	)		-
NET INCOME BEFORE INCOME TAXES		(3,427,058	)		5,399,330			6,985,168		(12,384,498	)		(3,427,058	)
INCOME TAX BENEFIT		(1,176,643	)		-			-		-			(1,176,643	)
NET LOSS	$	(2,250,415	)	$	5,399,330		$	6,985,168	$	(12,384,498	)	$	(2,250,415	)

For the three months ended June 30, 2014	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Origination and servicing income	$	-		$	342,850		$	-	$	(342,850	)	$	-
Gain on life settlements, net		-			-			5,484,889		-			5,484,889
Interest and other income		6,000			362			18		-			6,380
TOTAL REVENUE		6,000			343,212			5,484,907		(342,850	)		5,491,269
EXPENSES
Origination and servicing fees		-			-			342,850		(342,850	)		-
Employee compensation and benefits		664,495			514,324			-		-			1,178,819
Legal and professional fees		375,243			44,094			-		-			419,337
Interest expense		4,475,461			793,702			1,338,880		-			6,608,043
Other expenses		767,096			408,883			12,500		-			1,188,479
TOTAL EXPENSES		6,282,295			1,761,003			1,694,230		(342,850	)		9,394,678
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(6,276,295	)		(1,417,791	)		3,790,667		-			(3,903,409	)
EQUITY IN INCOME OF SUBSIDIARY		2,372,886			3,790,667			-		(6,163,563	)		-
NET INCOME BEFORE INCOME TAXES		(3,903,409	)		2,372,886			3,790,667		(6,163,563	)		(3,903,409	)
INCOME TAX BENEFIT		(1,316,712	)		-			-		-			(1,316,712	)
NET LOSS	$	(2,586,697	)	$	2,372,886		$	3,790,667	$	(6,163,563	)	$	(2,586,697	)

Condensed Consolidating Statements of Cash Flows

For the six months ended June 30, 2015	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,011,476		$	19,247,474		$	22,281,324		$	(41,528,798	)	$	1,011,476
Adjustments to reconcile net income to net cash flows from operating activities:
(Equity) of subsidiaries		(19,247,582	)		(22,281,216	)		-			41,528,798			-
Gain on life settlements		-			-			(12,134,482	)		-			(12,134,482	)
Amortization of deferred financing and issuance costs		1,729,175			211,116			(1,982,295	)		-			(42,004	)
Deferred income taxes		1,251,781			-			-			-			1,251,781
Convertible, redeemable preferred stock issued for dividends		335,232			-			-			-			335,232
(Increase) in operating assets:
Policy benefits receivable		-			-			(750,000	)					(750,000	)
Other assets		(17,998,823	)		(11,114,039	)		-			28,756,313			(356,549	)
Increase in operating liabilities:
Accounts payable and accrued expenses		2,493,495			228,640			(1,419,689	)		-			1,302,446
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(30,425,246	)		(13,708,025	)		(5,994,858	)		28,756,313			(9,382,100	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(10,224,018	)		-			(10,224,018	)
Proceeds from settlement of life settlements		-			-			3,742,983			-			3,742,983
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(6,481,035	)		-			(6,481,035	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of revolving credit facility		-			-			(7,150,000	)		-			(7,150,000	)
Payments for redemption of Series I Secured notes		-			(3,617,544	)		-			-			(3,617,544	)
Proceeds from issuance of L Bonds		50,498,356			-			-			-			50,498,356
Payments for redemption and issuance of L Bonds		(13,013,057	)		-			-			-			(13,013,057	)
Proceeds from restricted cash		-			(102,500	)		(3,524,637	)		-			(3,627,137	)
Issuance of common stock		582,000			-			-			-			582,000
Redemptions of convertible, redeemable preferred stock		(273,998	)		-			-			-			(273,998	)
Issuance of member capital		-			17,445,391			11,310,922			(28,756,313	)		-
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		37,793,301			13,725,347			636,285			(28,756,313	)		23,398,620
NET INCREASE IN CASH AND CASH EQUIVALENTS		7,368,055			17,322			150,108			-			7,535,485
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		30,446,473			216,231			-			-			30,662,704
END OF THE PERIOD	$	37,814,528		$	233,553		$	150,108		$	-		$	38,198,189

For the six months ended June 30, 2014	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(4,487,867	)	$	5,004,443		$	6,827,686		$	(11,832,129	)	$	(4,487,867	)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
(Equity) of subsidiaries		(5,004,443	)		(6,827,686	)		-			11,832,129			-
Life settlements – change in fair value		-			-			(22,211,338	)		-			(22,211,338	)
Amortization of deferred financing and issuance costs		1,727,610			301,104			(321,050	)					1,707,664
Deferred income taxes		(2,271,570	)		-			-						(2,271,570	)
Convertible, redeemable preferred stock dividends payable		389,331			-			-			-			389,331
(Increase) in operating assets:
Policy benefits receivable		-			-			(300,000	)		-			(300,000	)
Other assets		(26,622,350	)		(24,654,818	)		-			50,328,249			(948,919	)
Increase in operating liabilities:
Accounts payable and accrued expenses		1,971,543			302,402			894,218			-			3,168,163
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(34,297,746	)		(25,874,555	)		(15,110,484	)		50,328,249			(24,954,536	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(10,879,435	)		-			(10,879,435	)
Proceeds from settlement of life settlements		-			-			68,500			-			68,500
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(10,810,935	)		-			(10,810,935	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for redemption of Series I Secured notes		-			(1,538,924	)		-			-			(1,538,924	)
Proceeds from issuance of L Bonds		33,234,487			-			-			-			33,234,487
Payments for redemption and issuance of L Bonds		(9,322,411	)		-			-			-			(9,322,411	)
Proceeds from restricted cash		-			855,000			2,167,537			-			3,022,537
Redemptions of convertible, redeemable preferred stock		(20,056	)		-			-			-			(20,056	)
Issuance of member capital		-			26,574,367			23,753,882			(50,328,249	)		-
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		23,892,020			25,890,443			25,921,419			(50,328,249	)		25,375,633
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(10,405,723	)		15,888			-			-			(10,389,838	)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		32,711,636			738,157			-			-			33,449,793
END OF THE PERIOD	$	22,305,910		$	754,045		$	-		$	-		$	23,059,955

For the three months ended June 30, 2015	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(2,250,415	)	$	5,399,330		$	6,985,168		$	(12,384,498	)	$	(2,250,415	)
Adjustments to reconcile net loss to net cash flows from operating activities:
(Equity) of subsidiaries		(5,399,386	)		(6,985,112	)		-			12,384,498			-
Gain on life settlements		-			-			(14,028,327	)		-			(14,028,327	)
Amortization of deferred financing and issuance costs		1,685,700			80,928			(1,259,602	)		-			507,026
Deferred income taxes		(930,470	)		-			-			-			(930,470	)
Convertible, redeemable preferred stock dividends payable		146,420			-			-			-			146,420
(Increase) in operating assets:
Policy benefits receivable		-			-			17,140,000			-			17,140,000
Other assets		(7,124,387	)		(5,236,604	)		-			12,135,615			(225,376	)
Increase (decrease) in operating liabilities:
Accounts payable and other accrued expenses		213,843			(509,444	)		(1,037,640	)		-			(1,333,241	)
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(13,658,695	)		(7,250,902	)		7,799,599			12,135,615			(974,383	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(7,777,541	)		-			(7,777,541	)
Proceeds from settlement of life settlements		-			-			132,388			-			132,388
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(7,645,153	)		-			(7,645,153	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of revolving credit facility		-			-			(7,150,000	)					(7,150,000	)
Payments for redemption of Series I Secured notes		-			(2,344,355	)		-			-			(2,344,355	)
Proceeds from issuance of L Bonds		22,538,059			-			-			-			22,538,059
Payments for redemption and issuance of L Bonds		(6,134,935	)		-			-			-			(6,134,935	)
Proceeds from restricted cash		-			1,677,500			1,732,927			-			3,410,427
Issuance of member capital		-			6,872,932			5,262,683			(12,135,615	)		-
Issuance of common stock		582,000			-			-			-			582,000
Redemptions of convertible, redeemable preferred stock		(273,998	)		-			-			-			(273,998	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		16,711,126			6,206,077			(154,390	)		(12,135,615	)		10,627,198
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		3,052,431			(1,044,825	)		56			-			2,007,662
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		34,762,097			1,278,378			150,052			-			36,190,527
END OF THE PERIOD	$	37,814,528		$	233,553		$	150,108		$	-		$	38,198,189

For the three months ended June 30, 2014	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(2,586,697	)	$	2,372,886		$	3,790,677		$	(6,163,563	)	$	(2,586,697	)
Adjustments to reconcile net loss to cash:
(Equity) of subsidiaries		(2,372,886	)		(3,790,677	)		-			6,163,563			-
Gain on life settlements		-			-			(10,852,425	)		-			(10,852,425	)
Amortization of deferred financing and issuance costs		880,374			134,158			339,475			-			1,354,007
Deferred income taxes		(1,316,712	)		-			-			-			(1,316,712	)
Convertible, redeemable preferred stock dividends payable		196,991			-			-			-			196,991
(Increase) in operating assets:
Policy benefits receivable		-			-			(300,000	)		-			(300,000	)
Other assets		(10,674,637	)		(9,406,461	)		-			19,384,025			(697,073	)
Increase in operating liabilities:
Accounts payable and accrued expenses		1,257,758			72,959			559,620			-			1,890,337
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(14,615,809	)		(10,617,135	)		(6,462,653	)		19,384,025			(12,311,572	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(2,608,232	)		-			(2,608,232	)
Proceeds from settlement of life settlements		-			-			68,500			-			68,500
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(2,539,732	)		-			(2,539,732	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for redemption of Series I Secured notes		-			(670,621	)		-			-			(670,621	)
Proceeds from issuance of L Bonds		14,868,830			-			-			-			14,868,830
Payments for redemption and issuance of L Bonds		(4,393,523	)		-			-			-			(4,393,523	)
Proceeds from restricted cash		-			(215,000	)		258,330			-			43,330
Issuance of member capital		-			10,639,970			8,744,055			(19,384,025	)		-
Redemptions of convertible, redeemable preferred stock		(20,056	)		-			-			-			(20,056	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		10,455,251			9,754,349			9,002,385			(19,384,025	)		9,827,960
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(4,160,558	)		(862,786	)		-			-			(5,023,344	)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		26,466,468			1,616,831			-			-			28,083,299
END OF THE PERIOD	$	22,305,910		$	754,045		$	-		$	-		$	23,059,955

XML

Fair Value Definition and Hierarchy (Tables)

6 Months Ended

Jun. 30, 2015

Fair Value Definition and Hierarchy [Abstract]

Reconciliation of investments in life insurance policies

	Three month ended June 30,						Six months ended June 30,
	2015			2014			2015			2014
Beginning balance	$	278,395,000		$	254,504,000		$	282,883,000		$	234,673,000
Purchases		9,208,000			2,608,000			10,225,000			11,080,000
Maturities (cash in excess of carrying value)		(132,000	)		(68,000	)		(3,743,000	)		(68,000	)
Net change in fair value		14,028,000			10,852,000			12,134,000			22,211,000
Ending balance (June 30)	$	301,499,000		$	267,896,000		$	301,499,000		$	267,896,000

Summary of inputs utilized in estimating the fair value

	As of June 30, 2015			As of December 31, 2014
Weighted average age of insured		82.9			82.8
Weighted average life expectancy, months*		78.7			78.4
Average face amount per policy	$	2,568,000		$	2,677,000
Discount rate		11.19	%		11.43	%

* Standard life expectancy as adjusted for insured’s specific circumstances.

Fair value sensitivity analysis on the investment in life insurance policies

	Change in life expectancy estimates
	minus 8 months		minus  4 months		plus  4 months			plus  8 months
June 30, 2015	$	41,402,000	$	20,590,000	$	(20,105,000	)	$	(39,752,000	)
December 31, 2014	$	40,634,000	$	20,130,000	$	(19,664,000	)	$	(38,864,000	)

	Change in discount rate
	minus 2%		minus 1%		plus 1%			plus 2%
June 30, 2015	$	29,494,000	$	14,144,000	$	(13,061,000	)	$	(25,148,000	)
December 31, 2014	$	28,179,000	$	13,522,000	$	(12,502,000	)	$	(24,085,000	)

Warrants Level 3 instruments and measured at fair value upon issuance

Month issued	Warrants issued		Fair value per share		Risk free rate			Volatility			Term
December 2011		68,937	$	0.22		0.42	%		25.25	%	5 years
March 2012		38,130	$	0.52		0.38	%		36.20	%	5 years
June 2012		161,840	$	1.16		0.41	%		47.36	%	5 years
July 2012		144,547	$	1.16		0.41	%		47.36	%	5 years
September 2012		2,500	$	0.72		0.31	%		40.49	%	5 years
September 2014		16,000	$	1.26		1.85	%		17.03	%	5 years
		431,954

XML

Convertible, Redeemable Preferred Stock (Details) - USD ($)		1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
	Sep. 02, 2012	Jul. 31, 2011	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Convertible Preferred Stock (Textual)
Exercise price of warrants					$ 12.50
Exercise period					3 years
Maturity period of warrant					3 years
Conversion of Series A preferred stock into common stock, description					One share of common stock for every 40 shares of Series A Preferred Stock purchased.
Preferred stock redemption terms					The Company may redeem the Series A preferred shares at a price equal to 110% of their liquidation preference ($7.50 per share) at any time.
Preferred stock, liquidation preference per share			$ 7.50		$ 7.50
Redemption price of preferred shares			$ 7.50		$ 7.50
Series A preferred stock outstanding			2,746,000		2,746,000
Gross consideration from convertible preferred stock					$ 20,560,000
Series A preferred stock issuance costs							$ 2,838,000
Warrant outstanding			$ 431,954		$ 431,954		$ 431,954
Weighted average remaining life of warrants outstanding					1 year 11 months 5 days		2 years 5 months 5 days
Accrued preferred dividend			514,000		$ 514,000
Percentage of unredeemed shares redeemed one year after issuance					33.00%
Percentage of unredeemed shares redeemed two year after issuance					66.00%
Percentage of unredeemed shares redeemed three year after issuance					100.00%
Redeemed shares of Series A preferred stock					182,000
Minimum gross proceeds from common stock offering					$ 5,000,000
Maximum offering price of common stock					$ 11.00
Fair value of outstanding warrants attached to Series A preferred stock					$ 428,000
Term of redemption of warrants prior to expiration					The Company may redeem outstanding warrants prior to their expiration, at a price of $0.01 per share upon 30 days written notice to the investors at any time after (i) the Company has completed a registration of its common stock with the SEC and (ii) the volume of weighted-average sale price per share of common stock equals or exceeds $14.00 per share for ten consecutive trading days ending on the third business day prior to proper notice of such redemption.
Declared and accrued dividends			$ 495,000	$ 638,000	$ 1,032,000	$ 1,276,000
Preferred stock issued in lieu of cash dividend			21,000	28,000	48,000	54,000
Cash dividend rate, per share					$ 7
Initial public offering [Member]
Convertible Preferred Stock (Textual)
Convertible preferred stock, shares issued upon conversion			678,000		678,000
Conversion of stock, shares converted into common stock					508,000
Series A 10 % convertible Preferred Stock [Member]
Convertible Preferred Stock (Textual)
Company offering shares of convertible redeemable preferred stock		3,333,333
Series A preferred stock shares sold for cash	3,278,000
Consideration received on sale of Series A preferred stock	$ 24,582,000
Series A preferred stock shares issued in conversion of dividends					324,000
Series A preferred stock value issued in conversion of dividends					$ 2,271,000
Offering price of series A preferred stock			$ 7.50		$ 7.50
Series A preferred stock, Dividend rate					10.00%
Conversion term for series A preferred stock					Each share has the right to convert into 0.75 shares of the Company's common stock.
Convertible preferred stock, shares issued upon conversion			678,000		678,000
Conversion of stock, shares converted into common stock					508,000

XML

Fair Value Definition and Hierarchy (Details 2) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Plus 8 months [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life policies	$ (20,105,000)	$ (19,664,000)
Minus 8 months [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life policies	41,402,000	40,634,000
Plus 4 Months [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life policies	(39,752,000)	(38,864,000)
Minus 4 Months [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life policies	20,590,000	20,130,000
Plus 2% [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life policies	(25,148,000)	(24,085,000)
Minus 2% [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life policies	29,494,000	28,179,000
Plus 1% [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life policies	(13,061,000)	(12,502,000)
Minus 1% [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life policies	$ 14,144,000	$ 13,522,000

XML

Condensed Consolidated Statement of Cash Flows - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$ (2,250,415)	$ (2,586,697)	$ 1,011,476	$ (4,487,867)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Gain on life settlements	(14,028,327)	(10,852,425)	(12,134,482)	(22,211,338)
Amortization of deferred financing and issuance costs	507,026	1,354,007	(42,004)	1,707,664
Deferred income taxes	(930,470)	(1,316,712)	1,251,781	(2,271,570)
Convertible, redeemable preferred stock dividends payable	146,420	196,991	335,232	389,331
(Increase) decrease in operating assets:
Policy benefits receivable	17,140,000	(300,000)	(750,000)	(300,000)
Other assets	(225,376)	(697,073)	(356,549)	(948,919)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses	(1,333,241)	1,890,337	1,302,446	3,168,163
NET CASH FLOWS USED IN OPERATING ACTIVITIES	(974,383)	(12,311,572)	(9,382,100)	(24,954,536)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements	(7,777,541)	(2,608,232)	(10,224,018)	(10,879,435)
Proceeds from settlement of life settlements	132,388	68,500	3,742,983	68,500
NET CASH FLOWS USED IN INVESTING ACTIVITIES	(7,645,153)	$ (2,539,732)	(6,481,035)	$ (10,810,935)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of revolving credit facility	(7,150,000)		(7,150,000)
Payments for redemption of Series I Secured notes	(2,344,355)	$ (670,621)	(3,617,544)	$ (1,538,924)
Proceeds from issuance of L Bonds	22,538,059	14,868,830	50,498,356	33,234,487
Payments for redemption and issuance of L Bonds	(6,134,935)	(4,393,523)	(13,013,057)	(9,322,411)
Proceeds from restricted cash	3,410,427	$ 43,330	(3,627,137)	$ 3,022,537
Issuance of common stock	582,000		582,000
Redemptions of convertible, redeemable preferred stock	(273,998)	$ (20,056)	(273,998)	$ (20,056)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES	10,627,198	9,827,960	23,398,620	25,375,633
NET INCREASE IN CASH AND CASH EQUIVALENTS	2,007,662	(5,023,344)	7,535,485	(10,389,838)
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD	36,190,527	28,083,299	30,662,704	33,449,793
END OF PERIOD	38,198,189	23,059,955	38,198,189	23,059,955
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	7,041,000	3,531,000	13,143,000	7,781,000
Series I Secured notes:
Non-cash conversion of accrued interest and commissions payable to principal	86,000	40,000	127,000	105,000
L Bonds:
Non-cash conversion of accrued interest and commission payable to principal	219,000	162,000	438,000	282,000
Convertible, redeemable preferred stock
Non-cash conversion of dividends payable	$ 150,000	193,000	$ 334,000	380,000
Non-cash accretion of convertible, redeemable preferred stock to redemption value		101,000		227,000
Investment in life settlements included in accounts payable	$ 61,000	$ 75,000	$ 61,000	$ 75,000

XML

Fair Value Definition and Hierarchy

6 Months Ended

Jun. 30, 2015

Fair Value Definition and Hierarchy [Abstract]

Fair value definition and hierarchy

(4) Fair value definition and hierarchy

ASC 820 establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring assets and liabilities at fair value. Market price observability is affected by a number of factors, including the type of investment, the characteristics specific to the investment and the state of the marketplace including the existence and transparency of transactions between market participants. Assets and liabilities with readily available active quoted prices or for which fair value can be measured from actively quoted prices in an orderly market generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. ASC 820 establishes a three-level valuation hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

The hierarchy is broken down into three levels based on the observability of inputs as follows:

● Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

● Level 2 - Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

● Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The availability of observable inputs can vary by types of assets and liabilities and is affected by a wide variety of factors, including, for example, whether instrument is established in the marketplace, the liquidity of markets and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by management in determining fair value is greatest for assets and liabilities categorized in Level 3.

Level 3 Valuation Process

The estimated fair value of the Company’s life settlements are determined on a quarterly basis by the Company’s portfolio management committee, taking into consideration changes in discount rate assumptions, estimated premium payments and life expectancy assumptions, as well as any changes in economic and other relevant conditions. These inputs are then used to estimate the discounted cash flows using the MAPS probabilistic portfolio pricing model, which estimates the cash flows using various different probabilities and scenarios. The valuation process includes a review by senior management as of each valuation date. Management also engages a third party expert to independently test the accuracy of the valuations using the inputs provided by management.

Life insurance policies represent financial instruments recorded at fair value on a recurring basis. The following table reconciles the beginning and ending fair value of the Company’s Level 3 investments in life insurance policies for the three and six-month periods ending June 30, as follows:

	Three month ended June 30,						Six months ended June 30,
	2015			2014			2015			2014
Beginning balance	$	278,395,000		$	254,504,000		$	282,883,000		$	234,673,000
Purchases		9,208,000			2,608,000			10,225,000			11,080,000
Maturities (cash in excess of carrying value)		(132,000	)		(68,000	)		(3,743,000	)		(68,000	)
Net change in fair value		14,028,000			10,852,000			12,134,000			22,211,000
Ending balance (June 30)	$	301,499,000		$	267,896,000		$	301,499,000		$	267,896,000

The fair value of a portfolio of life insurance policies is based on information available to the Company at the reporting date. Fair value is based upon a discounted cash flow model that incorporates life expectancy estimate assumptions. Life expectancy estimates are obtained from independent, third-party, widely accepted life expectancy estimate providers at policy acquisition. The life expectancy values of each insured, as determined at policy acquisition, are rolled down monthly for the passage of time by the MAPS actuarial software the Company uses for ongoing valuation of its portfolio of life insurance policies. The discount rate incorporates current information about discount rates applied by other reporting companies owning portfolios of life insurance policies, discount rates observed in the life insurance secondary market, market interest rates, the credit exposure to the insurance company that issued the life insurance policy and management’s estimate of the risk premium a purchaser would require to receive the future cash flows derived from our portfolio of life insurance policies.

On September 15, 2014, 21st Services announced changes to its mortality tables primarily for insureds age 90 and older, as well as updated adjustment factors designed to better underwrite seniors with multiple impairments. These changes represent small portions of 21st Services’ historical underwritings. We expect medical-actuarial underwriting firms to continue improving and refining their underwriting methodology.

The fair value of life insurance policies is estimated using present value calculations of estimated cash flows based on the data specific to each individual life insurance policy. Estimated future policy premium payments are calculated based on the terms of the policy and the premium payment history. The following summarizes the unobservable inputs utilized in estimating the fair value of the portfolio of life insurance policies:

	As of June 30, 2015			As of December 31, 2014
Weighted average age of insured		82.9			82.8
Weighted average life expectancy, months*		78.7			78.4
Average face amount per policy	$	2,568,000		$	2,677,000
Discount rate		11.19	%		11.43	%

* Standard life expectancy as adjusted for insured’s specific circumstances.

These assumptions are, by their nature, inherently uncertain and the effect of changes in estimates may be significant. The techniques used in estimating the present value of estimated cash flows are derived from valuation techniques generally used in the industry that include inputs for the asset that are not based on observable market data. The extent to which the fair value could reasonably vary in the near term has been quantified by evaluating the effect of changes in significant underlying assumptions used to estimate the fair value. If the life expectancy estimates were increased or decreased by four and eight months on each outstanding policy and the discount factors were increased or decreased by 1% and 2%, while all other variables are held constant, the fair value of the investment in life insurance policies would increase or (decrease) by the amounts summarized below: 

	Change in life expectancy estimates
	minus 8 months		minus  4 months		plus  4 months			plus  8 months
June 30, 2015	$	41,402,000	$	20,590,000	$	(20,105,000	)	$	(39,752,000	)
December 31, 2014	$	40,634,000	$	20,130,000	$	(19,664,000	)	$	(38,864,000	)

	Change in discount rate
	minus 2%		minus 1%		plus 1%			plus 2%
June 30, 2015	$	29,494,000	$	14,144,000	$	(13,061,000	)	$	(25,148,000	)
December 31, 2014	$	28,179,000	$	13,522,000	$	(12,502,000	)	$	(24,085,000	)

Other Fair Value Considerations

Carrying value of receivables, prepaid expenses, accounts payable and accrued expenses approximate fair value due to their short-term maturities and low credit risk. The estimated fair value of the Company’s Series I Secured notes and L Bonds is approximately $253,263,000 based on a weighted average market interest rate of 7.08% based on an income approach, the combined face value of these notes is $251,038,000 as of June 30, 2015. The carrying value of the revolving credit facility reflects interest charged at the commercial paper rate plus an applicable margin. The margin represents our credit risk, and the strength of the portfolio of life insurance policies collateralizing the debt. The overall rate reflects market, and the carrying value of the revolver approximates fair value. All of the financial instruments are Level 3 fair value measurements.

The Company has issued warrants to purchase common stock in connection with the issuance of its convertible, redeemable preferred stock. Warrants were determined by the Company as permanent equity. The fair value measurements associated with the warrants, measured at issuance represent level 3 instruments.

As of June 30, 2015:

Month issued	Warrants issued		Fair value per share		Risk free rate			Volatility			Term
December 2011		68,937	$	0.22		0.42	%		25.25	%	5 years
March 2012		38,130	$	0.52		0.38	%		36.20	%	5 years
June 2012		161,840	$	1.16		0.41	%		47.36	%	5 years
July 2012		144,547	$	1.16		0.41	%		47.36	%	5 years
September 2012		2,500	$	0.72		0.31	%		40.49	%	5 years
September 2014		16,000	$	1.26		1.85	%		17.03	%	5 years
		431,954

Volatility is based upon the weekly percentage change in the stock price of selected comparable insurance companies. The percentage change is calculated on the average price of those selected stocks at the weekly close of business for the year preceding the balance sheet date. We compare annual volatility based on this weekly information.

XML

Guarantees of Secured Debt (Details 1) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
REVENUE
Origination and servicing income
Gain on life settlements, net	$ 8,473,886	$ 5,484,889	$ 25,257,295	$ 11,001,094
Interest and other income	90,380	6,380	139,676	13,747
TOTAL REVENUE	$ 8,564,266	$ 5,491,269	$ 25,396,971	$ 11,014,841
EXPENSES
Origination and servicing fees
Employee compensation and benefits	$ 2,144,725	$ 1,178,819	$ 3,872,642	$ 2,147,564
Legal and professional fees	642,931	419,337	1,166,184	826,339
Interest expense	7,322,347	6,608,043	14,498,881	12,934,591
Other expenses	1,881,321	1,188,479	3,415,060	1,865,784
TOTAL EXPENSES	11,991,324	9,394,678	22,952,767	17,774,278
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES	$ (3,427,058)	$ (3,903,409)	$ 2,444,204	$ (6,759,437)
EQUITY IN INCOME OF SUBSIDIARY
NET INCOME BEFORE INCOME TAXES	$ (3,427,058)	$ (3,903,409)	$ 2,444,204	$ (6,759,437)
INCOME TAX EXPENSE	(1,176,643)	(1,316,712)	1,432,728	(2,271,570)
NET LOSS	$ (2,250,415)	$ (2,586,697)	$ 1,011,476	$ (4,487,867)	$ (5,962,909)
Parent [Member]
REVENUE
Origination and servicing income
Gain on life settlements, net
Interest and other income	$ 17,480	$ 6,000	$ 25,023	$ 12,929
TOTAL REVENUE	$ 17,480	$ 6,000	$ 25,023	$ 12,929
EXPENSES
Origination and servicing fees
Employee compensation and benefits	$ 1,605,795	$ 664,495	$ 2,911,596	$ 1,255,079
Legal and professional fees	351,507	375,243	828,858	723,106
Interest expense	5,781,796	4,475,461	11,031,758	8,691,989
Other expenses	1,104,826	767,096	2,056,188	1,106,635
TOTAL EXPENSES	8,843,924	6,282,295	16,828,400	11,776,809
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES	(8,826,444)	(6,276,295)	(16,803,377)	(11,763,880)
EQUITY IN INCOME OF SUBSIDIARY	(5,399,386)	2,372,886	(19,247,582)	5,004,443
NET INCOME BEFORE INCOME TAXES	(3,427,058)	(3,903,409)	2,444,204	(6,759,437)
INCOME TAX EXPENSE	(1,176,643)	(1,316,712)	1,432,728	(2,271,570)
NET LOSS	(2,250,415)	(2,586,697)	1,011,476	(4,487,867)
Guarantor Sub [Member]
REVENUE
Origination and servicing income	$ 661,264	$ 342,850	$ 1,018,750	$ 1,308,906
Gain on life settlements, net
Interest and other income	$ 430	$ 362	$ 6,880	$ 169,976
TOTAL REVENUE	$ 661,694	$ 343,212	$ 1,025,630	$ 1,478,882
EXPENSES
Origination and servicing fees
Employee compensation and benefits	$ 538,930	$ 514,324	$ 961,046	$ 892,485
Legal and professional fees	291,424	44,094	337,326	103,233
Interest expense	684,879	793,702	1,458,965	1,572,269
Other expenses	732,243	408,883	1,302,036	734,138
TOTAL EXPENSES	2,247,476	1,761,003	4,059,373	3,302,125
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES	(1,585,782)	(1,417,791)	(3,033,743)	(1,823,243)
EQUITY IN INCOME OF SUBSIDIARY	(6,985,112)	3,790,677	(22,281,216)	6,827,686
NET INCOME BEFORE INCOME TAXES	$ 5,399,330	$ 2,372,886	$ 19,247,474	$ 5,004,443
INCOME TAX EXPENSE
NET LOSS	$ 5,399,330	$ 2,372,886	$ 19,247,474	$ 5,004,443
Non-Guarantor Sub [Member]
REVENUE
Origination and servicing income
Gain on life settlements, net	$ 8,473,886	$ 5,484,889	$ 25,257,295	$ 11,001,094
Interest and other income	72,470	18	107,773	63
TOTAL REVENUE	8,546,356	5,484,907	25,365,068	11,001,157
EXPENSES
Origination and servicing fees	$ 661,264	$ 342,850	$ 1,018,750	$ 1,308,906
Employee compensation and benefits
Legal and professional fees
Interest expense	$ 855,672	$ 1,338,880	$ 2,008,158	$ 2,670,333
Other expenses	44,252	12,500	56,836	194,232
TOTAL EXPENSES	1,561,188	1,694,230	3,083,744	4,173,471
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES	$ 6,985,168	$ 3,790,667	$ 22,281,324	$ 6,827,686
EQUITY IN INCOME OF SUBSIDIARY
NET INCOME BEFORE INCOME TAXES	$ 6,985,168	$ 3,790,667	$ 22,281,324	$ 6,827,686
INCOME TAX EXPENSE
NET LOSS	$ 6,985,168	$ 3,790,667	$ 22,281,324	$ 6,827,686
Eliminations [Member]
REVENUE
Origination and servicing income	$ (661,264)	$ (342,850)	$ (1,018,750)	$ (1,308,906)
Gain on life settlements, net
Interest and other income				$ (169,221)
TOTAL REVENUE	$ (661,264)	$ (342,850)	$ (1,018,750)	(1,478,127)
EXPENSES
Origination and servicing fees	$ (661,264)	$ (342,850)	$ (1,018,750)	$ (1,308,906)
Employee compensation and benefits
Legal and professional fees
Interest expense
Other expenses				$ (169,221)
TOTAL EXPENSES	$ (661,264)	$ (342,850)	$ (1,018,750)	$ (1,478,127)
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES
EQUITY IN INCOME OF SUBSIDIARY	$ 12,384,498	$ 6,163,563	$ 41,528,798	$ 11,832,129
NET INCOME BEFORE INCOME TAXES	$ 12,384,498	$ 6,163,563	$ 41,528,798	$ 11,832,129
INCOME TAX EXPENSE
NET LOSS	$ (12,384,498)	$ (6,163,563)	$ (41,528,798)	$ (11,832,129)

XML

Series I Secured Notes (Tables)

6 Months Ended

Jun. 30, 2015

Credit Facilities / Series I Secured Notes / L Bonds (formerly Renewable Secured Debentures) [Abstract]

Future contractual maturities of series I secured notes payable

Years Ending December 31,	Contractual Maturities		Amortization of Deferred Financing Costs
Six months ending December 31 ,2015	$	5,085,000	$	20,000
2016		10,964,000		144,000
2017		6,164,000		149,000
2018		1,127,000		36,000
2019		347,000		7,000
Thereafter		1,041,000		34,000
	$	24,728,000	$	390,000

XML

Investment in Life Insurance Policies (Details Textual) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Investment in Life Insurance Policies (Textual)
Realized gains from life insurance policy	$ 618,000	$ 232,000	$ 25,632,000	$ 232,000
Benefit recognized from insurance policy	750,000	300,000	29,375,000	300,000
Carrying value of life insurance policy	$ 132,000	$ 68,000	$ 3,743,000	$ 68,000
Life insurance policies [Member]
Investment in Life Insurance Policies (Textual)
Discount rate applied to portfolio			11.19%		11.43%

XML

Contingencies

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies [Abstract]

Contingencies

(14) Contingencies

Litigation - In the normal course of business, the Company is involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings would not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Opportunity Finance, LLC, owned by Jon Sabes and Steven Sabes, is subject to litigation clawback claims by the bankruptcy trustee for third-party matters for payments that may have been deemed preference payments. In addition, Jon Sabes and Steven Sabes are subject to litigation clawback claims by the bankruptcy trustee for third-party matters for payments received from Opportunity Finance that may have been deemed preference payments. If the parties are unsuccessful in defending against these claims, their equity ownership in the Company may be sold or transferred to other parties to satisfy such claims. In addition, the Company loaned $1,000,000 to Opportunity Finance, LLC, and was repaid in full plus interest of $177,000. This investment amount may also be subject to clawback claims by the bankruptcy court.