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 March 31, 2016

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 May 13, 2016, GWG Holdings, Inc. had 5,973,790 shares of common stock outstanding.

GWG HOLDINGS, INC.

Index to Form 10-Q

for the Quarter Ended March 31, 2016

		Page No.
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of March 31, 2016, and December 31, 2015	1
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2016 and 2015	2
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015	3
	Consolidated Statement of Changes in Stockholders’ Equity	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 4.	Controls and Procedures	52
PART II.	OTHER INFORMATION
Item 6.	Exhibits	53
SIGNATURES		54

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GWG HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2016 (unaudited)			December 31, 2015
A S S E T S
Cash and cash equivalents	$	10,998,625		$	34,425,105
Restricted cash		19,828,620			2,341,900
Investment in life insurance contracts, at fair value		387,402,111			356,649,715
Secured MCA advances		4,235,442			-
Policy benefits receivable		15,912,839			-
Other assets		3,224,325			2,461,045
TOTAL ASSETS	$	441,601,962		$	395,877,765
L I A B I L I T I E S & S T O C K H O L D E R S’ E Q U I T Y
LIABILITIES
Revolving credit facility	$	82,304,099		$	63,279,596
Series I Secured Notes payable		18,226,541			23,287,704
L Bonds		301,924,332			276,482,796
Notes payable to related parties		1,760,000			-
Accounts payable		2,119,791			1,517,440
Interest payable		12,915,598			12,340,061
Other accrued expenses		1,397,378			1,060,786
Deferred taxes, net		2,819,697			1,763,968
TOTAL LIABILITIES	$	423,467,436		$	379,732,351
STOCKHOLDERS’ EQUITY
CONVERTIBLE PREFERRED STOCK
(par value $0.001; shares authorized 40,000,000; shares outstanding 2,713,246 and 2,781,735; liquidation preference of $20,349,000 and $20,863,000 on March 31, 2016 and December 31, 2015, respectively)		20,274,155			20,784,841
REDEEMABLE PREFERRED STOCK
(par value $0.001; shares authorized 100,000; shares outstanding 1,449 on March 31, 2016)		1,369,938			-
COMMON STOCK
(par value $0.001: shares authorized 210,000,000; shares issued and outstanding 5,948,290 and 5,941,790 on March 31, 2016 and December 31, 2015)		5,948			5,942
Additional paid-in capital		17,204,940			17,149,391
Accumulated deficit		(20,720,455	)		(21,794,760	)
TOTAL STOCKHOLDERS’ EQUITY		18,134,526			16,145,414
TOTAL LIABILITIES & EQUITY	$	441,601,962		$	395,877,765

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

-1-

 
GWG HOLDINGS, INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three Months Ended
	March 31, 2016		March 31, 2015
REVENUE
Gain on life insurance contracts, net	$	17,713,712	$	16,783,409
Interest and other income		190,181		49,296
TOTAL REVENUE		17,903,893		16,832,705
EXPENSES
Interest expense		9,660,386		7,176,534
Employee compensation and benefits		2,466,197		1,727,917
Legal and professional fees		1,206,128		578,144
Other expenses		2,412,160		1,478,848
TOTAL EXPENSES		15,744,871		10,961,443
INCOME BEFORE INCOME TAXES		2,159,022		5,871,262
INCOME TAX EXPENSE		1,084,717		2,609,371
NET INCOME		1,074,305		3,261,891
Income attributable to preferred shareholders		342,962		353,155
INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	1,417,267	$	3,615,046
NET INCOME PER COMMON SHARE
Basic	$	0.24	$	0.62
Diluted	$	0.18	$	0.46
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		5,942,790		5,870,193
Diluted		7,987,321		7,940,645

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

-2-

GWG HOLDINGS, INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

	Three Months Ended
	March 31, 2016			March 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,074,305		$	3,261,891
Adjustments to reconcile net income to net
cash flows from operating activities:
(Gain) loss on life insurance contracts		(11,531,553	)		1,893,845
Amortization of deferred financing and issuance costs		784,188			(549,030	)
Deferred income taxes		1,055,729			2,182,251
Preferred stock dividends payable		163,577			188,812
(Increase) decrease in operating assets:
Policy benefits receivable		(15,912,839	)		(17,890,000	)
Other assets		173,426			(131,173	)
Increase in operating liabilities:
Due to related party		1,712,392			-
Accounts payable and other accrued expenses		1,967,969			2,635,687
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(20,512,806	)		(8,407,717	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts		(24,326,322	)		(2,446,477	)
Proceeds from settlement of life insurance contracts		4,610,479			3,610,595
Investment in Secured MCA advances		(4,353,585	)		-
Proceeds from Secured MCA advances		118,143			-
NET CASH FLOWS (USED IN) PROVIDED BY INVESTING ACTIVITIES		(23,951,285	)		1,164,118
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on senior revolving credit facility		20,000,000			-
Payments for redemption of Series I Secured notes payable		(5,237,393	)		(1,273,189	)
Proceeds from issuance of L Bonds		34,368,889			27,960,297
Payments for issuance and redemption of L Bonds		(10,909,693	)		(6,878,122	)
Increase in restricted cash		(17,486,720	)		(7,037,564	)
Issuance of common stock		46,545			-
Proceeds from issuance of preferred stock		1,028,536			-
Payments for issuance and redemption of preferred stock		(772,553	)		-
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		21,037,611			12,771,422
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(23,426,480	)		5,527,823
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		34,425,105			30,662,704
END OF THE PERIOD	$	10,998,625		$	36,190,527

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

-3-

GWG HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS – CONTINUED

(unaudited)

	Three Months Ended
	March 31,		March 31,
	2016		2015
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest and preferred dividends paid	$	6,453,000	$	6,102,000
Premiums paid	$	8,445,000	$	6,325,000
Stock-based compensation	$	9,000	$	33,000
NON-CASH INVESTING AND FINANCING ACTIVITIES
Series I Secured Notes:
Conversion of accrued interest and commission payable to principal	$	44,000	$	41,000
L Bonds:
Conversion of accrued interest and commission payable to principal	$	291,000	$	218,000
Series A Preferred Stock:
Issuance of preferred stock in lieu of cash dividends	$	168,000	$	184,000
Investment in life insurance contracts included in accounts payable	$	1,551,000	$	87,000

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

-4-

GWG HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)

	Preferred Stock			Preferred			Common		Common Stock		Additional Paid-in		Accumulated			Total
	Shares			Stock			Shares		(par)		Capital		Deficit			Equity
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 loss		-			-			-		-		-		(7,393,274	)		(7,393,274	)
Issuance of common stock		-			-			60,000		60		581,940		-			582,000
Series A Preferred Stock conversion to common stock		(15,463	)		(115,973	)		11,597		12		115,961		-			-
Issuance of preferred stock		58,232			387,948			-		-		-		-			387,948
Issuance of stock options		-			-			-		-		193,804		-			193,804
Balance, December 31, 2015		2,781,735		$	20,799,841			5,941,790	$	5,942	$	17,149,391	$	(21,794,760	)	$	16,160,414
Net income		-			-			-		-		-		1,074,305			1,074,305
Issuance of common stock		-			-			6,500		6		46,539		-			46,545
Redemption of Series A Preferred Stock		(92,527	)		(693,955	)								-			(693,955	)
Issuance of  Series A Preferred Stock		24,038			168,269			-		-				-			168,269
Issuance of redeemable preferred stock		1,028			1,448,536			-		-		-		-			1,448,536
Issuance of stock options		-			-			-		-		9,010		-			9,010
Balance, March 31, 2016		2,714,274		$	21,722,691			5,948,290	$	5,948	$	17,204,940	$	(20,720,455	)	$	18,134,526

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

-5-

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), 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), GWG Life USA, LLC (GWG Life USA) and Wirth Park Agency, LLC, 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). GWG Holdings is also involved in the merchant cash advance business through its wholly owned subsidiary GWG MCA Capital, Inc. (GWG MCA). 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” or “GWG MCA,” are meant to refer only to the particular entity referenced.

On September 30, 2015, GWG Holdings formed a wholly owned subsidiary, Wirth Park Agency, LLC. Wirth Park Agency was formed to convert term life insurance policies into universal, or permanent life insurance. Wirth Park Agency produces commission revenue through this activity.

On December 7, 2015, GWG Holdings formed a wholly owned subsidiary, GWG MCA, LLC. On January 13, 2016, GWG MCA, LLC was converted to a corporation and became GWG MCA Capital, Inc. GWG MCA was formed to engage in the merchant cash advance business.

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 insurance contracts - ASC 325-30, Investments in Insurance Contracts, allows a reporting entity the election to account for its investments in life insurance contracts 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 insurance contracts.

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

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

-6-

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The Company recognizes the difference between the policy benefits and carrying values of the policy when an insured’s mortality event has occurred and the Company determines that settlement and ultimate collection of the policy 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 $526,000 and $31,000 at March 31, 2016 and December 31, 2015, respectively.

Deferred financing and issuance costs – Loans advanced under the Company’s revolving senior credit facility, as described in note 5, have been reported net of financing costs which are amortized using the straight-line method over the term of the revolving senior credit facility.  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 9, 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, 2015, those costs were fully amortized. Redeemable Preferred Stock, as described in note 10, reported net of issuance costs, sales commissions and other direct expenses.

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 (loss) per share is calculated based on the potential dilutive impact, if any, of the Company’s Series A Preferred Stock, Redeemable Preferred Stock, 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. 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 Company adopted ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, during the first quarter of 2016, as required by the standard. The impact of the new ASU on the Company’s balance sheet was a reduction of approximately $2,288,000 to assets and the corresponding reduction to liabilities and stockholders’ equity. There was no impact on the Company’s statements of operations.

Reclassification - Certain 2015 amounts have been reclassified to conform to ASU No. 2015-03, as described under “Recently adopted pronouncements” above. The reclassifications have no effect on the reported amounts of consolidated net income.

-7-

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(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 senior credit facility, and collect policy benefits. DZ Bank AG, as agent for Autobahn Funding Company, LLC, the lender for the revolving senior credit facility as described in note 5, authorizes the disbursements from these accounts. At March 31, 2016 and December 31, 2015, there was a balance of $19,829,000, and $2,342,000, 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 11.08% and 11.09% were applied to the portfolio as of March 31, 2016 and December 31, 2015, respectively.

In September of 2015, AXA (an insurance company) announced pending cost of insurance rate increases for certain universal life policies.  The effective date of the increases was originally scheduled for January 1, 2016, but was later delayed until March 1, 2016.  GWG identified 14 such policies in the portfolio that are affected. As of April 21, 2016 we were in receipt of the related updated policy illustrations from AXA.  We calculated the change in fair value related to the increased premiums on these 14 policies to be a reduction of $2,395,000 to the MAPS valuation of the portfolio of $389,797,000 resulting in a net valuation of $387,402,000 as of March 31, 2016.

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 March 31, 2016						As of December 31, 2015
Years Ending December 31,		Number of Contracts		Estimated Fair Value		Face Value		Number of Contracts		Estimated Fair Value		Face Value
	2016		3	$	5,440,000	$	6,000,000		5	$	7,503,000	$	8,500,000
	2017		11		13,855,000		18,043,000		12		12,875,000		17,418,000
	2018		29		32,989,000		50,905,000		27		37,109,000		58,428,000
	2019		51		51,866,000		91,707,000		51		54,242,000		100,967,000
	2020		70		71,319,000		148,360,000		59		64,750,000		137,868,000
	2021		56		53,756,000		130,169,000		48		45,724,000		116,805,000
	2022		49		36,273,000		109,262,000		44		38,394,000		116,998,000
	Thereafter		196		121,904,000		473,375,000		150		96,053,000		387,860,000
	Totals		465	$	387,402,000	$	1,027,821,000		396	$	356,650,000		944,844,000

The Companyrecognizedinsurancebenefits of$19,238,000and$28,625,000 duringthe three months ended March 31, 2016and2015,respectively, related topolicies withacarrying value of$4,611,000 and$3,611,000, respectively. TheCompany recordedrealizedgainsof$14,627,000 and$25,014,000 onsuchpolicies.

Reconciliation of gain on life insurance contracts:

Three Months Ended:	March 31, 2016			March 31, 2015
Change in fair value	$	11,532,000		$	(1,894,000	)
Premiums and other annual fees		(8,445,000	)		(6,337,000	)
Policy maturities		14,627,000			25,014,000
Gain on life insurance contracts, net	$	17,714,000		$	16,783,000

-8-

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The estimated expected premium payments and servicing fees to maintain the above life insurance policies in force for the next five years, assuming no mortalities, are as follows:

Years Ending December 31,	Premiums		Servicing		Premiums and Servicing Fees
Nine months ending December 31 ,2016	$	25,258,000	$	558,000	$	25,816,000
2017		36,083,000		558,000		36,641,000
2018		39,398,000		558,000		39,956,000
2019		44,304,000		558,000		44,862,000
2020		49,314,000		558,000		49,872,000
2021		54,825,000		558,000		55,383,000
	$	249,182,000	$	3,348,000	$	252,530,000

Management anticipates funding the estimated premium payments as noted above with proceeds from the DZ Bank revolving senior 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 hierarchical 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 an 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.

-9-

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Level 3 Valuation Process

The estimated fair value of the Company’s portfolio of life insurance contracts is 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 estimate assumptions, as well as any changes in economic and other relevant conditions. The discount rate incorporates current information about discount rate 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.

These inputs are then used to estimate the discounted cash flows using the Model Actuarial Pricing System (MAPS), probabilistic portfolio price model, which estimates the cash flows using various probabilities and scenarios. The valuation process includes a review by senior management as of each valuation date. Management has also engaged a third-party expert to independently test the accuracy of the valuations using the inputs provided by management on a quarterly basis. See Exhibit 99.1 filed herewith.

Life insurance policies, as well as the portfolio taken as a whole, 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 its portfolio of life insurance policies for the years ending December 31, as follows:

	Three Months Ended March 31,
	2016			2015
Beginning balance	$	356,650,000		$	282,883,000
Purchases		23,831,000			1,016,000
Maturities (cash in excess of carrying value)		(4,611,000	)		(3,610,000	)
Net change in fair value		11,532,000			(1,894,000	)
Ending balance	$	387,402,000		$	278,395,000

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.

During the fourth quarter of 2014, GWG adopted a plan to update the independent life expectancy estimates, where possible, on the insured lives in our portfolio.  The plan covers all policies with the exception of those policies purchased with small face amount underwriting standards (under $1 million in face amount).  The plan is for each set of life expectancy estimates and medical records to be updated on a continuous rotating three-year cycle.  The records for approximately 1/12^th of the portfolio are being updated each quarter.

We have been notified of potential cost of insurance increases on certain universal life policies in our portfolio by other life insurance companies.  Although we cannot now precisely quantify the impact of the increase upon our costs, or upon the fair value of our portfolio, less than 4% of the fair value of our portfolio is attributable to such policies. As a result, we expect that our premium expense will increase and the fair value of our portfolio will be negatively impacted once we are in receipt of all of the required information regarding the proposed increases.

-10-

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 and other inputs utilized in estimating the fair value of the portfolio of life insurance policies:

	As of  March 31, 2016			As of December 31, 2015
Weighted-average age of insured, years		82.4			82.6
Weighted-average life expectancy, months		80.2			79.3
Average face amount per policy	$	2,210,000		$	2,386,000
Discount rate		11.08	%		11.09	%

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 Fair Value of the Investment in Life Insurance Policies

	Change in life expectancy estimates
	minus 8 months		minus 4 months		plus  4 months			plus  8 months
March 31, 2016	$	52,011,000	$	25,901,000	$	(25,278,000	)	$	(49,990,000	)
December 31, 2015	$	48,339,000	$	24,076,000	$	(23,501,000	)	$	(46,482,000	)

	Change in discount rate
	minus 2%		minus 1%		plus 1%			plus 2%
March 31, 2016	$	38,567,000	$	18,477,000	$	(17,033,000	)	$	(32,772,000	)
December 31, 2015	$	35,024,000	$	16,786,000	$	(15,485,000	)	$	(29,803,000	)

Other Fair Value Considerations

Carrying valueof receivables, prepaid expenses,accounts payableandaccruedexpenses approximatefairvalue dueto theirshort-term maturities andlow credit risk.The estimated fairvalue oftheCompany’sSeriesISecuredNotes payableand LBonds isapproximately $326,944,000based onaweighted-average marketinterest rateof 7.06%based onanincome approach,the combinedfacevalueofthesenotesis $325,339,000asofMarch 31,2016. The carrying value of the revolving senior credit facility reflects interestcharged atthe commercial paperrate plusan applicable margin.The margin represents ourcredit risk,andthestrengthoftheportfolio oflifeinsurancepolicies collateralizing thedebt. Theoverallratereflects market,and thecarryingvalue oftherevolverapproximates fair value. The carrying value of Secured MCA advances approximates market value, as they were purchased February 15, 2016. All of thefinancial instruments are Level 3fair value measurements.

The Company has issued warrants to purchase common stock in connection with the issuance of its convertible 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 March 31, 2016:

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

-11-

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Volatility is based upon the weekly percentage change in the stock price of selected comparable insurance companies. In June 2012, we evaluated the comparable companies used, and made certain changes to those used. 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 senior credit facility – Autobahn Funding Company LLC

On July 15, 2008, DLP II entered into a revolving senior 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 DLP II and DLP III, to June 30, 2018. Advances under the senior credit facility made after May 11, 2015 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%, which is 1.75% 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 senior 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 $85,011,000 and $65,011,000 at March 31, 2016 and December 31, 2015, respectively.

The Agreement requires DLP III 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 5.69% at March 31, 2016 and 5.58% at December 31, 2015. The Agreement also requires payment of an unused line fee on the unfunded amount under the revolving senior credit facility. The weighted-average effective interest rate (including the unused line fee) was 5.68% and 6.20% for the three months ended March 31, 2016 and 2015, respectively. The note is secured by the ownership of life insurance policies pledged to DZ Bank by DLP III via Wells Fargo as securities intermediary.

The Agreement has certain financial and nonfinancial covenants. The Company was in compliance with these covenants at March 31, 2016 and December 31, 2015.

-12-

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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 of $15 million or above.

Consolidated Non-GAAP net income and Non-GAAP tangible net worth as of and for the four quarters ended March 31, 2016, as calculated under the Agreement, was $28,333,000 and $118,922,000 respectively.

Advances under the Agreement are subject to a borrowing base formula, which limits the availability of advances 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 four primary factors which might limit availability of funds on the facility. Total funds available for additional borrowings under the borrowing base formula criteria at March 31, 2016 and December 31, 2015, were $20,000,000 and $39,989,000 respectively.

(6)       Series I Secured Notes payable

Series I Secured Notes payable have been issued in conjunction with the GWG Series I Secured Notes private placement memorandum dated August 25, 2009. Series I Secured Notes are secured by assets of GWG Life and are subordinate to our revolving senior credit facility (see Note 5). On June 14, 2011, the Company closed the Series I Secured Notes offering to additional investors; however, existing investors may elect to continue advancing amounts outstanding through the renewal provisions upon maturity subject to the Company’s option. 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 March 31, 2016 and December 31, 2015, the weighted-average interest rate of Series I Secured Notes was 8.61% and 8.47%, respectively. The notes are secured by assets of GWG Life. The principal amount outstanding under these Series I Secured Notes was $18,508,000 and $23,578,000 at March 31, 2016 and December 31, 2015, 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 $111,000 and $130,000 for the three months ended March 31, 2016 and 2015, respectively. Future expected amortization of deferred financing costs is $281,000 in total over the next six years.

Future contractual maturities of Series I Secured Notes payable and future amortization of their deferred financing costs at March 31, 2016 are as follows: 

Years Ending December 31,	Contractual Maturities		Amortization of Deferred Financing Costs
Nine months ending December 31 ,2016	$	6,581,000	$	35,000
2017		7,956,000		128,000
2018		1,596,000		41,000
2019		444,000		7,000
2020		1,766,000		63,000
Thereafter		165,000		7,000
	$	18,508,000	$	281,000

-13-

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(7)       L Bonds

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 debt securities are secured by assets of GWG Holdings and GWG Life and are subordinate to our revolving senior 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 registered a $1 billion follow-on offering of L Bonds. 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. 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 March 31, 2016 and December 31, 2015, the weighted-average interest rate of L Bonds was 7.14% and 7.18%, respectively. The amount outstanding under these L Bonds was $306,831,000 and $282,171,000 at March 31, 2016 and December 31, 2015, 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 $1,568,000 and $974,000 for the three months ended March 31, 2016 and 2015, respectively. Future expected amortization of deferred financing costs as of March 31, 2016 is $9,522,000 in total over the next eight years.

Future contractual maturities of L Bonds and future amortization of their deferred financing costs at March 31, 2016 are as follows: 

Years Ending December 31,	Contractual Maturities		Amortization of Deferred Financing Costs
Nine months ending December 31 ,2016	$	76,618,000	$	562,000
2017		73,736,000		1,734,000
2018		75,804,000		2,976,000
2019		33,648,000		1,521,000
2020		19,602,000		995,000
Thereafter		27,423,000		1,734,000
	$	306,831,000	$	9,522,000

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 bond holders. The Indenture has certain financial and non-financial covenants. The Company was in compliance with these covenants at March 31, 2016 and December 31, 2015.

(8)     Note Payable to Related Party

In February 2016, we acquired certain assets in our wholly owned subsidiary, GWG MCA. To finance this acquisition, GWG MCA borrowed $1,760,000 from Insurance Strategies Fund, LLC (ISF), a related party, under a promissory note dated February 16, 2016. ISF owns 100,000 shares of common stock in GWG Holdings. ISF is owned by SABKA, a trust controlled by Robert Sabes, the father of Jon and Steve Sabes, who beneficially own or control approximately 74% of our common stock. The promissory note accrues interest at an annual rate of 9%, and the obligations under this promissory note are unsecured. The maturity date of this note is the earlier of (i) December 31, 2016 or (ii) 30 calendar days after the date on which the GWG MCA shall have received net financings proceeds from it's private offer and sale of it's preferred stock equaling the amount of debt for borrowed money then outstanding under this promissory note.

(9)     Convertible 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. 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 at $10 per share. As of March 31, 2016, the Company had 2,713,000 shares of Series A Preferred Stock outstanding with gross consideration of $20,274,000 (including cash proceeds, conversion of Series I Secured Notes and accrued interest on Series I notes, 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 March 31, 2016.

-14-

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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. 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 March 31, 2016. 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 March 31, 2016 and December 31, 2015, were 431,954 with a weighted-average remaining life of 1.18 and 1.43 years, respectively. As of March 31, 2016, none of these warrants have been exercised.

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 11). As such, the convertible redeemable preferred stock was reclassified from temporary equity to permanent equity. The Company may redeem the Series A Preferred Stock at a price equal to 110% of its liquidation preference ($7.50 per share) at any time. As of March 31, 2016, the Company had redeemed an aggregate of 277,000 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 677,566 shares of preferred stock into 508,193 shares of common stock.

As of March 31, 2016, 398,000 shares of Series A Preferred Stock have been issued as a result of conversion of $2,788,000 in dividends, and 678,000 shares of Series A Preferred Stock have been converted to 508,000 shares of the Company’s common stock.

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 $507,000 and $537,000 for the three months ended March 31, 2016 and 2015, respectively, pursuant to a board resolution declaring the dividend. 24,000 and 26,000 shares of Series A Preferred Stock were issued in lieu of cash dividends in the three months ended March 31, 2016 and 2015, respectively. The shares issued in lieu of cash dividends were issued at $7.00 per share. As of March 31, 2016, GWG Holdings has $507,000 of accrued Series A Preferred Stock dividends which were paid or converted to shares of Series A Preferred Stock on April 15, 2016.

(10)       Redeemable Preferred Stock

The Company began offering up to 100,000 shares of Redeemable Preferred Stock for sale via Form S-1 registration statement effective November 30, 2015. The maximum offering price per share is $1,000 with a par value per share of $.001.

The Redeemable Preferred Stock ranks senior to our common stock and pari passu to our Series A Preferred Stock with respect to payment of dividends and rights upon liquidation dissolution or winding up. Redeemable Preferred Stock has an annualized yield of 7%.

-15-

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Subject to the limitations described below, holders of Redeemable Preferred Stock will have the option to convert the Redeemable Preferred Stock they purchase from us and hold into common stock at a conversion price equal to the volume-weighted average price of our common stock for the 20 trading days immediately prior to the date on which notice of conversion is delivered to us, subject to a minimum conversion price of $15.00, subject to equitable adjustment. The right of holders to convert their Redeemable Preferred Stock is limited to 15% of the stated value of Redeemable Preferred Stock originally purchased by such holder from us and still held by such holder.

A holder will have the opportunity to request that we redeem such holder's Redeemable Preferred Stock at a redemption price equal to the stated value of such redeemed shares, plus any accrued but unpaid dividends thereon, less the applicable redemption fee (if any). As a percentage of the aggregate redemption price of a holder’s shares to be redeemed, the redemption fee shall be:

● 12% if the redemption is requested before the first anniversary of the original issuance of the shares; and

● 10% if the redemption is requested on or after the first anniversary and before the second anniversary of the original issuance of such shares; and

● 8% if the redemption is requested on or after the second anniversary and before the third anniversary of the original issuance of such shares.

Beginning three years from the date of original issuance of such shares, no redemption fee shall be subtracted from the redemption price. Subject to certain restrictions and conditions, we will also redeem shares of Redeemable Preferred Stock of a holder who is a natural person (including an individual beneficial holder who holds our preferred shares through a custodian or nominee, such as a broker-dealer) upon his or her death, total disability or bankruptcy, within 60 days of our receipt of a written request from the holder or the holder’s estate at a redemption price equal to the stated value, plus accrued and unpaid dividends thereon.

After one year from the date of original issuance of shares of Redeemable Preferred Stock, we will have the right (but not the obligation) to call and redeem such shares of Redeemable Preferred Stock at 100% of their stated value, plus any accrued but unpaid dividends thereon.

We will not be obligated in all cases to redeem shares of Redeemable Preferred Stock, whether upon a redemption request by a holder, at the option of the Company, or upon the death, total disability or bankruptcy of a holder. In particular, we will not redeem or repurchase any preferred shares if we are restricted by applicable law or our Certificate of Incorporation, as amended, from making such redemption or to the extent any such redemption would cause or constitute a default under any borrowing agreements to which we or any of our subsidiaries are a party or otherwise bound. In addition, we will have no obligation to redeem preferred shares upon a redemption request made by a holder if we do not have sufficient funds available to fund that redemption. We have discretion under the Certificate of Designation for the Redeemable Preferred Stock to determine whether we are in possession of “sufficient funds” to fund a redemption request.

As of March 31, 2016 the Company sold 1,449 shares of the Redeemable Preferred Stock raising approximately $1,449,000. The Company incurred approximately $79,000 of selling costs related to the sale of the Redeemable Preferred Stock.

-16-

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(11)       Income taxes

The Company has a $29,000 and $0 of current income tax liability as of March 31, 2016 and December 31, 2015. The components of current and deferred income tax expense for the three months ended March 31, 2016 and 2015, respectfully, consisted of the following:

	Three Months Ended
	March 31,			March 31,
	2016			2015
Income tax:
Current:
Federal	$	(23,000	)	$	(324,000	)
State		(6,000	)		(103,000	)
Total current tax expense		(29,000	)		(427,000	)
Deferred:
Federal	$	(806,000	)	$	(1,654,000	)
State		(250,000	)		(528,000	)
Total deferred tax expense		(1,056,000	)		(2,182,000	)
Total income tax expense	$	(1,085,000	)	$	(2,609,000	)

The primary differences between the Company’s March 31, 2016 effective tax rate and the statutory federal rate are the accrual of nondeductible preferred stock dividend expense of $511,000, 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.

(12)       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.

On June 24, 2015 GWG issued 60,000 restricted shares of 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 is being amortized over a twelve-month period. On March 17, 2016 GWG issued 6,500 restricted shares of common stock at an average price of $7.16 per share, determined by closing market price, to the same vendor as a form of payment for additional services the vendor provided to the Company.

(13)       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 1,050,615 shares of common stock to employees, officers, and directors of the Company through March 31, 2016. Options for 502,205 shares have vested, and the remaining options will vest over three years. The options were issued with an exercise price between $6.60 and $10.18 for those owning more than 10% of the Company’s stock and between $6.00 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 20.59% 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 March 31, 2016, stock options for 345,685 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. As of March 31, 2016 53,000 of these options were forfeited and 53,000 have vested.

Outstanding stock options:

	Vested			Un-vested			Total
Balance as of December 31, 2014		314,288			685,813			1,000,101
Granted during the year		79,500			273,700			353,200
Vested during the year		238,999			(238,999	)		-
Exercised during the year		(27,667	)		-			(27,667	)
Forfeited during the year		(121,417	)		(150,602	)		(272,019	)
Balance as of December 31, 2015		483,703			569,912			1,053,615
Granted during the quarter		7,500			-			7,500
Vested during the quarter		14,092			(14,092	)		-
Forfeited during the quarter		(3,090	)		(7,410	)		(10,500	)
Balance as of March 31, 2016		502,205			548,410			1,050,615

Compensation expense related to un-vested options not yet recognized is $451,000. We expect to recognize this compensation expense over the next three years ($214,000 in 2016, $187,000 in 2017, and $50,000 in 2018). The Company issues new common stock for options exercised.

(14)       Net income per common share

The Company began issuing Series A Preferred Stock September, 1, 2011, as described in note 8. The Series A Preferred Stock is dilutive to the net income per common share calculation at both March 31, 2016 and 2015. The Company has also issued warrants to purchase common stock in conjunction with the sale of convertible preferred stock (see Note 9). The warrants and vested stock options are anti-dilutive at both March 31, 2016 and 2015 and have not been included in the fully diluted net loss per common share calculation. The Company’s outstanding stock options are anti-dilutive at both March 31, 2016 and 2015.

(15)       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 was for 11,695 square feet of office space located at 220 South Sixth Street, Minneapolis, Minnesota. The Company was obligated to pay base rent plus common area maintenance and a share of the building operating costs. Effective September 1, 2015, the Company entered into a Second Amendment to the office lease with US Bank National Association that extended the term of the lease to 120 months from the effective date and expanded to 17,687 square feet. The Second Amendment provides the right for us to extend the term of the lease for one three-year term, and a right of first offer on space adjacent to our leased premises.

-18-

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The Company is obligated to pay base rent plus common area maintenance and a share of the building operating costs. Rent expenses under the above agreements were $224,000 and $68,000 during the three months ended March 2016 and 2015, respectively.

Minimum lease payments under the Second Amendment to Lease are as follows:

Nine months ending December 31, 2016	$	130,000
2017		178,000
2018		185,000
2019		191,000
2020		198,000
2021		204,000
2022		210,000
2023		217,000
2024		223,000
2025		230,000
2026		38,000
	$	2,004,000

GWG MCA entered into a sublease agreement with Wellington Group as tenant. The sublease was effective February 1, 2016 with a term through August 1, 2016. The sublease was for an office space and use of reception, kitchen and common areas of 450 Seventh Avenue, Suite 809, New York, New York. The total rent for the sublease term is $30,000 paid in $5,000 monthly installments. Additional charges for services (utilities and cleaning services) during the sublease term equal to monthly payments of $500.

(16)    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.

(17)    Guarantees of L Bonds

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 GWG 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 III and the Trust. The policies held by DLP III are not collateral for the L Bond obligations as such policies serve as collateral for the senior 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 GWG 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 senior 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 GWG 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.

-19-

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The following represents consolidating financial information as of March 31, 2016 and December 31, 2015, with respect to the financial position, and for the three months ended March 31, 2016 and 2015 with respect to results of operations and cash flows of GWG Holdings and its subsidiaries. The parent column presents the financial information of GWG 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

March 31, 2016	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
A S S E T S
Cash and cash equivalents	$	6,274,035		$	4,340,365		$	384,225	$	-		$	10,998,625
Restricted cash		-			4,807,637			15,020,983		-			19,828,620
Investment in life insurance contracts, at fair value		-			-			387,402,111		-			387,402,111
Secured MCA advances		-			-			4,235,442		-			4,235,442
Policy benefits receivable		-			-			15,912,839		-			15,912,839
Other assets		4,560,495			863,833			530,899		(2,730,902	)		3,224,325
Investment in subsidiaries		321,992,234			332,430,230			-		(645,422,464	)		-
TOTAL ASSETS	$	332,826,764		$	342,442,065		$	423,486,499	$	(657,153,366	)	$	441,601,962
L I A B I L I T I E S  &  S T O C K H O L D E R S'  E Q U I T Y  (D E F I C I T)
LIABILITIES
Revolving senior credit facility	$	-		$	(2,275,000	)	$	84,579,099	$	-		$	82,304,099
Series I Secured Notes payable		-			18,226,541			-		-			18,226,541
L Bonds		301,924,332			-			-		-			301,924,332
Notes payable to related parties		-			-			4,460,000		(2,700,000	)		1,760,000
Accounts payable		188,894			365,147			1,565,750		-			2,119,791
Interest payable		8,879,457			3,714,441			352,602		(30,902	)		12,915,598
Other accrued expenses		879,858			486,943			30,577		-			1,397,378
Deferred taxes		2,819,697			-			-		-			2,819,697
TOTAL LIABILITIES		314,692,238			20,518,072			90,988,028		(2,730,902	)		423,467,436
STOCKHOLDERS’ EQUITY (DEFICIT)
Member capital		-			321,923,993			332,498,471		(654,422,464	)		-
Convertible preferred stock		20,274,155			-			-		-			20,274,155
Redeemable preferred stock		1,369,938			-			-		-			1,369,938
Common stock		5,948			-			-		-			5,948
Additional paid-in capital		17,204,940			-			-		-			17,204,940
Accumulated deficit		(20,720,455	)		-			-		-			(20,720,455	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		18,134,526			321,923,993			332,498,471		(654,422,464	)		18,134,526
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	332,826,764		$	342,442,065		$	423,486,499	$	(657,153,366	)	$	441,601,962

-20-

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Condensed Consolidating Balance Sheets (continued)

December 31, 2015	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
A S S E T S
Cash and cash equivalents	$	32,292,162		$	1,982,722		$	150,221	$	-		$	34,425,105
Restricted cash		-			2,102,257			239,643		-			2,341,900
Investment in life insurance contracts, at fair value		-			-			356,649,715		-			356,649,715
Other assets		1,742,074			688,071			30,900		-			2,461,045
Investment in subsidiaries		269,886,254			291,295,951			-		(561,182,205	)		-
TOTAL ASSETS	$	303,920,490		$	296,069,001		$	357,070,479	$	(561,182,205	)	$	395,877,765
L I A B I L I T I E S  &  S T O C K H O L D E R S'  E Q U I T Y  (D E F I C I T)
LIABILITIES
Revolving senior credit facility	$	-		$	(1,000,000	)	$	64,279,596	$	-		$	63,279,596
Series I Secured Notes payable		-			23,287,704			-		-			23,287,704
L Bonds		276,482,796			-			-		-			276,482,796
Accounts payable		280,988			157,217			1,079,235		-			1,517,440
Interest payable		8,529,959			3,544,626			265,476		-			12,340,061
Other accrued expenses		717,365			343,421			-		-			1,060,786
Deferred taxes		1,763,968			-			-		-			1,763,968
TOTAL LIABILITIES		287,775,076			26,332,968			65,624,307		-			379,732,351
STOCKHOLDERS’ EQUITY (DEFICIT)
Member capital		-			269,736,033			291,446,172		(561,182,205	)		-
Convertible preferred stock		20,784,841			-			-		-			20,784,841
Common stock		5,942			-			-		-			5,942
Additional paid-in capital		17,149,391			-			-		-			17,149,391
Accumulated deficit		(21,794,760	)		-			-		-			(21,794,760	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		16,145,414			269,736,033			291,446,172		(561,182,205	)		16,145,414
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	303,920,490		$	296,069,001		$	357,070,479	$	(561,182,205	)	$	395,877,765

-21-

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Condensed Consolidating Statements of Operations

For the three months ended March 31, 2016	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Contract servicing fees	$	-		$	13,417		$	-	$	(13,417	)	$	-
Gain on life insurance contracts, net		-			-			17,713,712		-			17,713,712
Interest and other income		34,798			306			185,979		(30,902	)		190,181
TOTAL REVENUE		34,798			2,762,748			17,899,691		(44,319	)		17,903,893
EXPENSES
Origination and servicing fees		-			-			13,417		(13,417	)		-
Interest expense		7,598,824			657,236			1,435,228		(30,902	)		9,660,386
Employee compensation and benefits		1,536,430			829,081			100,686		-			2,466,197
Legal and professional fees		594,739			534,650			76,739		-			1,206,128
Other expenses		1,257,977			968,674			185,509		-			2,412,160
TOTAL EXPENSES		10,987,970			2,989,641			1,811,579		(44,319	)		15,744,871
INCOME (LOSS) BEFORE EQUITY IN
INCOME OF SUBSIDIARIES		(10,953,172	)		(2,975,918	)		16,088,112		-			2,159,022
EQUITY IN INCOME OF SUBSIDIARY		13,112,194			16,301,366			-		(29,413,560	)		-
NET INCOME BEFORE INCOME TAXES		2,159,022			13,325,448			16,088,112		(29,413,560	)		2,159,022
INCOME TAX EXPENSE		1,084,717			-			-		-			1,084,717
NET INCOME (LOSS)		1,074,305			13,325,448			16,088,112		(29,413,560	)		1,074,305

For the three months ended March 31, 2015	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Contract servicing fees	$	-		$	357,486		$	-	$	(357,486	)	$	-
Gain on life insurance contracts, net		-			-			16,783,409		-			16,783,409
Interest and other income		7,543			6,450			35,303		-			49,296
TOTAL REVENUE		7,543			363,936			16,818,712		(357,486	)		16,832,705
EXPENSES
Origination and servicing fees		-			-			357,486		(357,486	)		-
Interest expense		5,249,962			774,086			1,152,486		-			7,176,534
Employee compensation and benefits		1,305,801			422,116			-		-			1,727,917
Legal and professional fees		477,351			100,793			-		-			578,144
Other expenses		951,362			514,902			12,584		-			1,478,848
TOTAL EXPENSES		7,984,476			1,811,897			1,522,556		(357,486	)		10,961,443
INCOME (LOSS) BEFORE EQUITY IN
INCOME OF SUBSIDIARIES		(7,976,933	)		(1,447,961	)		15,296,156		-			5,871,262
EQUITY IN INCOME OF SUBSIDIARY		13,848,195			15,296,105			-		(29,144,300	)		-
NET INCOME BEFORE INCOME TAXES		5,871,262			13,848,144			15,296,156		(29,144,300	)		5,871,262
INCOME TAX EXPENSE		2,609,371			-			-		-			2,609,371
NET INCOME (LOSS)		3,261,891			13,848,144			15,296,156		(29,144,300	)		3,261,891

-22-

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Condensed Consolidating Statements of Cash Flows

For the three months ended March 31, 2016	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,074,305		$	13,325,448		$	16,088,112		$	(29,413,560	)	$	1,074,305
Adjustments to reconcile net income to cash flows from operating activities:
Equity of subsidiaries		(13,112,194	)		(16,301,366	)		-			29,413,560			-
Gain on life insurance contracts		-			-			(11,531,553	)		-			(11,531,553	)
Amortization of deferred financing and issuance costs		1,648,891			(1,164,206	)		299,503			-			784,188
Deferred income taxes		1,055,729			-			-			-			1,055,729
Preferred stock dividends payable		163,577			-			-			-			163,577
(Increase) decrease in operating assets:
Policy benefits receivable		-			-			(15,912,839	)		-			(15,912,839	)
Other assets		(38,661,205	)		(24,992,068	)		-			63,826,699			173,426
Increase (decrease) in operating liabilities:
Due to related party		(2,731,001	)		(16,607	)		4,460,000			-			1,712,392
Accounts payable and other accrued expenses		782,047			586,702			599,220			-			1,967,969
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(49,779,851	)		(28,562,097	)		(5,997,557	)		63,826,699			(20,512,806	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts		-			-			(24,326,322	)		-			(24,326,322	)
Proceeds from settlement of life insurance contracts		-			-			4,610,479			-			4,610,479
Investments in Secured MCA advances		-			-			(4,353,585	)		-			(4,353,585	)
Proceeds from Secured MCA advances					-			118,143			-			118,143
NET CASH FLOWS (USED IN) PROVIDED BY INVESTING ACTIVITIES		-			-			(23,951,285	)		-			(23,951,285	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on Senior Revolving Credit Facility		-			-			20,000,000			-			20,000,000
Payments for redemption of Series I Secured notes payable		-			(5,237,393	)		-			-			(5,237,393	)
Proceeds from issuance of L Bonds		34,368,889			-			-			-			34,368,889
Payments for issuance and redemption of L Bonds		(10,909,693	)		-			-			-			(10,909,693	)
Increase in restricted cash		-			(2,705,379	)		(14,781,341	)		-			(17,486,720	)
Issuance of common stock		46,545			-			-			-			46,545
Proceeds from issuance of preferred stock		1,028,536			-			-			-			1,028,536
Payments for issuance and redemption of preferred stock		(772,553	)		-			-			-			(772,553	)
Issuance of member capital		-			38,862,512			24,964,187			(63,826,699	)		-
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		23,761,724			30,919,740			30,182,846			(63,826,699	)		21,037,611
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(26,018,127	)		2,357,643			234,004			-			(23,426,480	)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		32,292,162			1,982,722			150,221			-			34,425,105
END OF THE PERIOD	$	6,274,035		$	4,340,365		$	384,225		$	-		$	10,998,625

-23-

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Consolidating Statements of Cash Flows (continued)

For the three months ended March 31, 2015	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	3,261,891		$	13,848,144		$	15,296,156		$	(29,144,300	)	$	3,261,891
Adjustments to reconcile net income to cash flows from operating activities:
Equity of subsidiaries		(13,848,196	)		(15,296,104	)		-			29,144,300			-
Loss on life insurance contracts		-			-			1,893,845			-			1,893,845
Amortization of deferred financing and issuance costs		43,475			130,188			(722,693	)		-			(549,030	)
Deferred income taxes		2,182,251			-			-			-			2,182,251
Preferred stock dividends payable		188,812			-			-			-			188,812
(Increase) decrease in operating assets:
Policy benefits receivable		-			-			(17,890,000	)		-			(17,890,000	)
Other assets		(10,874,436	)		(5,877,435	)		-			16,620,698			(131,173	)
Increase in operating liabilities:
Accounts payable and other accrued expenses		2,279,652			738,084			382,049			-			2,635,687
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(16,766,551	)		(6,457,123	)		(1,804,741	)		16,620,698			(8,407,717	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts		-			-			(2,446,477	)		-			(2,446,477	)
Proceeds from settlement of life insurance contracts		-			-			3,610,595			-			3,610,595
NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES		-			-			1,164,118			-			1,164,118
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for redemption of Series I Secured notes payable		-			(1,273,189	)		-			-			(1,273,189	)
Proceeds from issuance of L Bonds		27,960,297			-			-			-			27,960,297
Payments from issuance and redemption of L Bonds		(6,878,122	)		-			-			-			(6,878,122	)
Proceeds from restricted cash		-			(1,780,000	)		(5,257,564	)		-			(7,073,564	)
Issuance of member capital		-			10,572,459			6,048,239			(16,620,698	)		-
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		21,082,175			7,519,270			790,675			(16,620,698	)		12,771,422
NET INCREASE IN CASH AND CASH EQUIVALENTS		4,315,624			1,062,147			150,052			-			5,527,823
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		30,446,473			216,231			-			-			30,662,704
END OF THE PERIOD	$	34,762,097		$	1,278,378		$	150,052		$	-		$	36,190,527

-24-

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(18) 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.

Life insurance company	March 31,			December 31,
	2016			2015
AXA Equitable		14.01	%		14.00	%
John Hancock		11.64	%		12.73	%
Transamerica		10.38	%		*

* percentage does not exceed 10% of the total face value.

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

State of Residence	March 31,			December 31,
	2016			2015
California		23.66	%		25.25	%
Florida		18.92	%		19.25	%

(19) Subsequent events

Subsequent toMarch 31, 2016,the Companyhas issuedapproximately anadditional $13,863,000 inprincipal amount ofL Bonds.

Subsequent to March 31, 2016, the Company has issued approximately $4,214,000 of Redeemable Preferred Stock.

Subsequent to March 31, 2016, the Company has issued 25,000 restricted shares of common stock at $6.25 per share, determined by closing market price, to a vendor as a form of payment for services the vendor will provide to the Company.

Effective February 4, 2016, GWG MCA began to offer for sale up to of 2,000,000 shares of 9% Preferred Stock at an offering price of $10 per share in a private placement. As of May 13, 2016, GWG MCA had not issued any 9% Preferred Stock in this offering.

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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 “Risk Relating to Forward-Looking Statements” below.

Risk Relating to Forward-Looking Statements

Certain matters discussed 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 assumptions underlying our actuarial models;

● our reliance on 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, state and FINRA regulatory matters;

● competition in the secondary market of life insurance;

● the relative illiquidity of life insurance policies;

● our ability to satisfy our debt obligations if we were to sell our entire portfolio of life insurance policies;

● life insurance company credit exposure;

● cost-of-insurance (premium) increases on our life insurance contracts;

● general economic outlook, including prevailing interest rates;

● performance of our investments in life insurance policies;

● financing requirements;

● risks associated with our recent entry into the merchant cash advance business;

● 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. We caution you that the forward-looking statements in this report are only estimates and predictions, or statements of current intent. Actual results, outcomes or actions that we ultimately undertake, could differ materially from those anticipated in the forward-looking statements due to risks, uncertainties or actual events differing from the assumptions underlying these statements.

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.

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Overview

GWG Holdings, Inc. is a specialty finance company and a leading financial purchaser of life insurance assets in the secondary market. We create opportunities for consumers owning life insurance to obtain significant value for their policies as compared to the traditional options offered by insurance companies. We also create opportunities for investors to participate in alternative asset classes, such as life insurance, not correlated to traditional financial markets. In so doing, we enable investors to take advantage of financial opportunities dominated by banks prior to the 2008 credit crisis.

We seek to build a profitable and large portfolio of life insurance assets that are well diversified in terms of insurance companies and insureds. We believe that diversification is a key risk mitigation strategy to provide consistent cash flows and reliable investment returns from our portfolio of life insurance assets. To grow our portfolio and achieve the diversification we seek, we offer investors the opportunity to participate in the yield potentially generated by our portfolio of life insurance assets through a variety of financings and securities offerings. We chose to finance our business in this manner after the 2008 credit crisis, during which banks largely ceased financing alternative asset classes as a result of the regulatory response to the financial crisis. We believe we are well positioned to continue providing investors with yield participation opportunities from alternative asset classes once dominated by the banking sector.

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Business Update 

In February 2016, we launched a new operating division in the merchant cash industry through a subsidiary entity, GWG MCA Capital, Inc. (“GWG MCA”). GWG MCA provides secured loans to merchant cash advance funders, and also provides merchant cash advances directly to small businesses across the United States. To begin this operating division, we acquired a $4.3 million portfolio of loans and advances from a subsidiary of Walker Preston Capital. As part of the transaction, we retained the services of Patrick F. Preece as the President and Chief Executive Officer of GWG MCA. Mr. Preece had been the Chief Executive Officer of Walker Preston Capital prior to our acquisition of its loan portfolio and, prior to his work with Walker Preston Capital, Mr. Preece was head of asset securitization for Autobahn Funding, a $6 billion commercial paper conduit for DZ Bank that specialized in financing alternative classes. To finance our GWG MCA portfolio, we intend to offer investors the opportunity to participate in the yield potentially generated by these alternative assets through a variety of securities offerings.

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

We account for thepurchase of life insurance policies in accordance with Financial Accounting StandardsBoard’sAccountingStandardsCodification (FASB ASC)325-30, Investments in Insurance Contracts, whichrequires us touseeither theinvestment methodor thefairvalue method. Wehaveelected toaccount for all of our lifeinsurancepolicies usingthe fair value method.

The fair value of our life insurance policies is determined as the net present value of the life insurance portfolio’s future expected cash flows (policy benefits received and required premium payments) that incorporates current life expectancy estimates and discount rate assumptions.

We initially record our purchase of life insurance policies at the transaction price, which is the amount paid for the policy, inclusive of all external 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 subsequent 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. 

Fair Value Components – Medical Underwriting

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 (policy benefits received and required premium payments made) 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 expected future cash flows to be derived from our portfolio.

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Fair Value Components – Required Premium Payments

We must pay the premiums on the life insurance policies within our portfolio in order to collect the policy benefit. The same probabilistic model and methodologies used to generate expected cash inflows from the life insurance policy benefits over the expected life of the insured are used to estimate cash outflows due to required premium payments. Premiums paid are offset against revenue in the applicable reporting period.

Fair Value Components – Discount Rate

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.

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

March 31, 2016	December 31, 2015
11.08%	11.09%

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, 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 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. 

We engaged a third party, Model Actuarial Pricing Systems (MAPS), to prepare a third-party calculation of our life insurance 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 supplied to calculate a net present value for our portfolio using the specified discount rate of 11.08%. MAPS independently calculated the net present value of our portfolio of 465 policies to be $389.8 million and furnished us with a letter documenting its calculation. A copy of such letter is filed as Exhibit 99.1 to this report. After accounting for AXA cost of insurance increase the net present value of our portfolio was adjusted to $387.4 million, which is the same fair value estimate we used on the balance sheet as of March 31, 2016.

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, which has been charged-off for financial reporting purposes, 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.

Wehave alsoprovided avaluation allowance againstthe deferred taxassetrelated to ataxbasiscapital lossgenerated withrespect tooursettlement and subsequentdisposalofanearlier investment in Athena Structured FundsPLC. Aswe have no expectation ofgenerating capital gainswith theapplicable carry-forwardperiod,we donot believe thatit ismore likely thannotthat the deferredasset will berealized.

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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 those which are expected to result in a capital loss.

Deferred Financing and Issuance Costs

Financing costs incurred under the revolving senior credit facility have been capitalized and are amortized using the straight-line method over the term of the revolving senior 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, as described in Note 9, was 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 a three-year redemption period. As of December 31, 2015, these costs have been fully amortized.  Redeemable Preferred Stock, as described in Note 10, reported net of issuance costs, sales commissions and other direct expenses.

Principal Revenue and Expense Items

We earn revenues from the following three primary sources.

● Policy Benefits Realized. We recognize the difference between the face value of the policy benefits and carrying values when an insured’s mortality event has occurred and determine that settlement and collection of the policy 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 benefit from the insurance company within 45 days of recognizing the revenue.

● 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 the 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 our business operations, including operations related to the purchasing and servicing of life insurance policies. These expenses include salaries and benefits, sales, marketing, occupancy and other expenditures.

● Interest and Dividends. 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 senior credit facility, as well as all interest paid on our L Bonds and other outstanding indebtedness such as our Series I Secured Notes and dividends on our Series A Preferred Stock and our 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.

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Results of Operations — Three Months Ended March 31, 2016 Compared to the Same Period in 2015

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.

Revenue.

	Three Months Ended March 31,
	2016		2015
Revenue recognized from the receipt of policy benefits	$	14,627,000	$	25,014,000
Revenue (loss) recognized from the change in fair value of life insurance policies, net of premiums and carrying costs (1)		3,087,000		(8,231,000	)
Gain on life insurance contracts, net	$	17,714,000	$	16,873,000
Number of policies matured		6		6
The change in fair value related to new policies acquired during the period	$	8,019,000	$	612,000

(1) The discount rate applied to estimate the fair value of the portfolio of life insurance policies we own was 11.08% as of March 31, 2016, compared to 11.38% as of March 31, 2015.  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 (see “Notes to Condensed Consolidated Financial Statements,” Note 4).

Expenses.

	Three Months Ended March 31,
	2016		2015		Increase
Employee compensation and benefits (1)	$	2,466,000	$	1,728,000	$	738,000
Interest expense (including amortization of deferred financing costs and preferred stock dividends) (2)		9,661,000		7,176,000		2,485,000
Legal and professional expenses (3)		1,206,000		578,000		628,000
Other expenses (4)		2,412,000		1,479,000		933,000
Total expenses	$	15,745,000	$	10,961,000	$	4,784,000

(1)	We hired additional members to our sales, marketing and information technology teams.  At the end of 2015 we employed approximately 50 employees, and at March 31, 2016 we employed approximately 66 employees.
(2)	The increase in the current period was due to the increase in our average debt outstanding.
(3)	Increase is due to SEC filings and other costs related to securities offerings and compliance.
(4)	Increase is due to increased public relations, sales and marketing costs associated with growing and servicing our network of independent financial advisors.

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Income Tax Expense. For the three months ended March 31, 2016, we had $2.2 million of income before income taxes and recorded income tax expense of $1.1 million, or 50.2%. In the same period of 2015, we had $5.9 million of income before income taxes and recorded income tax expense of $2.6 million, or 44.4%. 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 primary permanent difference between our effective tax rate and the statutory federal rate are the accrual of preferred stock dividend expense, state income taxes, and other non-deductible expenses. The dividends charged to interest expense were $0.5 million during both the first three month of 2016 and 2015.

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				Three Months Ended
	March 31, 2016				March 31, 2015
Statutory federal income tax (benefit)	$	734,000	34.0	%	$	1,998,000	34.0	%
State income taxes, net of federal benefit		175,000	8.1	%		416,000	7.1	%
Series A Preferred Stock dividends		174,000	8.0	%		183,000	3.1	%
Other permanent and temporary differences		2,000	0.1	%		12,000	0.2	%
Total income tax expense (benefit)	$	1,085,000	50.2	%	$	2,609,000	44.4	%

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 fair value 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 senior revolving credit facility. We have used our debt offerings and a senior revolving credit facility primarily for policy acquisition, policy servicing, and portfolio related financing expenditures.

As of March 31, 2016 and December 31, 2015, we had approximately $50.8 million and $74.4 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.

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Debt Financings Summary

We had the following outstanding debt balances as of March 31, 2016:

Issuer/Borrower	Principal Amount Outstanding		Weighted Average Interest Rate
GWG Holdings, Inc. – L Bonds	$	306,831,000		7.14	%
GWG Life, LLC – Series I Secured Notes		18,508,000		8.61	%
GWG DLP Funding II, LLC – Revolving credit facility		85,011,000		5.69	%
Total	$	410,350,000		6.91	%

Our total revolving senior credit facility and other indebtedness balance as of March 31, 2016 and December 31, 2015 was $410.3 million and $370.8 million, respectively. At March 31, 2016, the total outstanding face amount under our Series I Secured Notes outstanding was $18.5 million, less unamortized selling costs of $0.3 million, resulting in a carrying amount of $18.2 million. At December 31, 2015, the total outstanding face amount under our Series I Secured Notes outstanding was $23.6 million, less unamortized selling costs of $0.3 million, resulting in a carrying amount of $23.3 million. At March 31, 2016, the total outstanding face amount of L Bonds was $306.8 million plus $4.6 million of subscriptions in process, less unamortized selling costs of $9.5 million resulting in a carrying amount of $301.9 million. At December 31, 2015, the total outstanding face amount of L Bonds was $282.2 million plus $3.0 million of subscriptions in process, less unamortized selling costs of $8.2 million resulting in a carrying

The weighted-average interest rate of our outstanding Series I Secured Notes as of March 31, 2016 and December 31, 2015 was 8.61% and 8.47%, respectively, and the weighted-average maturity at those dates was 1.27 and 1.06 years, respectively. The Series I Secured Notes have renewal features. Since we first issued our Series I Secured Notes, we have experienced $159.3 million in maturities, of which $120.0 million has renewed for an additional term as of March 31, 2016. This has provided us with an aggregate renewal rate of approximately 75% for investments in these securities.

The weighted-average interest rate of our outstanding L Bonds as of March 31, 2016 and December 31, 2015 was 7.14% and 7.18%, respectively, and the weighted-average maturity at those dates was 2.04 and 2.02 years, respectively. Our L Bonds have renewal features. Since we first issued our L Bonds, we have experienced $189.4 million in maturities, of which $123.9 million has renewed for an additional term as of March 31, 2016. This has provided us with an aggregate renewal rate of approximately 65% for investments in these securities. 

Future contractual maturities of Series I Secured Notes and L Bonds at December 31, 2016 are:

Years Ending December 31,	Series I Secured Notes		L Bonds		Total
2016	$	6,581,000	$	76,618,000	$	83,199,000
2017		7,956,000		73,736,000		81,692,000
2018		1,596,000		75,804,000		77,400,000
2019		444,000		33,648,000		34,092,000
2020		1,766,000		19,602,000		21,368,000
Thereafter		165,000		27,423,000		27,588,000
	$	18,508,000	$	306,831,000	$	325,339,000

The L Bonds and Series I Secured Notes are secured by all of our assets, and are subordinate to our revolving senior 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 to Condensed Consolidated Financial Statements,” Notes 6 and 7). 

We maintain a $105 million revolving senior credit facility with Autobahn/DZ Bank through GWG Life’s wholly owned subsidiaries DLP II and DLP III. The revolving senior credit facility is used to pay the premium expenses related to our portfolio of life insurance policies. As of March 31, 2016 and December 31, 2015, we had approximately $85.0 million and $65.0 million, respectively, outstanding under the revolving senior credit facility, and maintained an available borrowing base surplus of $20.0 million and $40.0 million, respectively. Effective May 11, 2015, we amended and restated our senior credit facility to reduce the interest cost and extend the term of the facility to June 2018 (see “Notes to Condensed Consolidated Financial Statements,” Note 5). 

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Capital expenditures have historically not been material and we do not anticipate making material capital expenditures in 2016 or beyond.

Corporate Financing History

In November 2009, our wholly owned subsidiary GWG Life offered Series I Secured Notes in a private placement to accredited investors only. This offering was closed in November 2011. As of March 31, 2016 and December 31, 2015, we had approximately $18.5 million and $23.6 million, respectively, in principal amount of Series I Secured Notes outstanding.

In September 2011, we concluded a private placement offering of Series A Preferred Stock, 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. As of March 31, 2016 and December 31, 2015, respectively, we had approximately $20.3 million and $20.8 million of Series A Preferred Stock outstanding.

In January 2012, we began publicly offering up to $250.0 million in debt securities (initially named “Renewable Secured Debentures” and subsequently renamed “L Bonds”) that was completed January 2015.

In September 2014, we consummated an initial public offering of our 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.

In January 2015, we began publicly offering up to $1.0 billion of L Bonds as a follow-on offering to our earlier $250.0 million public debt offering. Through March 31, 2016, the total amount of these L Bonds sold, including renewals, was $496.3 million. As of March 31, 2016 and December 31, 2015, respectively, we had approximately $306.8 million and $282.2 million, respectively, in principal amount of L Bonds outstanding.

In October 2015, we began publicly offering up to 100,000 shares of our Redeemable Preferred Stock at a per-share price of $1,000. As of March 31, 2016 we had issued approximately $1.4 million of Redeemable Preferred Stock.

Portfolio Assets and Secured Indebtedness 

At March 31, 2016, the fair value of our investments in life insurance policies of $387.4 million plus our cash balance of $11.0 million, our restricted cash balance of $19.8 million and our policy benefits receivable of $15.9 million, totaled $434.1 million, representing an excess of portfolio assets over secured indebtedness of $23.8 million. At December 31, 2015, the fair value of our investments in life insurance policies of $356.6 million plus our cash balance of $34.4 million and our restricted cash balance of $2.3 million, totaled $393.3 million, representing an excess of portfolio assets over secured indebtedness of $22.5 million. The L Bonds and Series I Secured Notes are secured by all of our assets and are subordinate to our revolving senior 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.

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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 March 31, 2016. In all cases, the sale of the life insurance assets owned by DLP III will be used first to satisfy all amounts owing under the revolving senior credit facility with Autobahn/ DZ Bank. The net sale proceeds remaining after satisfying all obligations under the revolving senior 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	$	409,819,000	$	391,220,000	$	374,077,000	$	358,240,000		$	343,577,000
Cash, cash equivalents and policy benefits receivable		46,740,000		46,740,000		46,740,000		46,740,000			46,740,000
Total assets		456,559,000		437,960,000		420,817,000		404,980,000			390,317,000
Revolving senior credit facility Autobahn/DZ Bank		85,011,000		85,011,000		85,011,000		85,011,000			85,011,000
Net after revolving senior credit facility		371,548,000		352,949,000		335,806,000		319,969,000			305,306,000
Series I Secured Notes and L Bonds		325,339,000		325,339,000		325,339,000		325,339,000			325,339,000
Net after Series I Secured Notes and L Bonds		46,209,000		27,610,000		10,467,000		(5,370,000	)		(20,033,000	)
Impairment to Series I Secured Notes and L Bonds		No impairment		No impairment		No impairment		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 12.65% or higher. At December 31, 2015, the impairment occurred at a discount rate of approximately 12.58% or higher. The discount rates used to calculate the fair value of our portfolio were 11.08% and 11.09% as of March 31, 2016 and December 31, 2015, 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 — Fair Value Components – Discount Rate” 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.

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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 ages, premium payments will increase. Nevertheless, the probability of actually needing to pay the premiums decreases as the probability of mortality increases. These scheduled premiums and associated probabilities are factored into our expected internal rate of return and cash-flow modeling. Beyond premiums, we incur policy servicing costs, including annual trustee, tracking costs, and debt servicing costs, including principal and interest payments, all of which are excluded from our internal rate of return calculations. Until we receive a stable amount of proceeds from the policy benefits, we intend to pay these costs from our senior credit facility, when permitted, and through the issuance of debt securities, including the L Bonds, and equity securities including our Redeemable Preferred Stock.

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
Nine months ending December 31 ,2016	$	25,258,000	$	558,000	$	25,816,000
2017		36,083,000		558,000		36,641,000
2018		39,398,000		558,000		39,956,000
2019		44,304,000		558,000		44,862,000
2020		49,314,000		558,000		49,872,000
2021		54,825,000		558,000		55,383,000
	$	249,182,000	$	3,348,000	$	252,530,000

Our anticipated premium expenses are subject to the risk of increased cost-of-insurance (COI) charges (i.e., premium charges) for the universal life insurance policies we own.  As of April 21, 2016 we were in receipt of updated life insurance policy illustrations reflecting increased COI for certain policies issued by AXA. The change in fair value associated with these policies was $2.4 million. We have been notified of potential cost of insurance increases on certain universal life policies in our portfolio by other life insurance companies.  Although we cannot now precisely quantify the impact of the increase upon our costs, or upon the fair value of our portfolio, less than 4% of the fair value of our portfolio is attributable to such policies. As a result, we expect that our premium expense will increase and the fair value of our portfolio will be negatively impacted once we have the required information regarding the proposed increases.

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		28.1	%
June 30, 2012		489,255,000		8,703,000		15,412,000		56.5	%
September 30, 2012		515,661,000		7,833,000		15,837,000		49.5	%
December 31, 2012		572,245,000		7,350,000		16,597,000		44.3	%
March 31, 2013		639,755,000		11,350,000		18,044,000		62.9	%
June 30, 2013		650,655,000		13,450,000		19,182,000		70.1	%
September 30, 2013		705,069,000		18,450,000		20,279,000		91.0	%
December 31, 2013		740,648,000		16,600,000		21,733,000		76.4	%
March 31, 2014		771,940,000		12,600,000		21,930,000		57.5	%
June 30, 2014		784,652,000		6,300,000		22,598,000		27.9	%
September 30, 2014		787,964,000		4,300,000		23,121,000		18.6	%
December 31, 2014		779,099,000		18,050,000		23,265,000		77.6	%
March 31, 2015		754,942,000		46,675,000		23,786,000		196.2	%
June 30, 2015		806,274,000		47,125,000		24,348,000		193.6	%
September 30, 2015		878,882,000		44,482,000		25,313,000		175.7	%
December 31, 2015		944,844,000		31,232,000		26,650,000		117.2	%
March 31, 2016		1,027,821,000		21,845,000		28,771,000		75.9	%

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. As our receipt of life insurance policy benefits increases, we expect to use these cash flows to begin paying down our outstanding indebtedness and purchase additional life insurance policies. 

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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

GWG Holdings entered into an office lease with U.S. Bank National Association as the landlord. The original lease was for 11,695 square feet of office space located at 220 South Sixth Street, Minneapolis, Minnesota. The original lease agreement was effective April 22, 2012, amended on December 14, 2014 and expired on August 31, 2015. Effective September 14, 2015, GWG Holdings entered into a second amendment to the lease with U.S. Bank National Association (Second Amendment to Lease). The Second Amendment to Lease increases the office space area to 17,687 square feet and extends the lease expiration date by approximately ten years (see “Notes to Condensed Consolidated Financial Statements,” Note 15).

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. See “Portfolio Credit Risk Management” below.

Interest Rate Risk

Our senior credit facility is floating-rate financing. In addition, our ability to offer interest rates that attract capital (including in our continuous offering 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 also reduce the earnings we expect to achieve from our investments in life insurance policies.

Non-GAAP Financial Measures

We use non-GAAP financial measures for maintaining compliance with covenants contained in our borrowing agreements and for planning and forecasting purposes. Non-GAAP financial measures disclosed by management are provided as additional information to investors in order to provide 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. Please see the notes to our condensed consolidated financial statements and our financial statements contained herein.

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We use non-GAAP financial measures for evaluating financial results, planning and forecasting, and maintaining compliance with covenants contained in borrowing agreements. The application of current GAAP standards during a period of significant growth in our business, in which period we are building a large and actuarially diverse portfolio of life insurance, results in current period operating performance that may not be reflective of our long-term earnings potential. Management believes that our non-GAAP financial measures permit investors to better focus on this long-term earnings performance without regard to the volatility in GAAP financial results that can occur during this phase of growth.

In addition, management believes that GAAP financial 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 our expected internal rate of return based on statistical mortality probabilities for the insureds (using primarily the insured’s age, sex, health 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.

Our senior 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 using the method described above, without regard to GAAP-based fair value measures. In addition, our revolving senior 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 senior 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, the indenture under which our L Bonds were and continue to be issued, and the note issuance and security agreement under which our Series I Secured Notes were issued, 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. This ratio is calculated using non-GAAP measures in the method described below, without regard to GAAP-based fair value measures.

Adjusted Non-GAAP Net Income. Our senior 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.

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Three months ended March 31,	2016			2015
GAAP net income	$	1,074,000		$	3,262,000
Unrealized fair value gain (1)		(11,532,000	)		1,894,000
Adjusted cost basis increase (2)		15,367,000			12,229,000
Accrual of unrealized actuarial gain (3)		8,180,000			4,241,000
Total adjusted non-GAAP income (4)	$	13,089,000		$	21,626,000

(1)	Reversal of unrealized GAAP fair value gain of life insurance policies for current period.
(2)	Adjusted cost basis is increased to include interest, premiums and servicing fees which are not capitalized under GAAP (the non-GAAP cost basis).
(3)	Accrual of actuarial gain at expected internal rate of return based on the non-GAAP 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 senior 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 March 31, 2016			As of December 31, 2015
GAAP net worth (1)	$	17,715,000		$	16,160,000
Less intangible assets (2)		(12,964,000	)		(11,562,000	)
GAAP tangible net worth		4,751,000			4,598,000
Unrealized fair value gain (3)		(205,575,000	)		(194,043,000	)
Adjusted cost basis increase (4)		200,213,000			190,645,000
Accrual of unrealized actuarial gain (5)		119,533,000			111,355,000
Total adjusted non-GAAP tangible net worth (6)	$	118,922,000		$	112,555,000

(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 GAAP fair value gain or loss of life insurance policies.
(4)	Adjusted cost basis is increased to include interest, premiums and servicing fees which are not capitalized under GAAP.
(5)	Accrual of cumulative actuarial gain at expected internal rate of return based the non-GAAP 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.

Excess Spread. Our revolving senior 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 revolving senior credit facility’s interest rate. The expected internal rate of return on the portfolio is the rate of return the portfolio would earn if all future cash flows occurred over time in proportion to the likelihood of their occurrence.  Expected future cash flows represent the size of each potential payment (premiums and policy benefits), multiplied by the probability of that particular payment occurring.  This calculation is known as the “probabilistic expectation” and it is based on actuarial estimations of life expectancy.  For instance, a required premium payment of $10,000 might be projected for a given policy at a date five years from now.  If there is a 50% chance of survival for the next five years, then that particular expected cash-outflow is calculated at $5,000.  Similarly, if the policy benefit amount on the same policy is $1 million, then during the next five years, the probable expected cash-inflow of policy benefits will total $500,000 with the other $500,000 projected to occur over the remaining life of the insured. The rate of return generated by the net of all such future expected cash flows for the portfolio is thus the expected IRR for the portfolio.

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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 March 31, 2016			As of December 31, 2015
Weighted-average expected IRR (1)		11.33	%		11.11	%
Weighted-average revolving credit facility interest rate (2)		5.69	%		5.58	%
Excess spread (3)		5.64	%		5.53	%
Total weighted-average interest rate on indebtedness for borrowed money (4)		6.91	%		6.98	%
Total excess spread (5)		4.42	%		4.13	%

(1) This represents the weighted-average expected internal rate of return of the life insurance policies as of the measurement date based upon our Non-GAAP cost basis of the insurance policies and the expected cash flows from the life insurance portfolio.

Investment Cost Basis	As of March 31, 2016			As of December 31, 2015
GAAP fair value	$	387,402,000		$	356,650,000
Unrealized fair value gain (A)		(205,575,000	)		(194,043,000	)
Adjusted cost basis increase (B)		200,213,000			190,645,000
Investment cost basis (C)	$	382,040,000		$	353,252,000

(A)	This represents the reversal of cumulative unrealized GAAP fair value gain of life insurance policies.
(B)	Adjusted cost basis is increased to interest, premiums and servicing fees which are not capitalized under GAAP.
(C)	This is the non-GAAP cost basis in life insurance policies from which our expected internal rate of return is calculated.

(2)	This is the weighted-average revolving senior credit facility interest rate as of the measurement date.
(3)	We must maintain an excess spread of 2.00% relating to our revolving senior credit facility to maintain compliance under such facility.
(4)	Represents the weighted-average interest rate paid on all interest-bearing indebtedness as of the measurement date, determined as follows:

Indebtedness	As of March 31, 2016		As of December 31, 2015
Revolving senior credit facility	$	85,011,000	$	65,011,000
Series I Secured Notes		18,508,000		23,578,000
L Bonds		306,831,000		282,171,000
Total	$	410,350,000	$	370,760,000

Interest Rates on Indebtedness
Revolving senior credit facility	5.69	%	5.58	%
Series I Secured Notes	8.61	%	8.47	%
L Bonds	7.14	%	7.18	%
Weighted-average interest rates paid on indebtedness	6.91	%	7.20	%

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

Debt Coverage Ratio and Subordination Ratio. Our L Bond and Series I Secured Notes borrowing covenants 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 interest-bearing 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 interest-bearing 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 paid on all indebtedness. As of the date of this report, the subordination ratio provisions under the indenture have expired.

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	As of March 31, 2016			As of December 31, 2015
Life insurance portfolio policy benefits	$	1,027,821,000		$	944,844,000
Discount rate of future cash flows		6.91	%		6.98	%
Net present value of Life insurance portfolio policy benefits	$	478,483,000		$	435,738,000
Cash and cash equivalents		30,827,000			36,767,000
Total Coverage		509,310,000			472,505,000
Revolving credit facility		85,011,000			65,011,000
Series I Secured notes		18,508,000			23,578,000
L Bonds		306,831,000			282,171,000
Total Indebtedness	$	410,350,000		$	370,760,000
Debt Coverage Ratio		80.57	%		78.47	%
Subordination Ratio		16.69	%		13.76	%

As of March 31, 2016, we were in compliance with both the debt coverage ratio and the subordination ratio.

Non-GAAP Net Asset Value. The non-GAAP net asset value attempts to measure the economic value of the Company’s common equity by netting interest-bearing debt and the redemption/liquidation value of the Company’s outstanding Series A Preferred Stock against the value of the Company’s portfolio of life insurance (discounted at our weighted-average interest rate paid on all indebtedness) and cash, cash equivalents and policy benefits receivable, if any, at the end of the measurement period. Management believes this is a useful way to view the common equity value attributable to the current gross yield spread in the Company’s portfolio of life insurance.

	As of March 31,			As of December 31,
	2016			2015
Life insurance portfolio policy benefits	$	1,027,821,000		$	944,844,000
Discount rate of future cash flows		6.91	%		6.98	%
Net present value of life insurance policy benefits	$	478,483,000		$	435,738,000
Cash and cash equivalents	$	30,827,000		$	36,767,000
Policy benefits receivable	$	15,913,000		$	-
Interest bearing debt	$	(410,350,000	)	$	(370,760,000	)
Preferred stock redemption value	$	(22,384,000	)	$	(22,949,000	)
Net asset value	$	92,489,000		$	78,796,000
Per share	$	15.56		$	13.26
Shares outstanding (basic)		5,942,790			5,941,790

Non-GAAP Expected Portfolio Internal Rate of Return at Purchase. This measure replaces the Non-GAAP Blended Portfolio Internal Rate of Return previously disclosed. The non-GAAP expected portfolio internal rate of return (IRR) at purchase is calculated as the weighted average (by face amount of policy benefits) of the IRR expected at the time of purchase for all life insurance policies in the portfolio. This non-GAAP measure isolates our IRR expectation at purchase and utilizes our underwriting life expectancy assumptions at the time. This measure does not change with the passage of time as compared to our non-GAAP cost basis that increases with the payment of premiums and financing costs which are used to calculate our expected portfolio IRR.  

	As of March 31,			As of December 31,
	2016			2015
Life insurance portfolio policy benefits	$	1,027,821,000		$	945,000,000
Total number of polices		465			396
Non-GAAP Expected Portfolio Internal Rate of Return at Purchase		15.64	%		15.71	%

We have in the past reported Non-GAAP Blended Portfolio Internal Rate of Return, which is the weighted average (by face amount of policy benefits) of the IRR attained on policies that have matured and the IRR we expect to earn on our current portfolio. We use this non-GAAP measure to assess the reasonableness of our yield expectation of the portfolio over time. However, since reporting the Blended Internal Rate of Return we realized that when we have significant maturities within a short period of time after purchase (as we did in the three months ending March 31, 2016) the Blended Internal Rate of Return calculation’s effectiveness in characterizing long-term yield expectations of the portfolio is reduced. In addition, the value of reporting the Blended Internal Rate of Return was to illustrate that the ultimate IRR earned on the portfolio is expected to converge near the Expected Internal Rate of Return at Purchase. We expect to continue to report The Non-GAAP Expected Portfolio Internal Rate of Return at Purchase until we have a statistically significant population of maturities within the portfolio to accurately measure this expected convergence.

Additionally, we participate in a new and developing asset class, and as a result will continue to seek better and more useful metrics to measure the value and performance of our portfolio and business over time.

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Portfolio Information

Our portfolio of life insurance policies, owned by our subsidiaries as of March 31, 2016, is summarized below:

Life Insurance Portfolio Summary

Total portfolio face value of policy benefits	$	1,027,821,000
Average face value per policy	$	2,210,000
Average face value per insured life	$	2,453,000
Average age of insured (yrs.)*		82.4
Average life expectancy estimate (yrs.)*		6.7
Total number of policies		465
Number of unique lives		419
Demographics		72% Males; 28% Females
Number of smokers		12
Largest policy as % of total portfolio		0.97	%
Average policy as % of total portfolio		0.22	%
Average annual premium as % of face value		3.31	%

* Averages presented in the table are weighted averages.

Our portfolio of life insurance policies, owned by our wholly owned subsidiaries as of March 31, 2016, organized by the insured’s current age and the associated number of policies and policy benefits, is summarized below:

 Distribution of Policies and Policy Benefits by Current Age of Insured

						Percentage of Total
Min Age	Max Age	Policies	Policy Benefits		Wtd. Avg. Life Expectancy (yrs.)	Number of Policies			Policy Benefits
90	95	37	$	76,183,000	2.8		8.0	%		7.4	%
85	89	129	$	285,371,000	4.9		27.7	%		27.8	%
80	84	134	$	354,095,000	6.7		28.8	%		34.5	%
75	79	86	$	197,392,000	8.7		18.5	%		19.2	%
70	74	49	$	75,207,000	9.5		10.5	%		7.3	%
65	69	30	$	39,573,000	10.7		6.5	%		3.8	%
Total		465	$	1,027,821,000	6.7		100.0	%		100.0	%

Our portfolio of life insurance policies, owned by our wholly owned subsidiaries as of March 31, 2016, organized by the insured’s estimated life expectancy estimates and associated policy benefits, is summarized below:

Distribution of Policies by Current Life Expectancies of Insured

					Percentage of Total
Min LE (Months)	Max LE (Months)	Policies	Policy Benefits		Number of Policies			Policy Benefits
5	47	112	$	203,437,000		24.1	%		19.8	%
48	71	121		262,773,000		26.0	%		25.6	%
72	95	93		243,226,000		20.0	%		23.7	%
96	119	75		173,001,000		16.1	%		16.8	%
120	143	41		92,464,000		8.8	%		9.0	%
144	201	23		52,920,000		5.0	%		5.1	%
Total		465	$	1,027,821,000		100.0	%		100.0	%

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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 within the following ten primary disease categories: (1) cancer, (2) cardiovascular, (3) cerebrovascular, (4) dementia, (5) diabetes, (6) multiple, (7) neurological disorders, (8) no disease, (9) other, and (10) respiratory diseases. 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, the only primary disease category within our portfolio that represents a concentration of over 10% is cardiovascular, which constitutes 20.8% of the value of our portfolio.

Portfolio Credit Risk Management

We rely on the payment of policy benefit claims by life insurance companies as our most significant source of revenue collection. The life insurance assets we own represent obligations of third-party life insurance companies to pay face value of the life insurance policy benefits. As a result, we manage this credit risk exposure by generally purchasing policies issued by insurance companies with investment-grade ratings from Standard & Poor’s, and diversifying our portfolio among a number of insurance companies.

As of March 31, 2016, 97.6% of our life insurance policies, by face value benefits, were issued by insurance companies that maintained an investment-grade rating (BBB- or better) by Standard & Poor’s. Our largest life insurance company credit exposures and their respective Standard & Poor’s credit rating of their respective financial strength and claims paying ability is set forth below:

Rank	Policy Benefits		Percentage of Policy Benefit Amount			Insurance Company	Ins. Co. S&P Rating
1	$	143,974,000		14.0	%	AXA Equitable Life Insurance Company	A+
2	$	119,605,000		11.6	%	John Hancock Life Insurance Company (U.S.A.)	AA-
3	$	106,729,000		10.5	%	Transamerica Life Insurance Company	AA-
4	$	64,403,000		6.3	%	Voya Retirement Insurance and Annuity Company	A
5	$	60,569,000		5.9	%	Jefferson-Pilot Life Insurance Company	AA-
6	$	53,615,000		5.2	%	Lincoln National Life Insurance Company	AA-
7	$	50,646,000		4.9	%	Metropolitan Life Insurance Company	A+
8	$	47,675,000		4.6	%	American General Life Insurance Company	A+
9	$	44,250,000		4.3	%	Massachusetts Mutual Life Insurance Company	AA+
10	$	36,000,000		3.5	%	West Coast Life Insurance Company	AA-
		727,466,000		70.80	%

The yield to maturity on bonds issued by life insurance carriers reflects, among other things, the credit risk (risk of default) of such insurance carrier.  We follow the yields on certain publicly traded life insurance company bonds as this information is part of the data we consider when valuing our portfolio of life insurance policies for our financial statements according to GAAP. 

Name of Bond	Maturity		YTM			Duration (Years)		Bond S&P Rating
AXA 7.125%		12/15/2020		3.29	%		5.0	BBB
Manulife Finl 4.9%		9/17/2020		2.54	%		4.7	A
Lincoln National Corp Ind 4%		9/1/2023		3.44	%		7.7	A-
Amer Intl Grp 5%		4/26/2023		3.23	%		7.3	A-
Protective Life 7.375%		10/15/2019		2.85	%		3.8	A-
Metlife 3.048%		12/15/2022		2.94	%		7.0	A-
Prudential Finl Inc Mtns Book 4.5%		11/16/2021		2.86	%		5.9	A
Average yield on insurance bonds				3.02	%		5.9

The table above indicates the current yields to maturity (YTM) for the senior bonds of selected life insurance carriers with durations, on average, that our similar to our life insurance portfolio.  The average yield to maturity of these bonds was 3.02% which, we believe, reflects in part the financial market’s judgement that credit risk is low with regard to these carriers’ financial obligations. It should be noted that the obligations of life insurance carriers to pay life insurance policy benefits is senior in rank to any other obligation.  This “super senior” priority is not reflected in the yield to maturity in the table and, if considered, would result in a lower yield to maturity all else being equal. As such, as long as the respective premium payments have been made, it is highly likely that the owner of the insurance policy will collect the insurance policy benefit upon the mortality of the insured.

The complete detail of our portfolio of life insurance policies, owned by our wholly owned subsidiaries as of March 31, 2016, organized by the current age of the insured and the associated policy benefits, sex, estimated life expectancy, issuing insurance carrier, and the credit rating of the issuing insurance carrier, is set forth below.

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Life Insurance Portfolio Detail

(as of March 31, 2016)

	Face Amount		Gender	Age (ALB)	LE (mo.)		Insurance Company	S&P Rating
1	$	4,000,000	Male	95		33.8	MetLife Investors USA Insurance Company	A+
2	$	1,100,000	Male	95		28.4	Voya Retirement Insurance and Annuity Company	A
3	$	1,500,000	Female	95		31.3	Aviva Life Insurance Company	A-
4	$	1,000,000	Female	94		37.1	Transamerica Life Insurance Company	AA-
5	$	3,200,000	Male	94		26.5	West Coast Life Insurance Company	AA-
6	$	3,500,000	Male	93		38.8	Voya Retirement Insurance and Annuity Company	A
7	$	264,000	Female	93		24.0	Lincoln Benefit Life Company	BBB+
8	$	250,000	Male	93		21.3	Transamerica Life Insurance Company	AA-
9	$	572,429	Female	92		33.2	Voya Retirement Insurance and Annuity Company	A
10	$	3,000,000	Male	92		38.7	West Coast Life Insurance Company	AA-
11	$	500,000	Male	92		11.4	John Hancock Life Insurance Company (U.S.A)	AA-
12	$	5,000,000	Female	92		49.6	American General Life Insurance Company	A+
13	$	2,000,000	Female	92		10.2	Pruco Life Insurance Company	AA-
14	$	500,000	Female	92		47.2	Sun Life Assurance Company of Canada (U.S.)	AA-
15	$	1,682,773	Female	91		47.7	Hartford Life and Annuity Insurance Company	BBB+
16	$	5,000,000	Male	91		30.2	John Hancock Life Insurance Company (U.S.A)	AA-
17	$	3,100,000	Female	91		31.3	Lincoln Benefit Life Company	BBB+
18	$	500,000	Female	91		61.3	John Hancock Life Insurance Company	AA-
19	$	5,000,000	Female	91		28.6	John Hancock Life Insurance Company (U.S.A)	AA-
20	$	500,000	Male	91		47.2	Voya Retirement Insurance and Annuity Company	A
21	$	1,000,000	Male	91		7.4	Voya Retirement Insurance and Annuity Company	A
22	$	300,000	Female	91		29.0	West Coast Life Insurance Company	AA-
23	$	3,845,000	Female	91		44.6	Pacific Life Insurance Company	A+
24	$	500,000	Male	90		44.9	Massachusetts Mutual Life Insurance Company	AA+
25	$	500,000	Female	90		20.7	Lincoln National Life Insurance Company	AA-
26	$	1,000,000	Female	90		47.7	United of Omaha Life Insurance Company	AA-
27	$	3,500,000	Female	90		68.3	John Hancock Life Insurance Company (U.S.A)	AA-
28	$	1,500,000	Female	90		65.4	Jefferson-Pilot Life Insurance Company	AA-
29	$	2,500,000	Female	90		4.7	AXA Equitable Life Insurance Company	A+
30	$	2,500,000	Female	90		4.7	AXA Equitable Life Insurance Company	A+
31	$	3,000,000	Female	90		30.9	Jefferson-Pilot Life Insurance Company	AA-
32	$	5,000,000	Female	90		37.4	Voya Retirement Insurance and Annuity Company	A
33	$	5,000,000	Female	90		16.0	Lincoln National Life Insurance Company	AA-
34	$	715,000	Female	90		57.2	Jefferson-Pilot Life Insurance Company	AA-
35	$	1,203,520	Male	90		41.0	Columbus Life Insurance Company	AA
36	$	1,350,000	Female	90		33.2	Jefferson-Pilot Life Insurance Company	AA-
37	$	600,000	Female	90		19.3	Columbus Life Insurance Company	AA
38	$	5,000,000	Female	89		47.2	Massachusetts Mutual Life Insurance Company	AA+
39	$	2,500,000	Female	89		44.6	American General Life Insurance Company	A+
40	$	2,500,000	Male	89		50.0	Pacific Life Insurance Company	A+
41	$	5,000,000	Male	89		49.0	AXA Equitable Life Insurance Company	A+
42	$	375,000	Male	89		37.5	Lincoln National Life Insurance Company	AA-
43	$	1,103,922	Female	89		55.5	Sun Life Assurance Company of Canada (U.S.)	AA-
44	$	1,500,000	Male	89		39.9	John Hancock Life Insurance Company (U.S.A)	AA-
45	$	1,500,000	Male	89		39.9	John Hancock Life Insurance Company (U.S.A)	AA-
46	$	1,000,000	Female	89		60.4	Transamerica Life Insurance Company	AA-
47	$	250,000	Female	89		60.4	Transamerica Life Insurance Company	AA-
48	$	1,050,000	Male	89		39.6	John Hancock Life Insurance Company (U.S.A)	AA-
49	$	3,000,000	Male	89		94.4	Transamerica Life Insurance Company	AA-
50	$	500,000	Male	89		57.6	Lincoln National Life Insurance Company	AA-
51	$	4,785,380	Female	89		42.3	John Hancock Life Insurance Company (U.S.A)	AA-
52	$	1,803,455	Female	89		45.4	Metropolitan Life Insurance Company	A+
53	$	1,529,270	Female	89		45.4	Metropolitan Life Insurance Company	A+
54	$	800,000	Male	89		63.1	Lincoln National Life Insurance Company	AA-
55	$	5,000,000	Male	89		48.1	John Hancock Life Insurance Company (U.S.A)	AA-
56	$	2,225,000	Female	89		79.3	Transamerica Life Insurance Company	AA-
57	$	3,000,000	Female	89		77.2	Massachusetts Mutual Life Insurance Company	AA+
58	$	1,500,000	Male	89		42.5	Union Central Life Insurance Company	A+
59	$	3,500,000	Female	89		37.3	Lincoln National Life Insurance Company	AA-
60	$	396,791	Male	89		30.3	Lincoln National Life Insurance Company	AA-
61	$	1,500,000	Male	89		100.0	Transamerica Life Insurance Company	AA-
62	$	3,000,000	Male	89		28.6	American General Life Insurance Company	A+

-44-

	Face Amount		Gender	Age (ALB)	LE (mo.)		Insurance Company	S&P Rating
63	$	248,859	Female	88		29.3	Lincoln National Life Insurance Company	AA-
64	$	500,000	Female	88		62.7	Sun Life Assurance Company of Canada (U.S.)	AA-
65	$	5,000,000	Female	88		30.8	Transamerica Life Insurance Company	AA-
66	$	3,000,000	Male	88		43.4	Transamerica Life Insurance Company	AA-
67	$	250,000	Male	88		67.3	Metropolitan Life Insurance Company	A+
68	$	6,000,000	Female	88		51.5	Sun Life Assurance Company of Canada (U.S.)	AA-
69	$	4,000,000	Female	88		67.0	Transamerica Life Insurance Company	AA-
70	$	1,000,000	Female	88		34.0	New York Life Insurance Company	AA+
71	$	1,000,000	Male	88		50.8	AXA Equitable Life Insurance Company	A+
72	$	1,250,000	Male	88		31.6	Columbus Life Insurance Company	AA
73	$	300,000	Male	88		31.6	Columbus Life Insurance Company	AA
74	$	10,000,000	Female	88		66.7	West Coast Life Insurance Company	AA-
75	$	2,500,000	Male	88		43.8	Transamerica Life Insurance Company	AA-
76	$	1,000,000	Female	88		46.1	West Coast Life Insurance Company	AA-
77	$	2,000,000	Female	88		46.1	West Coast Life Insurance Company	AA-
78	$	800,000	Male	88		50.8	National Western Life Insurance Company	A
79	$	500,000	Female	88		45.5	Transamerica Life Insurance Company	AA-
80	$	400,000	Female	88		45.5	Lincoln Benefit Life Company	BBB+
81	$	1,269,017	Male	88		29.5	Hartford Life and Annuity Insurance Company	BBB+
82	$	200,000	Male	88		44.3	Lincoln Benefit Life Company	BBB+
83	$	4,445,467	Male	88		54.1	Penn Mutual Life Insurance Company	A+
84	$	7,500,000	Male	88		45.1	Jefferson-Pilot Life Insurance Company	AA-
85	$	3,600,000	Female	88		53.2	AXA Equitable Life Insurance Company	A+
86	$	1,000,000	Female	88		30.1	John Hancock Life Insurance Company (U.S.A)	AA-
87	$	4,513,823	Female	88		20.5	Aviva Life Insurance Company	A-
88	$	3,000,000	Male	88		38.7	Jefferson-Pilot Life Insurance Company	AA-
89	$	309,000	Male	88		31.5	Transamerica Life Insurance Company	AA-
90	$	2,000,000	Male	88		42.4	John Hancock Life Insurance Company (U.S.A)	AA-
91	$	100,000	Female	88		50.2	American General Life Insurance Company	A+
92	$	100,000	Female	88		50.2	American General Life Insurance Company	A+
93	$	2,000,000	Female	88		71.0	U.S. Financial Life Insurance Company	A+
94	$	1,000,000	Male	87		56.2	John Hancock Life Insurance Company (U.S.A)	AA-
95	$	2,000,000	Male	87		56.2	John Hancock Life Insurance Company (U.S.A)	AA-
96	$	5,000,000	Male	87		46.3	Jefferson-Pilot Life Insurance Company	AA-
97	$	1,200,000	Male	87		67.6	Transamerica Life Insurance Company	AA-
98	$	1,000,000	Female	87		81.2	Voya Retirement Insurance and Annuity Company	A
99	$	200,000	Female	87		79.6	Lincoln National Life Insurance Company	AA-
100	$	3,000,000	Male	87		73.6	AXA Equitable Life Insurance Company	A+
101	$	1,000,000	Female	87		20.4	State Farm Life Insurance Company	AA-
102	$	209,176	Male	87		86.8	Lincoln National Life Insurance Company	AA-
103	$	8,500,000	Male	87		75.7	Massachusetts Mutual Life Insurance Company	AA+
104	$	1,000,000	Male	87		22.0	Transamerica Life Insurance Company	AA-
105	$	500,000	Male	87		76.3	Metropolitan Life Insurance Company	A+
106	$	347,211	Male	87		35.5	Prudential Life Insurance Company	AA-
107	$	500,000	Female	87		49.4	Beneficial Life Insurance Company	N/A
108	$	5,000,000	Male	87		75.4	Lincoln National Life Insurance Company	AA-
109	$	2,000,000	Male	87		88.4	Voya Retirement Insurance and Annuity Company	A
110	$	2,000,000	Male	87		88.4	Voya Retirement Insurance and Annuity Company	A
111	$	2,000,000	Male	87		88.4	Voya Retirement Insurance and Annuity Company	A
112	$	1,365,000	Female	86		87.3	Transamerica Life Insurance Company	AA-
113	$	1,000,000	Male	86		35.1	Massachusetts Mutual Life Insurance Company	AA+
114	$	3,750,000	Male	86		70.5	AXA Equitable Life Insurance Company	A+
115	$	2,000,000	Male	86		90.7	Transamerica Life Insurance Company	AA-
116	$	2,000,000	Male	86		48.5	Metropolitan Life Insurance Company	A+
117	$	3,000,000	Male	86		48.5	Metropolitan Life Insurance Company	A+
118	$	1,000,000	Male	86		33.5	John Hancock Life Insurance Company (U.S.A)	AA-
119	$	2,000,000	Female	86		78.0	AXA Equitable Life Insurance Company	A+
120	$	3,000,000	Female	86		76.9	Sun Life Assurance Company of Canada (U.S.)	AA-
121	$	125,000	Male	86		58.8	Jackson National Life Insurance Company	AA
122	$	1,000,000	Male	86		49.8	AXA Equitable Life Insurance Company	A+
123	$	2,328,547	Male	86		39.5	Metropolitan Life Insurance Company	A+
124	$	2,000,000	Male	86		39.5	Metropolitan Life Insurance Company	A+

-45-

	Face Amount		Gender	Age (ALB)	LE (mo.)		Insurance Company	S&P Rating
125	$	2,000,000	Male	86		56.3	Jefferson-Pilot Life Insurance Company	AA-
126	$	1,500,000	Male	86		44.0	Voya Retirement Insurance and Annuity Company	A
127	$	1,500,000	Male	86		44.0	Voya Retirement Insurance and Annuity Company	A
128	$	3,000,000	Female	86		65.1	Transamerica Life Insurance Company	AA-
129	$	5,000,000	Male	86		67.3	Voya Retirement Insurance and Annuity Company	A
130	$	1,000,000	Male	86		41.9	John Hancock Life Insurance Company (U.S.A)	AA-
131	$	1,800,000	Male	86		48.5	John Hancock Variable Life Insurance Company	AA-
132	$	5,000,000	Female	86		85.8	American General Life Insurance Company	A+
133	$	2,000,000	Male	86		57.3	AXA Equitable Life Insurance Company	A+
134	$	1,750,000	Male	86		57.3	AXA Equitable Life Insurance Company	A+
135	$	4,000,000	Male	86		45.6	Metropolitan Life Insurance Company	A+
136	$	2,000,000	Male	86		30.2	Transamerica Life Insurance Company	AA-
137	$	1,425,000	Male	86		71.8	John Hancock Life Insurance Company (U.S.A)	AA-
138	$	800,000	Male	86		45.2	Metropolitan Life Insurance Company	A+
139	$	5,000,000	Female	85		92.7	AXA Equitable Life Insurance Company	A+
140	$	1,000,000	Female	85		76.1	John Hancock Life Insurance Company (U.S.A)	AA-
141	$	6,000,000	Female	85		102.8	American General Life Insurance Company	A+
142	$	1,433,572	Male	85		48.8	Security Mutual Life Insurance Company of NY	N/A
143	$	1,500,000	Male	85		32.6	Transamerica Life Insurance Company	AA-
144	$	1,500,000	Female	85		101.4	Lincoln Benefit Life Company	BBB+
145	$	1,000,000	Female	85		37.6	Metropolitan Life Insurance Company	A+
146	$	4,000,000	Male	85		30.8	John Hancock Life Insurance Company (U.S.A)	AA-
147	$	1,000,000	Male	85		71.0	John Hancock Life Insurance Company (U.S.A)	AA-
148	$	2,000,000	Female	85		91.2	Lincoln Benefit Life Company	BBB+
149	$	1,000,000	Male	85		48.6	Voya Retirement Insurance and Annuity Company	A
150	$	2,000,000	Female	85		66.1	New York Life Insurance Company	AA+
151	$	2,400,000	Male	85		31.4	Genworth Life Insurance Company	BB
152	$	829,022	Female	85		20.2	Hartford Life and Annuity Insurance Company	BBB+
153	$	1,500,000	Male	85		72.7	AXA Equitable Life Insurance Company	A+
154	$	5,000,000	Male	85		82.2	Voya Retirement Insurance and Annuity Company	A
155	$	7,600,000	Female	85		92.6	Transamerica Life Insurance Company	AA-
156	$	2,500,000	Female	85		59.2	American General Life Insurance Company	A+
157	$	2,500,000	Male	85		53.5	AXA Equitable Life Insurance Company	A+
158	$	3,000,000	Male	85		53.5	Lincoln National Life Insurance Company	AA-
159	$	500,000	Male	85		36.3	Genworth Life Insurance Company	BB
160	$	500,000	Male	85		44.0	New England Life Insurance Company	AA-
161	$	4,000,000	Female	85		45.5	Voya Retirement Insurance and Annuity Company	A
162	$	3,000,000	Female	85		37.6	AXA Equitable Life Insurance Company	A+
163	$	1,703,959	Male	85		61.5	Jefferson-Pilot Life Insurance Company	AA-
164	$	500,000	Male	85		14.9	Great Southern Life Insurance Company	N/A
165	$	1,000,000	Male	85		52.1	Hartford Life and Annuity Insurance Company	BBB+
166	$	3,500,000	Female	85		100	Lincoln Benefit Life Company	BBB+
167	$	5,000,000	Male	84		59.4	AXA Equitable Life Insurance Company	A+
168	$	1,000,000	Male	84		56.7	Texas Life Insurance Company	N/A
169	$	500,000	Male	84		98.1	Metropolitan Life Insurance Company	A+
170	$	2,000,000	Male	84		34.9	National Life Insurance Company	A
171	$	2,147,816	Female	84		111.9	John Hancock Life Insurance Company (U.S.A)	AA-
172	$	4,200,000	Female	84		110.4	Transamerica Life Insurance Company	AA-
173	$	850,000	Male	84		53.5	American General Life Insurance Company	A+
174	$	750,000	Male	84		80.7	West Coast Life Insurance Company	AA-
175	$	5,000,000	Male	84		51.2	AXA Equitable Life Insurance Company	A+
176	$	385,000	Male	84		67.2	Metropolitan Life Insurance Company	A+
177	$	500,000	Male	84		67.2	Metropolitan Life Insurance Company	A+
178	$	5,000,000	Male	84		68.2	Jefferson-Pilot Life Insurance Company	AA-
179	$	1,500,000	Male	84		70.4	Jefferson-Pilot Life Insurance Company	AA-
180	$	3,500,000	Female	84		81.3	AXA Equitable Life Insurance Company	A+
181	$	1,000,000	Female	84		94.4	West Coast Life Insurance Company	AA-
182	$	8,500,000	Male	84		102.9	John Hancock Life Insurance Company	AA-
183	$	600,000	Male	84		93.9	AXA Equitable Life Insurance Company	A+
184	$	3,000,000	Female	84		61.3	MetLife Investors USA Insurance Company	A+
185	$	750,000	Male	84		72.4	John Hancock Life Insurance Company (U.S.A)	AA-

-46-

	Face Amount		Gender	Age (ALB)	LE (mo.)		Insurance Company	S&P Rating
186	$	4,500,000	Male	84		67.6	AXA Equitable Life Insurance Company	A+
187	$	250,000	Male	84		46	Transamerica Life Insurance Company	AA-
188	$	2,275,000	Male	84		86.2	Voya Retirement Insurance and Annuity Company	A
189	$	340,000	Female	84		79.8	Jackson National Life Insurance Company	AA
190	$	2,000,000	Male	84		79.2	Pacific Life Insurance Company	A+
191	$	3,500,000	Male	84		66.5	AXA Equitable Life Insurance Company	A+
192	$	7,600,000	Male	84		94.8	Transamerica Life Insurance Company	AA-
193	$	1,800,000	Female	84		54.0	Jefferson-Pilot Life Insurance Company	AA-
194	$	3,000,000	Male	84		55.3	Metropolitan Life Insurance Company	A+
195	$	1,275,000	Male	84		49.3	General American Life Insurance Company	A+
196	$	2,000,000	Female	84		90.7	Jefferson-Pilot Life Insurance Company	AA-
197	$	2,247,450	Female	84		53.4	Transamerica Life Insurance Company	AA-
198	$	400,000	Male	84		43.7	Transamerica Life Insurance Company	AA-
199	$	3,500,000	Female	83		83.0	Jefferson-Pilot Life Insurance Company	AA-
200	$	1,000,000	Male	83		63.1	Lincoln National Life Insurance Company	AA-
201	$	3,000,000	Male	83		36.2	U.S. Financial Life Insurance Company	A+
202	$	1,500,000	Male	83		53.7	Pacific Life Insurance Company	A+
203	$	5,000,000	Male	83		103.9	American General Life Insurance Company	A+
204	$	1,900,000	Male	83		59.8	American National Insurance Company	A
205	$	500,000	Male	83		41.2	New York Life Insurance Company	AA+
206	$	500,000	Male	83		41.2	New York Life Insurance Company	AA+
207	$	75,000	Male	83		42.4	Fidelity and Guaranty Insurance Company	AA
208	$	10,000,000	Male	83		68.1	Lincoln National Life Insurance Company	AA-
209	$	250,000	Male	83		28.0	Jackson National Life Insurance Company	AA
210	$	5,000,000	Female	83		70.3	Sun Life Assurance Company of Canada (U.S.)	AA-
211	$	1,995,000	Female	83		74.0	Transamerica Life Insurance Company	AA-
212	$	4,000,000	Male	83		51.6	Jefferson-Pilot Life Insurance Company	AA-
213	$	1,250,000	Female	83		55.1	Columbus Life Insurance Company	AA
214	$	10,000,000	Male	83		77.4	AXA Equitable Life Insurance Company	A+
215	$	1,000,000	Male	83		64.2	Hartford Life and Annuity Insurance Company	BBB+
216	$	1,000,000	Male	83		64.2	Jackson National Life Insurance Company	AA
217	$	2,300,000	Male	83		18.5	American General Life Insurance Company	A+
218	$	6,217,200	Female	83		98.9	Phoenix Life Insurance Company	B+
219	$	2,500,000	Female	83		65.8	Voya Retirement Insurance and Annuity Company	A
220	$	5,000,000	Female	83		51.3	Massachusetts Mutual Life Insurance Company	AA+
221	$	5,000,000	Male	83		70.0	Transamerica Life Insurance Company	AA-
222	$	1,000,000	Male	83		46.7	American General Life Insurance Company	A+
223	$	350,000	Male	83		32.2	Reassure America Life Insurance Company	AA
224	$	5,000,000	Male	83		77.8	Jefferson-Pilot Life Insurance Company	AA-
225	$	3,000,000	Male	82		63.0	Protective Life Insurance Company	AA-
226	$	1,500,000	Male	82		63.0	American General Life Insurance Company	A+
227	$	2,000,000	Female	82		99.6	Transamerica Life Insurance Company	AA-
228	$	5,000,000	Male	82		87.3	AXA Equitable Life Insurance Company	A+
229	$	550,000	Male	82		111.6	Genworth Life Insurance Company	BB
230	$	500,000	Male	82		59.7	West Coast Life Insurance Company	AA-
231	$	1,680,000	Female	82		65.1	AXA Equitable Life Insurance Company	A+
232	$	1,000,000	Female	82		91.9	Jefferson-Pilot Life Insurance Company	AA-
233	$	2,000,000	Male	82		80.5	New York Life Insurance Company	AA+
234	$	250,000	Male	82		141.5	Voya Retirement Insurance and Annuity Company	A
235	$	1,250,000	Male	82		96.4	Metropolitan Life Insurance Company	A+
236	$	1,000,000	Male	82		62.2	AXA Equitable Life Insurance Company	A+
237	$	1,250,000	Female	82		70.4	Principal Life Insurance Company	A+
238	$	2,000,000	Male	82		38.0	Jefferson-Pilot Life Insurance Company	AA-
239	$	10,000,000	Male	82		75.5	New York Life Insurance Company	AA+
240	$	417,300	Male	82		96.0	Jackson National Life Insurance Company	AA
241	$	10,000,000	Male	82		65.6	Hartford Life and Annuity Insurance Company	BBB+
242	$	5,000,000	Male	82		69.0	AXA Equitable Life Insurance Company	A+

-47-

	Face Amount		Gender	Age (ALB)	LE (mo.)		Insurance Company	S&P Rating
243	$	300,000	Female	82		69.0	Hartford Life and Annuity Insurance Company	BBB+
244	$	2,502,000	Male	82		145.6	Transamerica Life Insurance Company	AA-
245	$	10,000,000	Male	82		109.3	John Hancock Life Insurance Company (U.S.A)	AA-
246	$	2,000,000	Male	82		66.0	Ohio National Life Assurance Corporation	AA-
247	$	1,000,000	Male	82		66.0	Ohio National Life Assurance Corporation	AA-
248	$	3,000,000	Female	82		101.7	West Coast Life Insurance Company	AA-
249	$	7,000,000	Male	82		82.7	Genworth Life Insurance Company	BB
250	$	3,000,000	Male	81		145.4	Metropolitan Life Insurance Company	A+
251	$	6,000,000	Male	81		104.5	Transamerica Life Insurance Company	AA-
252	$	8,000,000	Male	81		81.1	AXA Equitable Life Insurance Company	A+
253	$	800,000	Male	81		75.9	North American Company for Life And Health Insurance	A+
254	$	2,000,000	Male	81		26.4	Metropolitan Life Insurance Company	A+
255	$	3,000,000	Female	81		65.9	AXA Equitable Life Insurance Company	A+
256	$	320,987	Female	81		101.6	John Hancock Life Insurance Company (U.S.A)	AA-
257	$	1,000,000	Male	81		53.6	AXA Equitable Life Insurance Company	A+
258	$	700,000	Male	81		97.3	Banner Life Insurance Company	AA-
259	$	2,000,000	Female	81		85.6	Pacific Life Insurance Company	A+
260	$	3,000,000	Male	81		94.6	John Hancock Life Insurance Company (U.S.A)	AA-
261	$	1,750,000	Male	81		79.2	AXA Equitable Life Insurance Company	A+
262	$	250,000	Male	81		76.4	American General Life Insurance Company	A+
263	$	2,000,000	Female	81		84.3	Transamerica Life Insurance Company	AA-
264	$	3,500,000	Male	81		81.5	Metropolitan Life Insurance Company	A+
265	$	250,000	Female	81		98.7	Aviva Life Insurance Company	A-
266	$	1,000,000	Male	81		54.2	Pacific Life Insurance Company	A+
267	$	3,000,000	Male	81		108.5	Principal Life Insurance Company	A+
268	$	200,000	Male	81		44.2	Prudential Life Insurance Company	AA-
269	$	1,210,000	Male	81		62.4	Lincoln National Life Insurance Company	AA-
270	$	3,000,000	Male	80		41.1	Pacific Life Insurance Company	A+
271	$	3,000,000	Male	80		41.1	Minnesota Life Insurance Company	A+
272	$	3,000,000	Male	80		41.1	Prudential Life Insurance Company	AA-
273	$	3,000,000	Male	80		88.0	Voya Retirement Insurance and Annuity Company	A
274	$	5,000,000	Male	80		95.0	Pacific Life Insurance Company	A+
275	$	5,000,000	Male	80		95.0	Pacific Life Insurance Company	A+
276	$	4,000,000	Male	80		78.5	Jefferson-Pilot Life Insurance Company	AA-
277	$	3,601,500	Male	80		91.7	Transamerica Life Insurance Company	AA-
278	$	300,000	Female	80		95.7	Metropolitan Life Insurance Company	A+
279	$	200,000	Male	80		70.4	Protective Life Insurance Company	AA-
280	$	150,000	Male	80		70.4	Protective Life Insurance Company	AA-
281	$	150,000	Male	80		70.4	Protective Life Insurance Company	AA-
282	$	350,000	Male	80		70.4	Lincoln National Life Insurance Company	AA-
283	$	5,000,000	Male	80		126.1	Principal Life Insurance Company	A+
284	$	5,000,000	Male	80		88.2	John Hancock Life Insurance Company (U.S.A)	AA-
285	$	7,000,000	Male	80		83.8	Lincoln Benefit Life Company	BBB+
286	$	100,000	Male	80		62.1	North American Company for Life And Health Insurance	A+
287	$	6,799,139	Male	80		122.5	AXA Equitable Life Insurance Company	A+
288	$	1,000,000	Female	80		84.9	Lincoln Benefit Life Company	BBB+
289	$	476,574	Male	80		70.1	Transamerica Life Insurance Company	AA-
290	$	6,000,000	Male	80		119.7	AXA Equitable Life Insurance Company	A+
291	$	130,000	Male	80		49.4	Genworth Life Insurance Company	BB
292	$	1,000,000	Male	80		120.9	Empire General Life Assurance Corporation	AA-
293	$	4,000,000	Male	80		92.4	Lincoln National Life Insurance Company	AA-
294	$	4,300,000	Female	80		106.7	American National Insurance Company	A
295	$	200,000	Male	80		64.2	Kansas City Life Insurance Company	N/A
296	$	200,000	Male	80		55.1	Lincoln National Life Insurance Company	AA-
297	$	6,000,000	Male	80		104.8	AXA Equitable Life Insurance Company	A+

-48-

	Face Amount		Gender	Age (ALB)	LE (mo.)		Insurance Company	S&P Rating
298	$	1,500,000	Female	80		72.9	Protective Life Insurance Company	AA-
299	$	750,000	Male	80		67.9	Lincoln National Life Insurance Company	AA-
300	$	500,000	Male	80		46.1	Transamerica Life Insurance Company	AA-
301	$	5,000,000	Male	79		77.2	John Hancock Life Insurance Company (U.S.A)	AA-
302	$	1,000,000	Male	79		93.8	Sun Life Assurance Company of Canada (U.S.)	AA-
303	$	5,000,000	Male	79		86.8	John Hancock Life Insurance Company (U.S.A)	AA-
304	$	1,250,000	Male	79		96.4	AXA Equitable Life Insurance Company	A+
305	$	3,000,000	Female	79		86.0	New York Life Insurance Company	AA+
306	$	1,009,467	Male	79		56.9	John Hancock Life Insurance Company (U.S.A)	AA-
307	$	4,000,000	Male	79		48.9	MetLife Investors USA Insurance Company	A+
308	$	2,500,000	Male	79		86.1	Massachusetts Mutual Life Insurance Company	AA+
309	$	2,500,000	Male	79		86.1	Massachusetts Mutual Life Insurance Company	AA+
310	$	5,000,000	Male	79		55.2	John Hancock Life Insurance Company (U.S.A)	AA-
311	$	2,250,000	Male	79		92.2	Massachusetts Mutual Life Insurance Company	AA+
312	$	775,000	Male	79		121.5	Lincoln National Life Insurance Company	AA-
313	$	1,000,000	Female	79		120.6	John Hancock Life Insurance Company (U.S.A)	AA-
314	$	1,445,000	Female	79		101.8	AXA Equitable Life Insurance Company	A+
315	$	1,500,000	Female	79		101.8	AXA Equitable Life Insurance Company	A+
316	$	1,000,000	Male	79		84.3	Lincoln National Life Insurance Company	AA-
317	$	325,000	Male	79		41.4	American General Life Insurance Company	A+
318	$	3,750,000	Male	79		58.0	AXA Equitable Life Insurance Company	A+
319	$	1,000,000	Male	79		108.2	Metropolitan Life Insurance Company	A+
320	$	5,000,000	Female	79		114.1	Voya Retirement Insurance and Annuity Company	A
321	$	5,000,000	Male	79		178.8	West Coast Life Insurance Company	AA-
322	$	3,000,000	Male	79		93.6	Principal Life Insurance Company	A+
323	$	5,000,000	Male	78		116.4	Jefferson-Pilot Life Insurance Company	AA-
324	$	3,000,000	Male	78		83.7	American General Life Insurance Company	A+
325	$	500,000	Male	78		65.6	John Hancock Life Insurance Company (U.S.A)	AA-
326	$	1,000,000	Male	78		112.3	Metropolitan Life Insurance Company	A+
327	$	2,840,000	Male	78		97.2	Transamerica Life Insurance Company	AA-
328	$	750,000	Male	78		87.7	North American Company for Life and Health Insurance	A+
329	$	1,000,000	Male	78		87.7	John Hancock Life Insurance Company	AA-
330	$	500,000	Female	78		114.1	Columbus Life Insurance Company	AA
331	$	1,000,000	Female	78		74.2	John Hancock Life Insurance Company (U.S.A)	AA-
332	$	2,000,000	Male	78		100.2	Lincoln National Life Insurance Company	AA-
333	$	2,000,000	Male	78		100.2	Lincoln National Life Insurance Company	AA-
334	$	1,750,000	Male	78		61.7	John Hancock Life Insurance Company (U.S.A)	AA-
335	$	5,000,000	Male	78		102.0	Transamerica Life Insurance Company	AA-
336	$	1,000,000	Male	78		120.7	Principal Life Insurance Company	A+
337	$	550,000	Male	78		77.9	Prudential Life Insurance Company	AA-
338	$	300,000	Male	78		77.9	Prudential Life Insurance Company	AA-
339	$	6,250,000	Male	78		193.7	John Hancock Life Insurance Company (U.S.A)	AA-
340	$	2,000,000	Female	78		55.6	Transamerica Life Insurance Company	AA-
341	$	1,000,000	Male	77		103.6	Aviva Life Insurance Company	A-
342	$	3,000,000	Male	77		96.5	Prudential Life Insurance Company	AA-
343	$	1,100,000	Male	77		138.7	Aviva Life Insurance Company	A-
344	$	3,000,000	Male	77		103.3	Protective Life Insurance Company	AA-
345	$	4,000,000	Male	77		67.3	Massachusetts Mutual Life Insurance Company	AA+
346	$	1,000,000	Female	77		128.4	John Hancock Life Insurance Company (U.S.A)	AA-
347	$	7,000,000	Female	77		121.9	Pacific Life Insurance Company	A+
348	$	100,946	Female	77		160.5	Genworth Life Insurance Company	BB
349	$	2,000,000	Male	77		105.4	Genworth Life Insurance Company	BB
350	$	1,000,000	Male	77		83.0	Pacific Life Insurance Company	A+
351	$	2,000,000	Male	77		118.9	Transamerica Life Insurance Company	AA-
352	$	200,000	Male	77		117.1	Prudential Life Insurance Company	AA-
353	$	150,000	Male	77		105.4	Genworth Life Insurance Company	BB

-49-

	Face Amount		Gender	Age (ALB)	LE (mo.)		Insurance Company	S&P Rating
354	$	490,620	Male	77		86.0	Ameritas Life Insurance Corporation	A+
355	$	600,000	Male	77		83.5	Protective Life Insurance Company	AA-
356	$	5,000,000	Male	77		59.5	West Coast Life Insurance Company	AA-
357	$	5,000,000	Male	76		148.5	Prudential Life Insurance Company	AA-
358	$	250,000	Male	76		103.7	Midland National Life Insurance Company	A+
359	$	3,000,000	Male	76		55.7	Aviva Life Insurance Company	A-
360	$	500,000	Male	76		102.1	AXA Equitable Life Insurance Company	A+
361	$	3,000,000	Male	76		113.3	John Hancock Life Insurance Company (U.S.A)	AA-
362	$	5,000,000	Male	76		113.3	John Hancock Life Insurance Company (U.S.A)	AA-
363	$	3,000,000	Female	76		106.3	John Hancock Life Insurance Company	AA-
364	$	5,000,000	Male	76		141.7	Massachusetts Mutual Life Insurance Company	AA+
365	$	5,000,000	Male	76		141.7	Massachusetts Mutual Life Insurance Company	AA+
366	$	8,000,000	Male	76		99.1	Metropolitan Life Insurance Company	A+
367	$	2,000,000	Female	76		119.1	Aviva Life Insurance Company	A-
368	$	1,000,000	Male	76		160.4	Security Mutual Life Insurance Company of NY	N/A
369	$	1,000,000	Male	76		103.9	Athene Life Insurance Company of New York	A-
370	$	5,000,000	Male	76		33.5	Lincoln Benefit Life Company	BBB+
371	$	850,000	Male	76		68.9	New York Life Insurance Company	AA+
372	$	1,000,000	Male	76		117.5	Transamerica Life Insurance Company	AA-
373	$	1,000,000	Male	75		127.3	Transamerica Life Insurance Company	AA-
374	$	200,000	Male	75		70.7	Voya Retirement Insurance and Annuity Company	A
375	$	500,000	Male	75		94.8	AXA Equitable Life Insurance Company	A+
376	$	500,000	Male	75		108.9	United of Omaha Life Insurance Company	AA-
377	$	750,000	Male	75		31.3	North American Company for Life And Health Insurance	A+
378	$	4,000,000	Female	75		143.6	American General Life Insurance Company	A+
379	$	355,700	Male	75		109.0	Voya Retirement Insurance and Annuity Company	A
380	$	300,000	Male	75		17.9	Lincoln National Life Insurance Company	AA-
381	$	2,000,000	Male	75		151.9	John Hancock Life Insurance Company	AA-
382	$	10,000,000	Female	75		139.8	Voya Retirement Insurance and Annuity Company	A
383	$	1,000,000	Female	75		155.4	John Hancock Life Insurance Company (U.S.A)	AA-
384	$	500,000	Male	75		77.2	American General Life Insurance Company	A+
385	$	3,000,000	Female	75		116.3	General American Life Insurance Company	A+
386	$	300,000	Female	75		138.2	Minnesota Life Insurance Company	A+
387	$	500,000	Male	74		39.2	Midland National Life Insurance Company	A+
388	$	1,000,000	Male	74		101.7	Transamerica Life Insurance Company	AA-
389	$	3,000,000	Male	74		76.1	AXA Equitable Life Insurance Company	A+
390	$	2,000,000	Male	74		124.6	Prudential Life Insurance Company	AA-
391	$	2,000,000	Male	74		99.8	American General Life Insurance Company	A+
392	$	400,000	Male	74		85.3	Protective Life Insurance Company	AA-
393	$	500,000	Male	73		127.6	Ameritas Life Insurance Corporation	A+
394	$	370,000	Male	73		127.6	Ameritas Life Insurance Corporation	A+
395	$	1,000,000	Female	73		125.3	United of Omaha Life Insurance Company	AA-
396	$	2,500,000	Male	73		108.6	John Hancock Life Insurance Company (U.S.A)	AA-
397	$	500,000	Male	73		140.1	Prudential Life Insurance Company	AA-
398	$	2,500,000	Male	73		109.9	American General Life Insurance Company	A+
399	$	800,000	Male	73		127.3	John Hancock Life Insurance Company	AA-
400	$	1,500,000	Male	73		131.2	Lincoln National Life Insurance Company	AA-
401	$	1,500,000	Male	73		131.2	Lincoln National Life Insurance Company	AA-
402	$	1,500,000	Male	73		131.2	Lincoln National Life Insurance Company	AA-
403	$	2,000,000	Male	73		136.6	John Hancock Life Insurance Company	AA-
404	$	1,167,000	Male	73		29.8	Transamerica Life Insurance Company	AA-
405	$	2,000,000	Male	72		104.6	New York Life Insurance Company	AA+
406	$	2,000,000	Male	72		104.6	New York Life Insurance Company	AA+
407	$	5,000,000	Male	72		133.7	John Hancock Life Insurance Company (U.S.A)	AA-
408	$	2,500,000	Male	72		119.6	Lincoln National Life Insurance Company	AA-
409	$	2,500,000	Male	72		119.6	John Hancock Life Insurance Company (U.S.A)	AA-

-50-

	Face Amount		Gender	Age (ALB)	LE (mo.)		Insurance Company	S&P Rating
410	$	500,000	Male	72		133.5	Metropolitan Life Insurance Company	A+
411	$	2,000,000	Male	72		125.8	Voya Financial	A
412	$	1,500,000	Male	72		125.8	Voya Financial	A
413	$	300,000	Male	72		118.8	Protective Life Insurance Company	AA-
414	$	250,000	Male	72		72.7	American General Life Insurance Company	A+
415	$	300,000	Male	72		116.4	New England Life Insurance Company	AA-
416	$	600,000	Male	72		88.2	AXA Equitable Life Insurance Company	A+
417	$	1,500,000	Male	72		113.9	Metropolitan Life Insurance Company	A+
418	$	420,000	Male	72		127.4	RiverSource Life Insurance Company	A+
419	$	10,000,000	Male	72		123.5	AXA Equitable Life Insurance Company	A+
420	$	250,000	Male	71		54.7	Protective Life Insurance Company	AA-
421	$	650,000	Female	71		76.4	Voya Retirement Insurance and Annuity Company	A
422	$	500,000	Male	71		125.4	Ohio National Life Assurance Corporation	AA-
423	$	2,500,000	Male	71		55.3	Transamerica Life Insurance Company	AA-
424	$	400,000	Male	71		201.1	Protective Life Insurance Company	AA-
425	$	3,000,000	Male	71		78.8	John Hancock Life Insurance Company (U.S.A)	AA-
426	$	750,000	Male	71		130.1	Transamerica Life Insurance Company	AA-
427	$	1,250,000	Male	71		104.5	West Coast Life Insurance Company	AA-
428	$	500,000	Male	71		96.1	Transamerica Life Insurance Company	AA-
429	$	500,000	Male	71		96.1	North American Company for Life And Health Insurance	A+
430	$	5,000,000	Male	71		156.7	Metropolitan Life Insurance Company	A+
431	$	250,000	Female	70		126.3	Ohio National Life Assurance Corporation	AA-
432	$	400,000	Male	70		166.3	Lincoln National Life Insurance Company	AA-
433	$	1,500,000	Female	70		158.5	Prudential Life Insurance Company	AA-
434	$	1,500,000	Male	70		75.7	Lincoln National Life Insurance Company	AA-
435	$	150,000	Male	70		38.0	Protective Life Insurance Company	AA-
436	$	750,000	Male	69		139.7	North American Company for Life And Health Insurance	A+
437	$	2,000,000	Male	69		117.1	Transamerica Life Insurance Company	AA-
438	$	1,000,000	Male	69		117.1	Genworth Life Insurance Company	BB
439	$	1,000,000	Male	69		65.0	Protective Life Insurance Company	AA-
440	$	1,500,000	Male	69		110.5	Midland National Life Insurance Company	A+
441	$	1,000,000	Male	68		143.1	Transamerica Life Insurance Company	AA-
442	$	2,500,000	Male	68		166.1	Prudential Life Insurance Company	AA-
443	$	2,500,000	Male	68		166.1	Prudential Life Insurance Company	AA-
444	$	500,000	Male	68		46.1	Voya Retirement Insurance and Annuity Company	A
445	$	1,000,000	Male	68		92.0	Protective Life Insurance Company	AA-
446	$	250,000	Female	68		163.2	Protective Life Insurance Company	AA-
447	$	150,000	Male	68		122.2	Protective Life Insurance Company	AA-
448	$	156,538	Female	68		110.4	New York Life Insurance Company	AA+
449	$	2,000,000	Male	68		53.1	MetLife Investors USA Insurance Company	A+
450	$	2,000,000	Male	68		53.1	MetLife Investors USA Insurance Company	A+
451	$	3,000,000	Male	68		198.4	John Hancock Life Insurance Company	AA-
452	$	300,000	Male	68		95.2	Protective Life Insurance Company	AA-
453	$	3,000,000	Male	67		105.0	Voya Retirement Insurance and Annuity Company	A
454	$	2,000,000	Male	67		105.0	AXA Equitable Life Insurance Company	A+
455	$	2,000,000	Male	67		105.0	AXA Equitable Life Insurance Company	A+
456	$	750,000	Male	67		166.6	Northwestern Mutual Life Insurance Company	AA+
457	$	5,616,468	Male	67		185.7	John Hancock Life Insurance Company (U.S.A)	AA-
458	$	400,000	Male	66		196.5	Lincoln National Life Insurance Company	AA-
459	$	1,000,000	Male	66		50.0	Lincoln National Life Insurance Company	AA-
460	$	1,000,000	Male	66		82.1	Transamerica Life Insurance Company	AA-
461	$	350,000	Female	66		90.2	Assurity Life Insurance Company	N/A
462	$	350,000	Male	66		102.1	RiverSource Life Insurance Company	A+
463	$	250,000	Male	66		168.1	Prudential Life Insurance Company	AA-
464	$	750,000	Male	66		133.4	Pacific Life Insurance Company	A+
465	$	500,000	Female	65		176.6	Banner Life Insurance Company	AA-
		1,027,820,898

(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 (i.e., a policy with $1 million in face value benefits or less), is the average of two life expectancy estimates provided by independent third-party medical-actuarial underwriting firms at the time of purchase, actuarially adjusted through the measurement date. Numbers in this column represent months.

-51-

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 March 31, 2016, 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 amended, 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 March 31, 2016 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
31.1	Section 302 Certification of the Chief Executive Officer (filed herewith).
31.2	Section 302 Certification of the Chief Financial Officer (filed herewith).
32.1	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 April 21, 2016 (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:  May 13, 2016	By:	/s/ Jon R. Sabes
		Chief Executive Officer
Date:  May 13, 2016	By:	/s/ William B. Acheson
		Chief Financial Officer

-54-

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: May 13, 2016	/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: May 13, 2016	/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 March 31, 2016, 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.

/s/ Jon R. Sabes

Jon R. Sabes

Chief Executive Officer

May 13, 2016

/s/ William B. Acheson

WILLIAM B. ACHESON

Chief Financial Officer

May 13, 2016

EX-99.1

Exhibit 99.1

4350 East-West Hwy, Suite 900 Bethesda, MD 20814 +1 (847) 483-9401

April 21, 2016

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 4/15/2016 to project potential cash flows monthly following the 3/31/2016 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 03/31/2016 file had 465 policies with total face amounts of $1,027,820,898, a net increase of 69 policies and net increase of $82,976,427 in face amount over the prior quarter. The 12/31/2015 file had 396 policies with total face amounts of $944,844,471.

● 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 11.08% and 6.91%. 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 3/31/2016
Number of Policies		465
Total Net Death Benefit ($)		1,027,820,898
Discount Rate		11.08%	6.91%	12.00%	15.00%
Expected Net Present Value ($)		389,797,312	478,483,088	374,077,035	329,973,303
Stochastic Analysis — 10,000 Scenarios
95th Percentile Net Present Value ($)		357,547,514	446,410,655	341,934,636	298,544,420
95% CTE Net Present Value ($)		349,667,441	437,990,931	334,135,267	290,778,563

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 

4350 East-West Hwy, Suite 900 Bethesda, MD 20814 +1 (847) 483-9401

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 95th 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: 11.08% and 6.91% 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

4350 East-West Hwy, Suite 900 Bethesda, MD 20814 +1 (847) 483-9401

Background

Model Actuarial Pricing Systems, LP is a subsidiary of Cantor Fitzgerald (a leading global fmancial 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/ Lisa Simms

Lisa Simms

Model Actuarial Pricing Systems, LP

Model Actuarial Pricing Systems, LP

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	May. 13, 2016
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	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		5,973,790

XML

Condensed Consolidated Balance Sheets - USD ($)	Mar. 31, 2016	Dec. 31, 2015
A S S E T S
Cash and cash equivalents	$ 10,998,625	$ 34,425,105
Restricted cash	19,828,620	2,341,900
Investment in life insurance contracts, at fair value	387,402,111	$ 356,649,715
Secured MCA advances	4,235,442
Policy benefits receivable	15,912,839
Other assets	3,224,325	$ 2,461,045
TOTAL ASSETS	441,601,962	395,877,765
LIABILITIES
Revolving credit facility	82,304,099	63,279,596
Series I Secured Notes payable	18,226,541	23,287,704
L Bonds	301,924,332	$ 276,482,796
Notes payable to related parties	1,760,000
Accounts payable	2,119,791	$ 1,517,440
Interest payable	12,915,598	12,340,061
Other accrued expenses	1,397,378	1,060,786
Deferred taxes, net	2,819,697	1,763,968
TOTAL LIABILITIES	423,467,436	379,732,351
STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK (par value $0.001; shares authorized 40,000,000; shares outstanding 2,713,246 and 2,781,735; liquidation preference of $20,349,000 and $20,863,000 on March 31, 2016 and December 31, 2015, respectively)	20,274,155	$ 20,784,841
REDEEMABLE PREFERRED STOCK (par value $0.001; shares authorized 100,000; shares outstanding 1,449 on March 31, 2016)	1,369,938
COMMON STOCK (par value $0.001: shares authorized 210,000,000; shares issued and outstanding 5,948,290 and 5,941,790 on March 31, 2016 and December 31, 2015)	5,948	$ 5,942
Additional paid-in capital	17,204,940	17,149,391
Accumulated deficit	(20,720,455)	(21,794,760)
TOTAL STOCKHOLDERS' EQUITY	18,134,526	16,145,414
TOTAL LIABILITIES & EQUITY	$ 441,601,962	$ 395,877,765

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
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	2,713,246	2,781,735
Convertible preferred stock, liquidation preference	$ 20,349,000	$ 20,863,000
Redeemable preferred stock, par value	$ 0.001
Redeemable preferred stock, shares authorized	100,000
Convertible preferred stock, shares outstanding	1,449
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	210,000,000	210,000,000
Common stock, shares issued	5,948,290	5,941,790
Common stock, shares outstanding	5,948,290	5,941,790

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
REVENUE
Gain on life insurance contracts, net	$ 17,713,712	$ 16,783,409
Interest and other income	190,181	49,296
TOTAL REVENUE	17,903,893	16,832,705
EXPENSES
Interest expense	9,660,386	7,176,534
Employee compensation and benefits	2,466,197	1,727,917
Legal and professional fees	1,206,128	578,144
Other expenses	2,412,160	1,478,848
TOTAL EXPENSES	15,744,871	10,961,443
INCOME BEFORE INCOME TAXES	2,159,022	5,871,262
INCOME TAX EXPENSE	1,084,717	2,609,371
NET INCOME	1,074,305	3,261,891
Income attributable to preferred shareholders	342,962	353,155
INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$ 1,417,267	$ 3,615,046
NET INCOME PER COMMON SHARE
Basic	$ 0.24	$ 0.62
Diluted	$ 0.18	$ 0.46
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic	5,942,790	5,870,193
Diluted	7,987,321	7,940,645

XML

Condensed Consolidated Statement of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 1,074,305	$ 3,261,891
Adjustments to reconcile net income to net cash flows from operating activities:
(Gain) loss on life insurance contracts	(11,531,553)	1,893,845
Amortization of deferred financing and issuance costs	784,188	(549,030)
Deferred income taxes	1,055,729	2,182,251
Preferred stock dividends payable	163,577	188,812
(Increase) decrease in operating assets:
Policy benefits receivable	(15,912,839)	(17,890,000)
Other assets	173,426	$ (131,173)
Increase in operating liabilities:
Due to related party	1,712,392
Accounts payable and other accrued expenses	1,967,969	$ 2,635,687
NET CASH FLOWS USED IN OPERATING ACTIVITIES	(20,512,806)	(8,407,717)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts	(24,326,322)	(2,446,477)
Proceeds from settlement of life insurance contracts	4,610,479	$ 3,610,595
Investment in Secured MCA advances	(4,353,585)
Proceeds from Secured MCA advances	118,143
NET CASH FLOWS (USED IN) PROVIDED BY INVESTING ACTIVITIES	(23,951,285)	$ 1,164,118
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on senior revolving credit facility	20,000,000
Payments for redemption of Series I Secured notes payable	(5,237,393)	$ (1,273,189)
Proceeds from issuance of L Bonds	34,368,889	27,960,297
Payments for issuance and redemption of L Bonds	(10,909,693)	(6,878,122)
Increase in restricted cash	(17,486,720)	$ (7,037,564)
Issuance of common stock	46,545
Proceeds from issuance of preferred stock	1,028,536
Payments for issuance and redemption of preferred stock	(772,553)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES	21,037,611	$ 12,771,422
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(23,426,480)	5,527,823
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD	34,425,105	30,662,704
END OF THE PERIOD	10,998,625	36,190,527
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest and preferred dividends paid	6,453,000	6,102,000
Premiums paid	8,445,000	6,325,000
Stock-based compensation	9,000	33,000
Series I Secured Notes:
Conversion of accrued interest and commission payable to principal	44,000	41,000
L Bonds:
Conversion of accrued interest and commission payable to principal	291,000	218,000
Series A Preferred Stock:
Issuance of preferred stock in lieu of cash dividends	168,000	184,000
Investment in life insurance contracts included in accounts payable	$ 1,551,000	$ 87,000

XML

Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - USD ($)	Total	Preferred Stock	Common Stock	Additional Paid-in Capital	Accumulated Deficit
Beginning balance at Dec. 31, 2014	$ 22,389,936	$ 20,527,866	$ 5,870	$ 16,257,686	$ (14,401,486)
Begining balance, Shares at Dec. 31, 2014		2,738,966	5,870,193
Net income/loss	(7,393,274)				$ (7,393,274)
Issuance of common stock	$ 582,000		$ 60	$ 581,940
Issuance of common stock, Share			60,000
Series A Preferred Stock conversion to common stock		$ (115,973)	$ 12	$ 115,961
Series A Preferred Stock conversion to common stock, Shares		(15,463)	11,597
Issuance of preferred stock	$ 387,948	$ 387,948
Issuance of preferred stock, Shares		58,232
Issuance of stock options	193,804			$ 193,804
Ending balance at Dec. 31, 2015	16,145,414	$ 20,799,841	$ 5,942	$ 17,149,391	$ (21,794,760)
Ending balance, Shares at Dec. 31, 2015		2,781,735	5,941,790
Net income/loss	1,074,305				$ 1,074,305
Issuance of common stock	46,545		$ 6	$ 46,539
Issuance of common stock, Share			6,500
Redemption of Series A Preferred Stock	(693,955)	$ (693,955)
Redemption of Series A Preferred Stock, Shares		(92,527)
Issuance of Series A Preferred Stock	168,269	$ 168,269
Issuance of Series A Preferred Stock, Shares		24,038
Issuance of redeemable preferred stock	1,448,536	$ 1,448,536
Issuance of redeemable preferred stock, Shares		1,028
Issuance of stock options	9,010			$ 9,010
Ending balance at Mar. 31, 2016	$ 18,134,526	$ 21,722,691	$ 5,948	$ 17,204,940	$ (20,720,455)
Ending balance, Shares at Mar. 31, 2016		2,714,274	5,948,290

XML

Nature of Business and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2016

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), 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), GWG Life USA, LLC (GWG Life USA) and Wirth Park Agency, LLC, 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). GWG Holdings is also involved in the merchant cash advance business through its wholly owned subsidiary GWG MCA Capital, Inc. (GWG MCA). 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” or “GWG MCA,” are meant to refer only to the particular entity referenced.

On September 30, 2015, GWG Holdings formed a wholly owned subsidiary, Wirth Park Agency, LLC. Wirth Park Agency was formed to convert term life insurance policies into universal, or permanent life insurance. Wirth Park Agency produces commission revenue through this activity.

On December 7, 2015, GWG Holdings formed a wholly owned subsidiary, GWG MCA, LLC. On January 13, 2016, GWG MCA, LLC was converted to a corporation and became GWG MCA Capital, Inc. GWG MCA was formed to engage in the merchant cash advance business.

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 insurance contracts - ASC 325-30, Investments in Insurance Contracts, allows a reporting entity the election to account for its investments in life insurance contracts 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 insurance contracts.

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

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

The Company recognizes the difference between the policy benefits and carrying values of the policy when an insured’s mortality event has occurred and the Company determines that settlement and ultimate collection of the policy 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 $526,000 and $31,000 at March 31, 2016 and December 31, 2015, respectively.

Deferred financing and issuance costs – Loans advanced under the Company’s revolving senior credit facility, as described in note 5, have been reported net of financing costs which are amortized using the straight-line method over the term of the revolving senior credit facility.  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 9, 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, 2015, those costs were fully amortized. Redeemable Preferred Stock, as described in note 10, reported net of issuance costs, sales commissions and other direct expenses.

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 (loss) per share is calculated based on the potential dilutive impact, if any, of the Company’s Series A Preferred Stock, Redeemable Preferred Stock, 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. 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 Company adopted ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, during the first quarter of 2016, as required by the standard. The impact of the new ASU on the Company’s balance sheet was a reduction of approximately $2,288,000 to assets and the corresponding reduction to liabilities and stockholders’ equity. There was no impact on the Company’s statements of operations.

Reclassification - Certain 2015 amounts have been reclassified to conform to ASU No. 2015-03, as described under “Recently adopted pronouncements” above. The reclassifications have no effect on the reported amounts of consolidated net income.

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Restrictions on Cash

3 Months Ended

Mar. 31, 2016

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 senior credit facility, and collect policy benefits. DZ Bank AG, as agent for Autobahn Funding Company, LLC, the lender for the revolving senior credit facility as described in note 5, authorizes the disbursements from these accounts. At March 31, 2016 and December 31, 2015, there was a balance of $19,829,000, and $2,342,000, respectively, maintained in these restricted cash accounts.

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Investment in Life Insurance Policies

3 Months Ended

Mar. 31, 2016

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 11.08% and 11.09% were applied to the portfolio as of March 31, 2016 and December 31, 2015, respectively.

In September of 2015, AXA (an insurance company) announced pending cost of insurance rate increases for certain universal life policies.  The effective date of the increases was originally scheduled for January 1, 2016, but was later delayed until March 1, 2016.  GWG identified 14 such policies in the portfolio that are affected. As of April 21, 2016 we were in receipt of the related updated policy illustrations from AXA.  We calculated the change in fair value related to the increased premiums on these 14 policies to be a reduction of $2,395,000 to the MAPS valuation of the portfolio of $389,797,000 resulting in a net valuation of $387,402,000 as of March 31, 2016.

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 March 31, 2016						As of December 31, 2015
Years Ending December 31,		Number of Contracts		Estimated Fair Value		Face Value		Number of Contracts		Estimated Fair Value		Face Value
	2016		3	$	5,440,000	$	6,000,000		5	$	7,503,000	$	8,500,000
	2017		11		13,855,000		18,043,000		12		12,875,000		17,418,000
	2018		29		32,989,000		50,905,000		27		37,109,000		58,428,000
	2019		51		51,866,000		91,707,000		51		54,242,000		100,967,000
	2020		70		71,319,000		148,360,000		59		64,750,000		137,868,000
	2021		56		53,756,000		130,169,000		48		45,724,000		116,805,000
	2022		49		36,273,000		109,262,000		44		38,394,000		116,998,000
	Thereafter		196		121,904,000		473,375,000		150		96,053,000		387,860,000
	Totals		465	$	387,402,000	$	1,027,821,000		396	$	356,650,000		944,844,000

The Companyrecognizedinsurancebenefits of$19,238,000and$28,625,000 duringthe three months ended March 31, 2016and2015,respectively, related topolicies withacarrying value of$4,611,000 and$3,611,000, respectively. TheCompany recordedrealizedgainsof$14,627,000 and$25,014,000 onsuchpolicies.

Reconciliation of gain on life insurance contracts:

Three Months Ended:	March 31, 2016			March 31, 2015
Change in fair value	$	11,532,000		$	(1,894,000	)
Premiums and other annual fees		(8,445,000	)		(6,337,000	)
Policy maturities		14,627,000			25,014,000
Gain on life insurance contracts, net	$	17,714,000		$	16,783,000

The estimated expected premium payments and servicing fees to maintain the above life insurance policies in force for the next five years, assuming no mortalities, are as follows:

Years Ending December 31,	Premiums		Servicing		Premiums and Servicing Fees
Nine months ending December 31 ,2016	$	25,258,000	$	558,000	$	25,816,000
2017		36,083,000		558,000		36,641,000
2018		39,398,000		558,000		39,956,000
2019		44,304,000		558,000		44,862,000
2020		49,314,000		558,000		49,872,000
2021		54,825,000		558,000		55,383,000
	$	249,182,000	$	3,348,000	$	252,530,000

Management anticipates funding the estimated premium payments as noted above with proceeds from the DZ Bank revolving senior 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.

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Fair Value Definition and Hierarchy

3 Months Ended

Mar. 31, 2016

Fair Value Definition and Hierarchy [Abstract]

Fair value definition and hierarchy

(4)       Fair value definition and hierarchy

ASC 820 establishes a hierarchical 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 an 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 portfolio of life insurance contracts is 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 estimate assumptions, as well as any changes in economic and other relevant conditions. The discount rate incorporates current information about discount rate 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.

These inputs are then used to estimate the discounted cash flows using the Model Actuarial Pricing System (MAPS), probabilistic portfolio price model, which estimates the cash flows using various probabilities and scenarios. The valuation process includes a review by senior management as of each valuation date. Management has also engaged a third-party expert to independently test the accuracy of the valuations using the inputs provided by management on a quarterly basis. See Exhibit 99.1 filed herewith.

Life insurance policies, as well as the portfolio taken as a whole, 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 its portfolio of life insurance policies for the years ending December 31, as follows:

	Three Months Ended  March 31,
	2016			2015
Beginning balance	$	356,650,000		$	282,883,000
Purchases		23,831,000			1,016,000
Maturities (cash in excess of carrying value)		(4,611,000	)		(3,610,000	)
Net change in fair value		11,532,000			(1,894,000	)
Ending balance	$	387,402,000		$	278,395,000

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.

During the fourth quarter of 2014, GWG adopted a plan to update the independent life expectancy estimates, where possible, on the insured lives in our portfolio.  The plan covers all policies with the exception of those policies purchased with small face amount underwriting standards (under $1 million in face amount).  The plan is for each set of life expectancy estimates and medical records to be updated on a continuous rotating three-year cycle.  The records for approximately 1/12^th of the portfolio are being updated each quarter.

We have been notified of potential cost of insurance increases on certain universal life policies in our portfolio by other life insurance companies.  Although we cannot now precisely quantify the impact of the increase upon our costs, or upon the fair value of our portfolio, less than 4% of the fair value of our portfolio is attributable to such policies. As a result, we expect that our premium expense will increase and the fair value of our portfolio will be negatively impacted once we are in receipt of all of the required information regarding the proposed increases.

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 and other inputs utilized in estimating the fair value of the portfolio of life insurance policies:

	As of  March 31, 2016			As of December 31, 2015
Weighted-average age of insured, years		82.4			82.6
Weighted-average life expectancy, months		80.2			79.3
Average face amount per policy	$	2,210,000		$	2,386,000
Discount rate		11.08	%		11.09	%

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 Fair Value of the Investment in Life Insurance Policies

	Change in life expectancy estimates
	minus 8 months		minus 4 months		plus  4 months			plus  8 months
March 31, 2016	$	52,011,000	$	25,901,000	$	(25,278,000	)	$	(49,990,000	)
December 31, 2015	$	48,339,000	$	24,076,000	$	(23,501,000	)	$	(46,482,000	)

	Change in discount rate
	minus 2%		minus 1%		plus 1%			plus 2%
March 31, 2016	$	38,567,000	$	18,477,000	$	(17,033,000	)	$	(32,772,000	)
December 31, 2015	$	35,024,000	$	16,786,000	$	(15,485,000	)	$	(29,803,000	)

Other Fair Value Considerations

Carrying valueof receivables, prepaid expenses,accounts payableandaccruedexpenses approximatefairvalue dueto theirshort-term maturities andlow credit risk.The estimated fairvalue oftheCompany’sSeriesISecuredNotes payableand LBonds isapproximately $326,944,000based onaweighted-average marketinterest rateof 7.06%based onanincome approach,the combinedfacevalueofthesenotesis $325,339,000asofMarch 31,2016. The carrying value of the revolving senior credit facility reflects interestcharged atthe commercial paperrate plusan applicable margin.The margin represents ourcredit risk,andthestrengthoftheportfolio oflifeinsurancepolicies collateralizing thedebt. Theoverallratereflects market,and thecarryingvalue oftherevolverapproximates fair value. The carrying value of Secured MCA advances approximates market value, as they were purchased February 15, 2016. All of thefinancial instruments are Level 3fair value measurements.

The Company has issued warrants to purchase common stock in connection with the issuance of its convertible 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 March 31, 2016:

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. In June 2012, we evaluated the comparable companies used, and made certain changes to those used. 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.

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Credit Facilities

3 Months Ended

Mar. 31, 2016

Credit facilities / Series I Secured Notes payable Renewable / L Bonds [Abstract]

Credit facilities

(5)       Credit facilities

Revolving senior credit facility – Autobahn Funding Company LLC

On July 15, 2008, DLP II entered into a revolving senior 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 DLP II and DLP III, to June 30, 2018. Advances under the senior credit facility made after May 11, 2015 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%, which is 1.75% 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 senior 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 $85,011,000 and $65,011,000 at March 31, 2016 and December 31, 2015, respectively.

The Agreement requires DLP III 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 5.69% at March 31, 2016 and 5.58% at December 31, 2015. The Agreement also requires payment of an unused line fee on the unfunded amount under the revolving senior credit facility. The weighted-average effective interest rate (including the unused line fee) was 5.68% and 6.20% for the three months ended March 31, 2016 and 2015, respectively. The note is secured by the ownership of life insurance policies pledged to DZ Bank by DLP III via Wells Fargo as securities intermediary.

The Agreement has certain financial and nonfinancial covenants. The Company was in compliance with these covenants at March 31, 2016 and December 31, 2015.

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 of $15 million or above.

Consolidated Non-GAAP net income and Non-GAAP tangible net worth as of and for the four quarters ended March 31, 2016, as calculated under the Agreement, was $28,333,000 and $118,922,000 respectively.

Advances under the Agreement are subject to a borrowing base formula, which limits the availability of advances 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 four primary factors which might limit availability of funds on the facility. Total funds available for additional borrowings under the borrowing base formula criteria at March 31, 2016 and December 31, 2015, were $20,000,000 and $39,989,000 respectively.

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Series I Secured Notes payable

3 Months Ended

Mar. 31, 2016

Credit facilities / Series I Secured Notes payable Renewable / L Bonds [Abstract]

Series I Secured Notes payable

(6)       Series I Secured Notes payable

Series I Secured Notes payable have been issued in conjunction with the GWG Series I Secured Notes private placement memorandum dated August 25, 2009. Series I Secured Notes are secured by assets of GWG Life and are subordinate to our revolving senior credit facility (see Note 5). On June 14, 2011, the Company closed the Series I Secured Notes offering to additional investors; however, existing investors may elect to continue advancing amounts outstanding through the renewal provisions upon maturity subject to the Company’s option. 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 March 31, 2016 and December 31, 2015, the weighted-average interest rate of Series I Secured Notes was 8.61% and 8.47%, respectively. The notes are secured by assets of GWG Life. The principal amount outstanding under these Series I Secured Notes was $18,508,000 and $23,578,000 at March 31, 2016 and December 31, 2015, 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 $111,000 and $130,000 for the three months ended March 31, 2016 and 2015, respectively. Future expected amortization of deferred financing costs is $281,000 in total over the next six years.

Future contractual maturities of Series I Secured Notes payable and future amortization of their deferred financing costs at March 31, 2016 are as follows: 

Years Ending December 31,	Contractual Maturities		Amortization of Deferred Financing Costs
Nine months ending December 31 ,2016	$	6,581,000	$	35,000
2017		7,956,000		128,000
2018		1,596,000		41,000
2019		444,000		7,000
2020		1,766,000		63,000
Thereafter		165,000		7,000
	$	18,508,000	$	281,000

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L Bonds

3 Months Ended

Mar. 31, 2016

Credit facilities / Series I Secured Notes payable Renewable / L Bonds [Abstract]

L Bonds

(7)       L Bonds

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 debt securities are secured by assets of GWG Holdings and GWG Life and are subordinate to our revolving senior 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 registered a $1 billion follow-on offering of L Bonds. 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. 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 March 31, 2016 and December 31, 2015, the weighted-average interest rate of L Bonds was 7.14% and 7.18%, respectively. The amount outstanding under these L Bonds was $306,831,000 and $282,171,000 at March 31, 2016 and December 31, 2015, 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 $1,568,000 and $974,000 for the three months ended March 31, 2016 and 2015, respectively. Future expected amortization of deferred financing costs as of March 31, 2016 is $9,522,000 in total over the next eight years.

Future contractual maturities of L Bonds and future amortization of their deferred financing costs at March 31, 2016 are as follows: 

Years Ending December 31,	Contractual Maturities		Amortization of Deferred Financing Costs
Nine months ending December 31 ,2016	$	76,618,000	$	562,000
2017		73,736,000		1,734,000
2018		75,804,000		2,976,000
2019		33,648,000		1,521,000
2020		19,602,000		995,000
Thereafter		27,423,000		1,734,000
	$	306,831,000	$	9,522,000

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 bond holders. The Indenture has certain financial and non-financial covenants. The Company was in compliance with these covenants at March 31, 2016 and December 31, 2015.

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Note Payable to Related Party

3 Months Ended

Mar. 31, 2016

Note Payable to Related Party [Abstract]

Note Payable to Related Party

(8)     Note Payable to Related Party

In February 2016, we acquired certain assets in our wholly owned subsidiary, GWG MCA. To finance this acquisition, GWG MCA borrowed $1,760,000 from Insurance Strategies Fund, LLC (ISF), a related party, under a promissory note dated February 16, 2016. ISF owns 100,000 shares of common stock in GWG Holdings. ISF is owned by SABKA, a trust controlled by Robert Sabes, the father of Jon and Steve Sabes, who beneficially own or control approximately 74% of our common stock. The promissory note accrues interest at an annual rate of 9%, and the obligations under this promissory note are unsecured. The maturity date of this note is the earlier of (i) December 31, 2016 or (ii) 30 calendar days after the date on which the GWG MCA shall have received net financings proceeds from it's private offer and sale of it's preferred stock equaling the amount of debt for borrowed money then outstanding under this promissory note.

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Convertible Preferred Stock

3 Months Ended

Mar. 31, 2016

Convertible and Redeemable Preferred Stock/Common Stock [Abstract]

Convertible preferred stock

(9)     Convertible 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. 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 at $10 per share. As of March 31, 2016, the Company had 2,713,000 shares of Series A Preferred Stock outstanding with gross consideration of $20,274,000 (including cash proceeds, conversion of Series I Secured Notes and accrued interest on Series I notes, 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 March 31, 2016.

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. 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 March 31, 2016. 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 March 31, 2016 and December 31, 2015, were 431,954 with a weighted-average remaining life of 1.18 and 1.43 years, respectively. As of March 31, 2016, none of these warrants have been exercised.

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 11). As such, the convertible redeemable preferred stock was reclassified from temporary equity to permanent equity. The Company may redeem the Series A Preferred Stock at a price equal to 110% of its liquidation preference ($7.50 per share) at any time. As of March 31, 2016, the Company had redeemed an aggregate of 277,000 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 677,566 shares of preferred stock into 508,193 shares of common stock.

As of March 31, 2016, 398,000 shares of Series A Preferred Stock have been issued as a result of conversion of $2,788,000 in dividends, and 678,000 shares of Series A Preferred Stock have been converted to 508,000 shares of the Company’s common stock.

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 $507,000 and $537,000 for the three months ended March 31, 2016 and 2015, respectively, pursuant to a board resolution declaring the dividend. 24,000 and 26,000 shares of Series A Preferred Stock were issued in lieu of cash dividends in the three months ended March 31, 2016 and 2015, respectively. The shares issued in lieu of cash dividends were issued at $7.00 per share. As of March 31, 2016, GWG Holdings has $507,000 of accrued Series A Preferred Stock dividends which were paid or converted to shares of Series A Preferred Stock on April 15, 2016.

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Redeemable Preferred Stock

3 Months Ended

Mar. 31, 2016

Convertible and Redeemable Preferred Stock/Common Stock [Abstract]

Redeemable Preferred Stock

(10)       Redeemable Preferred Stock

The Company began offering up to 100,000 shares of Redeemable Preferred Stock for sale via Form S-1 registration statement effective November 30, 2015. The maximum offering price per share is $1,000 with a par value per share of $.001.

The Redeemable Preferred Stock ranks senior to our common stock and pari passu to our Series A Preferred Stock with respect to payment of dividends and rights upon liquidation dissolution or winding up. Redeemable Preferred Stock has an annualized yield of 7%.

Subject to the limitations described below, holders of Redeemable Preferred Stock will have the option to convert the Redeemable Preferred Stock they purchase from us and hold into common stock at a conversion price equal to the volume-weighted average price of our common stock for the 20 trading days immediately prior to the date on which notice of conversion is delivered to us, subject to a minimum conversion price of $15.00, subject to equitable adjustment. The right of holders to convert their Redeemable Preferred Stock is limited to 15% of the stated value of Redeemable Preferred Stock originally purchased by such holder from us and still held by such holder.

A holder will have the opportunity to request that we redeem such holder's Redeemable Preferred Stock at a redemption price equal to the stated value of such redeemed shares, plus any accrued but unpaid dividends thereon, less the applicable redemption fee (if any). As a percentage of the aggregate redemption price of a holder’s shares to be redeemed, the redemption fee shall be:

● 12% if the redemption is requested before the first anniversary of the original issuance of the shares; and

● 10% if the redemption is requested on or after the first anniversary and before the second anniversary of the original issuance of such shares; and

● 8% if the redemption is requested on or after the second anniversary and before the third anniversary of the original issuance of such shares.

Beginning three years from the date of original issuance of such shares, no redemption fee shall be subtracted from the redemption price. Subject to certain restrictions and conditions, we will also redeem shares of Redeemable Preferred Stock of a holder who is a natural person (including an individual beneficial holder who holds our preferred shares through a custodian or nominee, such as a broker-dealer) upon his or her death, total disability or bankruptcy, within 60 days of our receipt of a written request from the holder or the holder’s estate at a redemption price equal to the stated value, plus accrued and unpaid dividends thereon.

After one year from the date of original issuance of shares of Redeemable Preferred Stock, we will have the right (but not the obligation) to call and redeem such shares of Redeemable Preferred Stock at 100% of their stated value, plus any accrued but unpaid dividends thereon.

We will not be obligated in all cases to redeem shares of Redeemable Preferred Stock, whether upon a redemption request by a holder, at the option of the Company, or upon the death, total disability or bankruptcy of a holder. In particular, we will not redeem or repurchase any preferred shares if we are restricted by applicable law or our Certificate of Incorporation, as amended, from making such redemption or to the extent any such redemption would cause or constitute a default under any borrowing agreements to which we or any of our subsidiaries are a party or otherwise bound. In addition, we will have no obligation to redeem preferred shares upon a redemption request made by a holder if we do not have sufficient funds available to fund that redemption. We have discretion under the Certificate of Designation for the Redeemable Preferred Stock to determine whether we are in possession of “sufficient funds” to fund a redemption request.

As of March 31, 2016 the Company sold 1,449 shares of the Redeemable Preferred Stock raising approximately $1,449,000. The Company incurred approximately $79,000 of selling costs related to the sale of the Redeemable Preferred Stock.

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Income Taxes

3 Months Ended

Mar. 31, 2016

Income Taxes [Abstract]

Income taxes

(11)       Income taxes

The Company has a $29,000 and $0 of current income tax liability as of March 31, 2016 and December 31, 2015. The components of current and deferred income tax expense for the three months ended March 31, 2016 and 2015, respectfully, consisted of the following:

	Three Months Ended
	March 31,			March 31,
	2016			2015
Income tax:
Current:
Federal	$	(23,000	)	$	(324,000	)
State		(6,000	)		(103,000	)
Total current tax expense		(29,000	)		(427,000	)
Deferred:
Federal	$	(806,000	)	$	(1,654,000	)
State		(250,000	)		(528,000	)
Total deferred tax expense		(1,056,000	)		(2,182,000	)
Total income tax expense	$	(1,085,000	)	$	(2,609,000	)

The primary differences between the Company’s March 31, 2016 effective tax rate and the statutory federal rate are the accrual of nondeductible preferred stock dividend expense of $511,000, 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.

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Common Stock

3 Months Ended

Mar. 31, 2016

Convertible and Redeemable Preferred Stock/Common Stock [Abstract]

Common Stock

(12)       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.

On June 24, 2015 GWG issued 60,000 restricted shares of 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 is being amortized over a twelve-month period. On March 17, 2016 GWG issued 6,500 restricted shares of common stock at an average price of $7.16 per share, determined by closing market price, to the same vendor as a form of payment for additional services the vendor provided to the Company.

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Stock Incentive Plan

3 Months Ended

Mar. 31, 2016

Stock Incentive Plan [Abstract]

Stock Incentive Plan

(13)       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 1,050,615 shares of common stock to employees, officers, and directors of the Company through March 31, 2016. Options for 502,205 shares have vested, and the remaining options will vest over three years. The options were issued with an exercise price between $6.60 and $10.18 for those owning more than 10% of the Company’s stock and between $6.00 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 20.59% 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 March 31, 2016, stock options for 345,685 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. As of March 31, 2016 53,000 of these options were forfeited and 53,000 have vested.

Outstanding stock options:

	Vested			Un-vested			Total
Balance as of December 31, 2014		314,288			685,813			1,000,101
Granted during the year		79,500			273,700			353,200
Vested during the year		238,999			(238,999	)		-
Exercised during the year		(27,667	)		-			(27,667	)
Forfeited during the year		(121,417	)		(150,602	)		(272,019	)
Balance as of December 31, 2015		483,703			569,912			1,053,615
Granted during the quarter		7,500			-			7,500
Vested during the quarter		14,092			(14,092	)		-
Forfeited during the quarter		(3,090	)		(7,410	)		(10,500	)
Balance as of March 31, 2016		502,205			548,410			1,050,615

Compensation expense related to un-vested options not yet recognized is $451,000. We expect to recognize this compensation expense over the next three years ($214,000 in 2016, $187,000 in 2017, and 50,000 in 2018). The Company issues new common stock for options exercised.

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Net income per common share

3 Months Ended

Mar. 31, 2016

Net Income Per Common Share [Abstract]

Net income per common share

(14)       Net income per common share

The Company began issuing Series A Preferred Stock September, 1, 2011, as described in note 8. The Series A Preferred Stock is dilutive to the net income per common share calculation at both March 31, 2016 and 2015. The Company has also issued warrants to purchase common stock in conjunction with the sale of convertible preferred stock (see Note 9). The warrants and vested stock options are anti-dilutive at both March 31, 2016 and 2015 and have not been included in the fully diluted net loss per common share calculation. The Company’s outstanding stock options are anti-dilutive at both March 31, 2016 and 2015.

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Commitments

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies [Abstract]

Commitments

(15)       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 was for 11,695 square feet of office space located at 220 South Sixth Street, Minneapolis, Minnesota. The Company was obligated to pay base rent plus common area maintenance and a share of the building operating costs. Effective September 1, 2015, the Company entered into a Second Amendment to the office lease with US Bank National Association that extended the term of the lease to 120 months from the effective date and expanded to 17,687 square feet. The Second Amendment provides the right for us to extend the term of the lease for one three-year term, and a right of first offer on space adjacent to our leased premises.

The Company is obligated to pay base rent plus common area maintenance and a share of the building operating costs. Rent expenses under the above agreements were $224,000 and $68,000 during the three months ended March 2016 and 2015, respectively.

Minimum lease payments under the Second Amendment to Lease are as follows:

Nine months ending December 31, 2016	$	130,000
2017		178,000
2018		185,000
2019		191,000
2020		198,000
2021		204,000
2022		210,000
2023		217,000
2024		223,000
2025		230,000
2026		38,000
	$	2,004,000

GWG MCA entered into a sublease agreement with Wellington Group as tenant. The sublease was effective February 1, 2016 with a term through August 1, 2016. The sublease was for an office space and use of reception, kitchen and common areas of 450 Seventh Avenue, Suite 809, New York, New York. The total rent for the sublease term is $30,000 paid in $5,000 monthly installments. Additional charges for services (utilities and cleaning services) during the sublease term equal to monthly payments of $500.

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Contingencies

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies [Abstract]

Contingencies

(16)    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.

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Guarantees of L Bonds

3 Months Ended

Mar. 31, 2016

Guarantees of L Bonds [Abstract]

Guarantees of L Bonds

(17)    Guarantees of L Bonds

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 GWG 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 III and the Trust. The policies held by DLP III are not collateral for the L Bond obligations as such policies serve as collateral for the senior 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 GWG 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 senior 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 GWG 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 March 31, 2016 and December 31, 2015, with respect to the financial position, and for the three months ended March 31, 2016 and 2015 with respect to results of operations and cash flows of GWG Holdings and its subsidiaries. The parent column presents the financial information of GWG 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

March 31, 2016	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
A S S E T S
Cash and cash equivalents	$	6,274,035		$	4,340,365		$	384,225	$	-		$	10,998,625
Restricted cash		-			4,807,637			15,020,983		-			19,828,620
Investment in life insurance contracts, at fair value		-			-			387,402,111		-			387,402,111
Secured MCA advances		-			-			4,235,442		-			4,235,442
Policy benefits receivable		-			-			15,912,839		-			15,912,839
Other assets		4,560,495			863,833			530,899		(2,730,902	)		3,224,325
Investment in subsidiaries		321,992,234			332,430,230			-		(645,422,464	)		-
TOTAL ASSETS	$	332,826,764		$	342,442,065		$	423,486,499	$	(657,153,366	)	$	441,601,962
L I A B I L I T I E S  &  S T O C K H O L D E R S'  E Q U I T Y  (D E F I C I T)
LIABILITIES
Revolving senior credit facility	$	-		$	(2,275,000	)	$	84,579,099	$	-		$	82,304,099
Series I Secured Notes payable		-			18,226,541			-		-			18,226,541
L Bonds		301,924,332			-			-		-			301,924,332
Notes payable to related parties		-			-			4,460,000		(2,700,000	)		1,760,000
Accounts payable		188,894			365,147			1,565,750		-			2,119,791
Interest payable		8,879,457			3,714,441			352,602		(30,902	)		12,915,598
Other accrued expenses		879,858			486,943			30,577		-			1,397,378
Deferred taxes		2,819,697			-			-		-			2,819,697
TOTAL LIABILITIES		314,692,238			20,518,072			90,988,028		(2,730,902	)		423,467,436
STOCKHOLDERS’ EQUITY (DEFICIT)
Member capital		-			321,923,993			332,498,471		(654,422,464	)		-
Convertible preferred stock		20,274,155			-			-		-			20,274,155
Redeemable preferred stock		1,369,938			-			-		-			1,369,938
Common stock		5,948			-			-		-			5,948
Additional paid-in capital		17,204,940			-			-		-			17,204,940
Accumulated deficit		(20,720,455	)		-			-		-			(20,720,455	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		18,134,526			321,923,993			332,498,471		(654,422,464	)		18,134,526
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	332,826,764		$	342,442,065		$	423,486,499	$	(657,153,366	)	$	441,601,962

December 31, 2015	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
A S S E T S
Cash and cash equivalents	$	32,292,162		$	1,982,722		$	150,221	$	-		$	34,425,105
Restricted cash		-			2,102,257			239,643		-			2,341,900
Investment in life insurance contracts, at fair value		-			-			356,649,715		-			356,649,715
Other assets		1,742,074			688,071			30,900		-			2,461,045
Investment in subsidiaries		269,886,254			291,295,951			-		(561,182,205	)		-
TOTAL ASSETS	$	303,920,490		$	296,069,001		$	357,070,479	$	(561,182,205	)	$	395,877,765
L I A B I L I T I E S  &  S T O C K H O L D E R S'  E Q U I T Y  (D E F I C I T)
LIABILITIES
Revolving senior credit facility	$	-		$	(1,000,000	)	$	64,279,596	$	-		$	63,279,596
Series I Secured Notes payable		-			23,287,704			-		-			23,287,704
L Bonds		276,482,796			-			-		-			276,482,796
Accounts payable		280,988			157,217			1,079,235		-			1,517,440
Interest payable		8,529,959			3,544,626			265,476		-			12,340,061
Other accrued expenses		717,365			343,421			-		-			1,060,786
Deferred taxes		1,763,968			-			-		-			1,763,968
TOTAL LIABILITIES		287,775,076			26,332,968			65,624,307		-			379,732,351
STOCKHOLDERS’ EQUITY (DEFICIT)
Member capital		-			269,736,033			291,446,172		(561,182,205	)		-
Convertible preferred stock		20,784,841			-			-		-			20,784,841
Common stock		5,942			-			-		-			5,942
Additional paid-in capital		17,149,391			-			-		-			17,149,391
Accumulated deficit		(21,794,760	)		-			-		-			(21,794,760	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		16,145,414			269,736,033			291,446,172		(561,182,205	)		16,145,414
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	303,920,490		$	296,069,001		$	357,070,479	$	(561,182,205	)	$	395,877,765

Condensed Consolidating Statements of Operations

For the three months ended March 31, 2016	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Contract servicing fees	$	-		$	13,417		$	-	$	(13,417	)	$	-
Gain on life insurance contracts, net		-			-			17,713,712		-			17,713,712
Interest and other income		34,798			306			185,979		(30,902	)		190,181
TOTAL REVENUE		34,798			2,762,748			17,899,691		(44,319	)		17,903,893
EXPENSES
Origination and servicing fees		-			-			13,417		(13,417	)		-
Interest expense		7,598,824			657,236			1,435,228		(30,902	)		9,660,386
Employee compensation and benefits		1,536,430			829,081			100,686		-			2,466,197
Legal and professional fees		594,739			534,650			76,739		-			1,206,128
Other expenses		1,257,977			968,674			185,509		-			2,412,160
TOTAL EXPENSES		10,987,970			2,989,641			1,811,579		(44,319	)		15,744,871
INCOME (LOSS) BEFORE EQUITY IN
INCOME OF SUBSIDIARIES		(10,953,172	)		(2,975,918	)		16,088,112		-			2,159,022
EQUITY IN INCOME OF SUBSIDIARY		13,112,194			16,301,366			-		(29,413,560	)		-
NET INCOME BEFORE INCOME TAXES		2,159,022			13,325,448			16,088,112		(29,413,560	)		2,159,022
INCOME TAX EXPENSE		1,084,717			-			-		-			1,084,717
NET INCOME (LOSS)		1,074,305			13,325,448			16,088,112		(29,413,560	)		1,074,305

For the three months ended March 31, 2015	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Contract servicing fees	$	-		$	357,486		$	-	$	(357,486	)	$	-
Gain on life insurance contracts, net		-			-			16,783,409		-			16,783,409
Interest and other income		7,543			6,450			35,303		-			49,296
TOTAL REVENUE		7,543			363,936			16,818,712		(357,486	)		16,832,705
EXPENSES
Origination and servicing fees		-			-			357,486		(357,486	)		-
Interest expense		5,249,962			774,086			1,152,486		-			7,176,534
Employee compensation and benefits		1,305,801			422,116			-		-			1,727,917
Legal and professional fees		477,351			100,793			-		-			578,144
Other expenses		951,362			514,902			12,584		-			1,478,848
TOTAL EXPENSES		7,984,476			1,811,897			1,522,556		(357,486	)		10,961,443
INCOME (LOSS) BEFORE EQUITY IN
INCOME OF SUBSIDIARIES		(7,976,933	)		(1,447,961	)		15,296,156		-			5,871,262
EQUITY IN INCOME OF SUBSIDIARY		13,848,195			15,296,105			-		(29,144,300	)		-
NET INCOME BEFORE INCOME TAXES		5,871,262			13,848,144			15,296,156		(29,144,300	)		5,871,262
INCOME TAX EXPENSE		2,609,371			-			-		-			2,609,371
NET INCOME (LOSS)		3,261,891			13,848,144			15,296,156		(29,144,300	)		3,261,891

Condensed Consolidating Statements of Cash Flows

For the three months ended March 31, 2016	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,074,305		$	13,325,448		$	16,088,112		$	(29,413,560	)	$	1,074,305
Adjustments to reconcile net income to cash flows from operating activities:
Equity of subsidiaries		(13,112,194	)		(16,301,366	)		-			29,413,560			-
Gain on life insurance contracts		-			-			(11,531,553	)		-			(11,531,553	)
Amortization of deferred financing and issuance costs		1,648,891			(1,164,206	)		299,503			-			784,188
Deferred income taxes		1,055,729			-			-			-			1,055,729
Preferred stock dividends payable		163,577			-			-			-			163,577
(Increase) decrease in operating assets:
Policy benefits receivable		-			-			(15,912,839	)		-			(15,912,839	)
Other assets		(38,661,205	)		(24,992,068	)		-			63,826,699			173,426
Increase (decrease) in operating liabilities:
Due to related party		(2,731,001	)		(16,607	)		4,460,000			-			1,712,392
Accounts payable and other accrued expenses		782,047			586,702			599,220			-			1,967,969
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(49,779,851	)		(28,562,097	)		(5,997,557	)		63,826,699			(20,512,806	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts		-			-			(24,326,322	)		-			(24,326,322	)
Proceeds from settlement of life insurance contracts		-			-			4,610,479			-			4,610,479
Investments in Secured MCA advances		-			-			(4,353,585	)		-			(4,353,585	)
Proceeds from Secured MCA advances					-			118,143			-			118,143
NET CASH FLOWS (USED IN) PROVIDED BY INVESTING ACTIVITIES		-			-			(23,951,285	)		-			(23,951,285	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on Senior Revolving Credit Facility		-			-			20,000,000			-			20,000,000
Payments for redemption of Series I Secured notes payable		-			(5,237,393	)		-			-			(5,237,393	)
Proceeds from issuance of L Bonds		34,368,889			-			-			-			34,368,889
Payments for issuance and redemption of L Bonds		(10,909,693	)		-			-			-			(10,909,693	)
Increase in restricted cash		-			(2,705,379	)		(14,781,341	)		-			(17,486,720	)
Issuance of common stock		46,545			-			-			-			46,545
Proceeds from issuance of preferred stock		1,028,536			-			-			-			1,028,536
Payments for issuance and redemption of preferred stock		(772,553	)		-			-			-			(772,553	)
Issuance of member capital		-			38,862,512			24,964,187			(63,826,699	)		-
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		23,761,724			30,919,740			30,182,846			(63,826,699	)		21,037,611
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(26,018,127	)		2,357,643			234,004			-			(23,426,480	)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		32,292,162			1,982,722			150,221			-			34,425,105
END OF THE PERIOD	$	6,274,035		$	4,340,365		$	384,225		$	-		$	10,998,625

For the three months ended March 31, 2015	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	3,261,891		$	13,848,144		$	15,296,156		$	(29,144,300	)	$	3,261,891
Adjustments to reconcile net income to cash flows from operating activities:
Equity of subsidiaries		(13,848,196	)		(15,296,104	)		-			29,144,300			-
Loss on life insurance contracts		-			-			1,893,845			-			1,893,845
Amortization of deferred financing and issuance costs		43,475			130,188			(722,693	)		-			(549,030	)
Deferred income taxes		2,182,251			-			-			-			2,182,251
Preferred stock dividends payable		188,812			-			-			-			188,812
(Increase) decrease in operating assets:
Policy benefits receivable		-			-			(17,890,000	)		-			(17,890,000	)
Other assets		(10,874,436	)		(5,877,435	)		-			16,620,698			(131,173	)
Increase in operating liabilities:
Accounts payable and other accrued expenses		2,279,652			738,084			382,049			-			2,635,687
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(16,766,551	)		(6,457,123	)		(1,804,741	)		16,620,698			(8,407,717	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts		-			-			(2,446,477	)		-			(2,446,477	)
Proceeds from settlement of life insurance contracts		-			-			3,610,595			-			3,610,595
NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES		-			-			1,164,118			-			1,164,118
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for redemption of Series I Secured notes payable		-			(1,273,189	)		-			-			(1,273,189	)
Proceeds from issuance of L Bonds		27,960,297			-			-			-			27,960,297
Payments from issuance and redemption of L Bonds		(6,878,122	)		-			-			-			(6,878,122	)
Proceeds from restricted cash		-			(1,780,000	)		(5,257,564	)		-			(7,073,564	)
Issuance of member capital		-			10,572,459			6,048,239			(16,620,698	)		-
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		21,082,175			7,519,270			790,675			(16,620,698	)		12,771,422
NET INCREASE IN CASH AND CASH EQUIVALENTS		4,315,624			1,062,147			150,052			-			5,527,823
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		30,446,473			216,231			-			-			30,662,704
END OF THE PERIOD	$	34,762,097		$	1,278,378		$	150,052		$	-		$	36,190,527

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Concentrations

3 Months Ended

Mar. 31, 2016

Concentrations [Abstract]

Concentrations

(18) 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.

Life insurance company	March 31,			December 31,
	2016			2015
AXA Equitable		14.01	%		14.00	%
John Hancock		11.64	%		12.73	%
Transamerica		10.38	%		*

* percentage does not exceed 10% of the total face value.

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

State of Residence	March 31,			December 31,
	2016			2015
California		23.66	%		25.25	%
Florida		18.92	%		19.25	%

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Subsequent Events

3 Months Ended

Mar. 31, 2016

Subsequent Events [Abstract]

Subsequent events

(19) Subsequent events

Subsequent toMarch 31, 2016,the Companyhas issuedapproximately anadditional $13,863,000 inprincipal amount ofL Bonds.

Subsequent to March 31, 2016, the Company has issued approximately $4,214,000 of Redeemable Preferred Stock.

Subsequent to March 31, 2016, the Company has issued 25,000 restricted shares of common stock at $6.25 per share, determined by closing market price, to a vendor as a form of payment for services the vendor will provide to the Company.

Effective February 4, 2016, GWG MCA began to offer for sale up to of 2,000,000 shares of 9% Preferred Stock at an offering price of $10 per share in a private placement. As of May 13, 2016, GWG MCA had not issued any 9% Preferred Stock in this offering.

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

3 Months Ended

Mar. 31, 2016

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 insurance contracts

Life insurance contracts - ASC 325-30, Investments in Insurance Contracts, allows a reporting entity the election to account for its investments in life insurance contracts 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 insurance contracts.

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

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

The Company recognizes the difference between the policy benefits and carrying values of the policy when an insured’s mortality event has occurred and the Company determines that settlement and ultimate collection of the policy 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 $526,000 and $31,000 at March 31, 2016 and December 31, 2015, respectively.

Deferred financing and issuance costs

Deferred financing and issuance costs – Loans advanced under the Company’s revolving senior credit facility, as described in note 5, have been reported net of financing costs which are amortized using the straight-line method over the term of the revolving senior credit facility.  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 9, 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, 2015, those costs were fully amortized. Redeemable Preferred Stock, as described in note 10, reported net of issuance costs, sales commissions and other direct expenses.

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 (loss) per share is calculated based on the potential dilutive impact, if any, of the Company’s Series A Preferred Stock, Redeemable Preferred Stock, 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. 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 Company adopted ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, during the first quarter of 2016, as required by the standard. The impact of the new ASU on the Company’s balance sheet was a reduction of approximately $2,288,000 to assets and the corresponding reduction to liabilities and stockholders’ equity. There was no impact on the Company’s statements of operations.

Reclassification

Reclassification - Certain 2015 amounts have been reclassified to conform to ASU No. 2015-03, as described under “Recently adopted pronouncements” above. The reclassifications have no effect on the reported amounts of consolidated net income.

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Investment in Life Insurance Policies (Tables)

3 Months Ended

Mar. 31, 2016

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 March 31, 2016						As of December 31, 2015
Years Ending December 31,		Number of Contracts		Estimated Fair Value		Face Value		Number of Contracts		Estimated Fair Value		Face Value
	2016		3	$	5,440,000	$	6,000,000		5	$	7,503,000	$	8,500,000
	2017		11		13,855,000		18,043,000		12		12,875,000		17,418,000
	2018		29		32,989,000		50,905,000		27		37,109,000		58,428,000
	2019		51		51,866,000		91,707,000		51		54,242,000		100,967,000
	2020		70		71,319,000		148,360,000		59		64,750,000		137,868,000
	2021		56		53,756,000		130,169,000		48		45,724,000		116,805,000
	2022		49		36,273,000		109,262,000		44		38,394,000		116,998,000
	Thereafter		196		121,904,000		473,375,000		150		96,053,000		387,860,000
	Totals		465	$	387,402,000	$	1,027,821,000		396	$	356,650,000		944,844,000

Reconciliation of gain on life insurance contracts

Three Months Ended:	March 31, 2016			March 31, 2015
Change in fair value	$	11,532,000		$	(1,894,000	)
Premiums and other annual fees		(8,445,000	)		(6,337,000	)
Policy maturities		14,627,000			25,014,000
Gain on life insurance contracts, net	$	17,714,000		$	16,783,000

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

Years Ending December 31,	Premiums		Servicing		Premiums and Servicing Fees
Nine months ending December 31 ,2016	$	25,258,000	$	558,000	$	25,816,000
2017		36,083,000		558,000		36,641,000
2018		39,398,000		558,000		39,956,000
2019		44,304,000		558,000		44,862,000
2020		49,314,000		558,000		49,872,000
2021		54,825,000		558,000		55,383,000
	$	249,182,000	$	3,348,000	$	252,530,000

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Fair Value Definition and Hierarchy (Tables)

3 Months Ended

Mar. 31, 2016

Fair Value Definition and Hierarchy [Abstract]

Reconciliation of investments in life insurance policies

	Three Months Ended  March 31,
	2016			2015
Beginning balance	$	356,650,000		$	282,883,000
Purchases		23,831,000			1,016,000
Maturities (cash in excess of carrying value)		(4,611,000	)		(3,610,000	)
Net change in fair value		11,532,000			(1,894,000	)
Ending balance	$	387,402,000		$	278,395,000

Summary of inputs utilized in estimating the fair value

	As of  March 31, 2016			As of December 31, 2015
Weighted-average age of insured, years		82.4			82.6
Weighted-average life expectancy, months		80.2			79.3
Average face amount per policy	$	2,210,000		$	2,386,000
Discount rate		11.08	%		11.09	%

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
March 31, 2016	$	52,011,000	$	25,901,000	$	(25,278,000	)	$	(49,990,000	)
December 31, 2015	$	48,339,000	$	24,076,000	$	(23,501,000	)	$	(46,482,000	)

	Change in discount rate
	minus 2%		minus 1%		plus 1%			plus 2%
March 31, 2016	$	38,567,000	$	18,477,000	$	(17,033,000	)	$	(32,772,000	)
December 31, 2015	$	35,024,000	$	16,786,000	$	(15,485,000	)	$	(29,803,000	)

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

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Series I Secured Notes payable (Tables)

3 Months Ended

Mar. 31, 2016

Credit facilities / Series I Secured Notes payable Renewable / L Bonds [Abstract]

Future contractual maturities of series I secured notes payable and future amortization of their deferred financing costs

Years Ending December 31,	Contractual Maturities		Amortization of Deferred Financing Costs
Nine months ending December 31 ,2016	$	6,581,000	$	35,000
2017		7,956,000		128,000
2018		1,596,000		41,000
2019		444,000		7,000
2020		1,766,000		63,000
Thereafter		165,000		7,000
	$	18,508,000	$	281,000

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L Bonds (Tables)

3 Months Ended

Mar. 31, 2016

Credit facilities / Series I Secured Notes payable Renewable / L Bonds [Abstract]

Schedule of future contractual maturities of L Bonds and future amortization of their deferred financing costs

Years Ending December 31,	Contractual Maturities		Amortization of Deferred Financing Costs
Nine months ending December 31 ,2016	$	76,618,000	$	562,000
2017		73,736,000		1,734,000
2018		75,804,000		2,976,000
2019		33,648,000		1,521,000
2020		19,602,000		995,000
Thereafter		27,423,000		1,734,000
	$	306,831,000	$	9,522,000

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Income Taxes (Tables)

3 Months Ended

Mar. 31, 2016

Income Taxes [Abstract]

Components of current and deferred income tax expense

	Three Months Ended
	March 31,			March 31,
	2016			2015
Income tax:
Current:
Federal	$	(23,000	)	$	(324,000	)
State		(6,000	)		(103,000	)
Total current tax expense		(29,000	)		(427,000	)
Deferred:
Federal	$	(806,000	)	$	(1,654,000	)
State		(250,000	)		(528,000	)
Total deferred tax expense		(1,056,000	)		(2,182,000	)
Total income tax expense	$	(1,085,000	)	$	(2,609,000	)

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Stock Incentive Plan (Tables)

3 Months Ended

Mar. 31, 2016

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		79,500			273,700			353,200
Vested during the year		238,999			(238,999	)		-
Exercised during the year		(27,667	)		-			(27,667	)
Forfeited during the year		(121,417	)		(150,602	)		(272,019	)
Balance as of December 31, 2015		483,703			569,912			1,053,615
Granted during the quarter		7,500			-			7,500
Vested during the quarter		14,092			(14,092	)		-
Forfeited during the quarter		(3,090	)		(7,410	)		(10,500	)
Balance as of March 31, 2016		502,205			548,410			1,050,615

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Commitments (Tables)

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies [Abstract]

Schedule of minimum lease payments under the second amendment to lease

Nine months ending December 31, 2016	$	130,000
2017		178,000
2018		185,000
2019		191,000
2020		198,000
2021		204,000
2022		210,000
2023		217,000
2024		223,000
2025		230,000
2026		38,000
	$	2,004,000

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Guarantees of L Bonds (Tables)

3 Months Ended

Mar. 31, 2016

Guarantees of L Bonds [Abstract]

Condensed consolidating balance sheets

March 31, 2016	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
A S S E T S
Cash and cash equivalents	$	6,274,035		$	4,340,365		$	384,225	$	-		$	10,998,625
Restricted cash		-			4,807,637			15,020,983		-			19,828,620
Investment in life insurance contracts, at fair value		-			-			387,402,111		-			387,402,111
Secured MCA advances		-			-			4,235,442		-			4,235,442
Policy benefits receivable		-			-			15,912,839		-			15,912,839
Other assets		4,560,495			863,833			530,899		(2,730,902	)		3,224,325
Investment in subsidiaries		321,992,234			332,430,230			-		(645,422,464	)		-
TOTAL ASSETS	$	332,826,764		$	342,442,065		$	423,486,499	$	(657,153,366	)	$	441,601,962
L I A B I L I T I E S  &  S T O C K H O L D E R S'  E Q U I T Y  (D E F I C I T)
LIABILITIES
Revolving senior credit facility	$	-		$	(2,275,000	)	$	84,579,099	$	-		$	82,304,099
Series I Secured Notes payable		-			18,226,541			-		-			18,226,541
L Bonds		301,924,332			-			-		-			301,924,332
Notes payable to related parties		-			-			4,460,000		(2,700,000	)		1,760,000
Accounts payable		188,894			365,147			1,565,750		-			2,119,791
Interest payable		8,879,457			3,714,441			352,602		(30,902	)		12,915,598
Other accrued expenses		879,858			486,943			30,577		-			1,397,378
Deferred taxes		2,819,697			-			-		-			2,819,697
TOTAL LIABILITIES		314,692,238			20,518,072			90,988,028		(2,730,902	)		423,467,436
STOCKHOLDERS’ EQUITY (DEFICIT)
Member capital		-			321,923,993			332,498,471		(654,422,464	)		-
Convertible preferred stock		20,274,155			-			-		-			20,274,155
Redeemable preferred stock		1,369,938			-			-		-			1,369,938
Common stock		5,948			-			-		-			5,948
Additional paid-in capital		17,204,940			-			-		-			17,204,940
Accumulated deficit		(20,720,455	)		-			-		-			(20,720,455	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		18,134,526			321,923,993			332,498,471		(654,422,464	)		18,134,526
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	332,826,764		$	342,442,065		$	423,486,499	$	(657,153,366	)	$	441,601,962

December 31, 2015	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
A S S E T S
Cash and cash equivalents	$	32,292,162		$	1,982,722		$	150,221	$	-		$	34,425,105
Restricted cash		-			2,102,257			239,643		-			2,341,900
Investment in life insurance contracts, at fair value		-			-			356,649,715		-			356,649,715
Other assets		1,742,074			688,071			30,900		-			2,461,045
Investment in subsidiaries		269,886,254			291,295,951			-		(561,182,205	)		-
TOTAL ASSETS	$	303,920,490		$	296,069,001		$	357,070,479	$	(561,182,205	)	$	395,877,765
L I A B I L I T I E S  &  S T O C K H O L D E R S'  E Q U I T Y  (D E F I C I T)
LIABILITIES
Revolving senior credit facility	$	-		$	(1,000,000	)	$	64,279,596	$	-		$	63,279,596
Series I Secured Notes payable		-			23,287,704			-		-			23,287,704
L Bonds		276,482,796			-			-		-			276,482,796
Accounts payable		280,988			157,217			1,079,235		-			1,517,440
Interest payable		8,529,959			3,544,626			265,476		-			12,340,061
Other accrued expenses		717,365			343,421			-		-			1,060,786
Deferred taxes		1,763,968			-			-		-			1,763,968
TOTAL LIABILITIES		287,775,076			26,332,968			65,624,307		-			379,732,351
STOCKHOLDERS’ EQUITY (DEFICIT)
Member capital		-			269,736,033			291,446,172		(561,182,205	)		-
Convertible preferred stock		20,784,841			-			-		-			20,784,841
Common stock		5,942			-			-		-			5,942
Additional paid-in capital		17,149,391			-			-		-			17,149,391
Accumulated deficit		(21,794,760	)		-			-		-			(21,794,760	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		16,145,414			269,736,033			291,446,172		(561,182,205	)		16,145,414
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	303,920,490		$	296,069,001		$	357,070,479	$	(561,182,205	)	$	395,877,765

-

Condensed consolidating statements of operations

For the three months ended March 31, 2016	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Contract servicing fees	$	-		$	13,417		$	-	$	(13,417	)	$	-
Gain on life insurance contracts, net		-			-			17,713,712		-			17,713,712
Interest and other income		34,798			306			185,979		(30,902	)		190,181
TOTAL REVENUE		34,798			2,762,748			17,899,691		(44,319	)		17,903,893
EXPENSES
Origination and servicing fees		-			-			13,417		(13,417	)		-
Interest expense		7,598,824			657,236			1,435,228		(30,902	)		9,660,386
Employee compensation and benefits		1,536,430			829,081			100,686		-			2,466,197
Legal and professional fees		594,739			534,650			76,739		-			1,206,128
Other expenses		1,257,977			968,674			185,509		-			2,412,160
TOTAL EXPENSES		10,987,970			2,989,641			1,811,579		(44,319	)		15,744,871
INCOME (LOSS) BEFORE EQUITY IN
INCOME OF SUBSIDIARIES		(10,953,172	)		(2,975,918	)		16,088,112		-			2,159,022
EQUITY IN INCOME OF SUBSIDIARY		13,112,194			16,301,366			-		(29,413,560	)		-
NET INCOME BEFORE INCOME TAXES		2,159,022			13,325,448			16,088,112		(29,413,560	)		2,159,022
INCOME TAX EXPENSE		1,084,717			-			-		-			1,084,717
NET INCOME (LOSS)		1,074,305			13,325,448			16,088,112		(29,413,560	)		1,074,305

For the three months ended March 31, 2015	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Contract servicing fees	$	-		$	357,486		$	-	$	(357,486	)	$	-
Gain on life insurance contracts, net		-			-			16,783,409		-			16,783,409
Interest and other income		7,543			6,450			35,303		-			49,296
TOTAL REVENUE		7,543			363,936			16,818,712		(357,486	)		16,832,705
EXPENSES
Origination and servicing fees		-			-			357,486		(357,486	)		-
Interest expense		5,249,962			774,086			1,152,486		-			7,176,534
Employee compensation and benefits		1,305,801			422,116			-		-			1,727,917
Legal and professional fees		477,351			100,793			-		-			578,144
Other expenses		951,362			514,902			12,584		-			1,478,848
TOTAL EXPENSES		7,984,476			1,811,897			1,522,556		(357,486	)		10,961,443
INCOME (LOSS) BEFORE EQUITY IN
INCOME OF SUBSIDIARIES		(7,976,933	)		(1,447,961	)		15,296,156		-			5,871,262
EQUITY IN INCOME OF SUBSIDIARY		13,848,195			15,296,105			-		(29,144,300	)		-
NET INCOME BEFORE INCOME TAXES		5,871,262			13,848,144			15,296,156		(29,144,300	)		5,871,262
INCOME TAX EXPENSE		2,609,371			-			-		-			2,609,371
NET INCOME (LOSS)		3,261,891			13,848,144			15,296,156		(29,144,300	)		3,261,891

Condensed consolidating statements of cash flows

For the three months ended March 31, 2016	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,074,305		$	13,325,448		$	16,088,112		$	(29,413,560	)	$	1,074,305
Adjustments to reconcile net income to cash flows from operating activities:
Equity of subsidiaries		(13,112,194	)		(16,301,366	)		-			29,413,560			-
Gain on life insurance contracts		-			-			(11,531,553	)		-			(11,531,553	)
Amortization of deferred financing and issuance costs		1,648,891			(1,164,206	)		299,503			-			784,188
Deferred income taxes		1,055,729			-			-			-			1,055,729
Preferred stock dividends payable		163,577			-			-			-			163,577
(Increase) decrease in operating assets:
Policy benefits receivable		-			-			(15,912,839	)		-			(15,912,839	)
Other assets		(38,661,205	)		(24,992,068	)		-			63,826,699			173,426
Increase (decrease) in operating liabilities:
Due to related party		(2,731,001	)		(16,607	)		4,460,000			-			1,712,392
Accounts payable and other accrued expenses		782,047			586,702			599,220			-			1,967,969
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(49,779,851	)		(28,562,097	)		(5,997,557	)		63,826,699			(20,512,806	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts		-			-			(24,326,322	)		-			(24,326,322	)
Proceeds from settlement of life insurance contracts		-			-			4,610,479			-			4,610,479
Investments in Secured MCA advances		-			-			(4,353,585	)		-			(4,353,585	)
Proceeds from Secured MCA advances					-			118,143			-			118,143
NET CASH FLOWS (USED IN) PROVIDED BY INVESTING ACTIVITIES		-			-			(23,951,285	)		-			(23,951,285	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on Senior Revolving Credit Facility		-			-			20,000,000			-			20,000,000
Payments for redemption of Series I Secured notes payable		-			(5,237,393	)		-			-			(5,237,393	)
Proceeds from issuance of L Bonds		34,368,889			-			-			-			34,368,889
Payments for issuance and redemption of L Bonds		(10,909,693	)		-			-			-			(10,909,693	)
Increase in restricted cash		-			(2,705,379	)		(14,781,341	)		-			(17,486,720	)
Issuance of common stock		46,545			-			-			-			46,545
Proceeds from issuance of preferred stock		1,028,536			-			-			-			1,028,536
Payments for issuance and redemption of preferred stock		(772,553	)		-			-			-			(772,553	)
Issuance of member capital		-			38,862,512			24,964,187			(63,826,699	)		-
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		23,761,724			30,919,740			30,182,846			(63,826,699	)		21,037,611
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(26,018,127	)		2,357,643			234,004			-			(23,426,480	)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		32,292,162			1,982,722			150,221			-			34,425,105
END OF THE PERIOD	$	6,274,035		$	4,340,365		$	384,225		$	-		$	10,998,625

For the three months ended March 31, 2015	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	3,261,891		$	13,848,144		$	15,296,156		$	(29,144,300	)	$	3,261,891
Adjustments to reconcile net income to cash flows from operating activities:
Equity of subsidiaries		(13,848,196	)		(15,296,104	)		-			29,144,300			-
Loss on life insurance contracts		-			-			1,893,845			-			1,893,845
Amortization of deferred financing and issuance costs		43,475			130,188			(722,693	)		-			(549,030	)
Deferred income taxes		2,182,251			-			-			-			2,182,251
Preferred stock dividends payable		188,812			-			-			-			188,812
(Increase) decrease in operating assets:
Policy benefits receivable		-			-			(17,890,000	)		-			(17,890,000	)
Other assets		(10,874,436	)		(5,877,435	)		-			16,620,698			(131,173	)
Increase in operating liabilities:
Accounts payable and other accrued expenses		2,279,652			738,084			382,049			-			2,635,687
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(16,766,551	)		(6,457,123	)		(1,804,741	)		16,620,698			(8,407,717	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts		-			-			(2,446,477	)		-			(2,446,477	)
Proceeds from settlement of life insurance contracts		-			-			3,610,595			-			3,610,595
NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES		-			-			1,164,118			-			1,164,118
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for redemption of Series I Secured notes payable		-			(1,273,189	)		-			-			(1,273,189	)
Proceeds from issuance of L Bonds		27,960,297			-			-			-			27,960,297
Payments from issuance and redemption of L Bonds		(6,878,122	)		-			-			-			(6,878,122	)
Proceeds from restricted cash		-			(1,780,000	)		(5,257,564	)		-			(7,073,564	)
Issuance of member capital		-			10,572,459			6,048,239			(16,620,698	)		-
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		21,082,175			7,519,270			790,675			(16,620,698	)		12,771,422
NET INCREASE IN CASH AND CASH EQUIVALENTS		4,315,624			1,062,147			150,052			-			5,527,823
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		30,446,473			216,231			-			-			30,662,704
END OF THE PERIOD	$	34,762,097		$	1,278,378		$	150,052		$	-		$	36,190,527

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Concentrations (Tables)

3 Months Ended

Mar. 31, 2016

Concentrations [Abstract]

Summary of the face value of insurance contracts

	March 31,			December 31,
	2016			2015
AXA Equitable		14.01	%		14.00	%
John Hancock		11.64	%		12.73	%
Transamerica		10.38	%		*

Summary of the number of insurance contracts

	March 31,			December 31,
	2016			2015
California		23.66	%		25.25	%
Florida		18.92	%		19.25	%

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Nature of Business and Summary of Significant Accounting Policies (Details) - USD ($)	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Nature of business and summary of significant accounting policies (Textual)
Deposits and direct cost advances	$ 526,000	$ 31,000
Redemption period for amortization of discount related to financing cost	3 years
Debt issuance costs in financial statement	$ 2,288,000

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Restrictions on Cash (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Restrictions on Cash (Textual)
Restricted cash	$ 19,829,000	$ 2,342,000

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Investment in Life Insurance Policies (Details)	Mar. 31, 2016 USD ($) INF	Dec. 31, 2015 USD ($) 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, 2016	3	5
Number of Contracts, 2017	11	12
Number of Contracts, 2018	29	27
Number of Contracts, 2019	51	51
Number of Contracts, 2020	70	59
Number of Contracts, 2021	56	48
Number of Contracts, 2022	49	44
Number of Contracts, Thereafter	196	150
Life Settlement Contracts, Number of Contracts, Total	465	396
Estimated Fair Value, 2016	$ 5,440,000	$ 7,503,000
Estimated Fair Value, 2017	13,855,000	12,875,000
Estimated Fair Value, 2018	32,989,000	37,109,000
Estimated Fair Value, 2019	51,866,000	54,242,000
Estimated Fair Value, 2020	71,319,000	64,750,000
Estimated Fair Value, 2021	53,756,000	45,724,000
Estimated Fair Value, 2022	36,273,000	38,394,000
Estimated Fair Value, Thereafter	121,904,000	96,053,000
Life Settlement Contracts, Estimated Fair Value, Total	387,402,000	356,650,000
Face Value, 2016	6,000,000	8,500,000
Face Value, 2017	18,043,000	17,418,000
Face Value, 2018	50,905,000	58,428,000
Face Value, 2019	91,707,000	100,967,000
Face Value, 2020	148,360,000	137,868,000
Face Value, 2021	130,169,000	116,805,000
Face Value, 2022	109,262,000	116,998,000
Face Value, Thereafter	473,375,000	387,860,000
Life Settlement Contracts, Face Value, Total	$ 1,027,821,000	$ 944,844,000

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Investment in Life Insurance Policies (Details 1) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Summary of reconciliation of gain on life settlements
Change in fair value	$ 11,532,000	$ (1,894,000)
Premiums and other annual fees	(8,445,000)	(6,337,000)
Policy maturities	14,627,000	25,014,000
Gain on life insurance contracts, net	$ 17,714,000	$ 16,783,000

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Investment in Life Insurance Policies(Details 2)	Mar. 31, 2016 USD ($)
Summary of estimated expected premium payments to maintain the above life insurance policies assuming no mortalities
Nine months ending December 31 ,2016	$ 25,816,000
2017	36,641,000
2018	39,956,000
2019	44,862,000
2020	49,872,000
2021	55,383,000
Estimated expected premium payments	252,530,000
Premiums [Member]
Summary of estimated expected premium payments to maintain the above life insurance policies assuming no mortalities
Nine months ending December 31 ,2016	25,258,000
2017	36,083,000
2018	39,398,000
2019	44,304,000
2020	49,314,000
2021	54,825,000
Estimated expected premium payments	249,182,000
Servicing [Member]
Summary of estimated expected premium payments to maintain the above life insurance policies assuming no mortalities
Nine months ending December 31 ,2016	558,000
2017	558,000
2018	558,000
2019	558,000
2020	558,000
2021	558,000
Estimated expected premium payments	$ 3,348,000

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Investment in Life Insurance Policies (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Investment in Life Insurance Policies (Textual)
Benefit recognized from insurance policy	$ 19,238,000	$ 28,625,000
Carrying value of life insurance policy	4,611,000	3,611,000
Realized gains from life insurance policy	$ 14,627,000	$ 25,014,000
Discount rate applied to portfolio	11.08%	11.09%
Change in fair value related to policies	$ (2,395,000)
Net valuation of life policies	387,402,000		$ 356,650,000
Valuation of the portfolio of life policies	$ 389,797,000
Life insurance policies [Member]
Investment in Life Insurance Policies (Textual)
Discount rate applied to portfolio	11.08%	11.09%

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Fair Value Definition and Hierarchy (Details) - Life insurance policies [Member] - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Summary of reconciliation of investments in life insurance policies
Beginning balance	$ 356,650,000	$ 282,883,000
Purchases	23,831,000	1,016,000
Maturities (cash in excess of carrying value)	(4,611,000)	(3,610,000)
Net change in fair value	11,532,000	(1,894,000)
Ending balance	$ 387,402,000	$ 278,395,000

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Fair Value Definition and Hierarchy (Details 1) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Summary of inputs utilized in estimating the fair value
Discount rate	11.08%	11.09%
Life insurance policies [Member]
Summary of inputs utilized in estimating the fair value
Weighted-average age of insured, years	82 years 4 months 24 days	82 years 7 months 6 days
Weighted average life expectancy, months	80 months 6 days	79 months 9 days
Average face amount per policy	$ 2,210,000		$ 2,386,000
Discount rate	11.08%	11.09%

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Fair Value Definition and Hierarchy (Details 2) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Minus 8 months [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life policies	$ 52,011,000	$ 48,339,000
Minus 4 Months [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life policies	25,901,000	24,076,000
Plus 4 Months [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life policies	(25,278,000)	(23,501,000)
Plus 8 months [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life policies	(49,990,000)	(46,482,000)
Minus 2% [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life policies	38,567,000	35,024,000
Minus 1% [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life policies	18,477,000	16,786,000
Plus 1% [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life policies	(17,033,000)	(15,485,000)
Plus 2% [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life policies	$ (32,772,000)	$ (29,803,000)

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Fair value definition and hierarchy (Details 3) - Level 3 [Member]	3 Months Ended
	Mar. 31, 2016 $ / shares shares
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 | $ / shares	$ 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 | $ / shares	$ 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. 12, 2012
Warrants issued	161,840
Fair value per share | $ / shares	$ 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 | $ / shares	$ 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 | $ / shares	$ 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 | $ / shares	$ 1.26
Risk free rate	1.85%
Volatility	17.03%
Term	5 years

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Fair Value Definition and Hierarchy (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2014
Fair Value Definition and Hierarchy (Textual)
Life expectancy report, Description		During the fourth quarter of 2014, GWG adopted a plan to update the independent life expectancy estimates, where possible, on the insured lives in our portfolio. The plan covers all policies with the exception of those policies purchased with small face amount underwriting standards (under $1 million in face amount). The plan is for each set of life expectancy estimates and medical records to be updated on a continuous rotating three-year cycle. The records for approximately 1/12th of the portfolio are being updated each quarter.
Estimated fair value of series I secured notes payable	$ 326,944,000
Weighted average market interest rate of secured notes payable	7.06%
Debt instruments face value	$ 325,339,000
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

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Credit Facilities (Details) - USD ($)		1 Months Ended	3 Months Ended
	Jul. 15, 2008	May. 29, 2014	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Credit Facilities (Textual)
Maximum borrowing amount under line of credit facility	$ 100,000,000
Expiry date of line of credit	Jul. 15, 2013	Dec. 31, 2016
Amount outstanding under line of credit facility			$ 85,011,000		$ 65,011,000
Effective rate of interest			5.69%		5.58%
Total funds available for additional borrowings under the borrowing base formula criteria			$ 20,000,000		$ 39,989,000
Weighted average effective interest rate			5.68%	6.20%
Minimum tangible net worth to be maintained by company			$ 45,000,000
Minimum cash and eligible investments			15,000,000
Consolidated tangible net worth under credit and security agreement			28,333,000
Consolidated net income under credit and security agreement			$ 118,922,000
Credit facility, Description			Advances under the senior 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.
Credit facility up to limit	$ 105,000,000

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Series I Secured Notes payable (Details) - Series I Secured Notes Payable [Member]	Mar. 31, 2016 USD ($)
Summary of future contractual maturities of notes payable
Nine months ending December 31 ,2016	$ 6,581,000
2017	7,956,000
2018	1,596,000
2019	444,000
2020	1,766,000
Thereafter	165,000
Total	18,508,000
Summary of amortization of deferred financing costs of notes payable
Nine months ending December 31 ,2016	35,000
2017	128,000
2018	41,000
2019	7,000
2020	63,000
Thereafter	7,000
Total	$ 281,000

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Series I Secured Notes payable (Details Textual) - USD ($)		3 Months Ended
	Jun. 14, 2011	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Series I Secured Notes Payable (Textual)
Effective rate of interest		5.69%		5.58%
Weighted average interest rate of secured notes payable		7.06%
Series I Secured Notes Payable [Member]
Series I Secured Notes Payable (Textual)
Description of interest payment		Interest is payable monthly, quarterly, annually or at maturity depending on the terms of the note.
Weighted average interest rate of secured notes payable		8.61%		8.47%
Principal amount outstanding under Series I Secured notes		$ 18,508,000		$ 23,578,000
Amortization of deferred financing and issuance costs		111,000	$ 130,000
Future expected amortization of deferred financing costs		$ 281,000
Minimum maturity period of secured notes	6 months	6 months
Maximum maturity period of secured notes	7 years	7 years
Amortizatoin period of deferred financing cost		6 years
Series I Secured Notes Payable [Member] | Maximum [Member]
Series I Secured Notes Payable (Textual)
Effective rate of interest	9.55%
Series I Secured Notes Payable [Member] | Minimum [Member]
Series I Secured Notes Payable (Textual)
Effective rate of interest	5.65%

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L Bonds (Details) - Renewable Secured Debentures [Member]	Mar. 31, 2016 USD ($)
Summary of future contractual maturities of L Bonds
Nine months ending December 31 ,2016	$ 76,618,000
2017	73,736,000
2018	75,804,000
2019	33,648,000
2020	19,602,000
Thereafter	27,423,000
Total	306,831,000
Summary of amortization of deferred financing costs of L Bonds
Nine months ending December 31 ,2016	562,000
2017	1,734,000
2018	2,976,000
2019	1,521,000
2020	995,000
Thereafter	1,734,000
Total	$ 9,522,000

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L Bonds (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015	Jan. 09, 2015	Jan. 31, 2012
Renewable Secured Debentures (Textual)
Debentures offer for sale	$ 325,339,000
Weighted average market interest rate of secured notes payable	7.06%
Renewable Secured Debentures [Member]
Renewable Secured Debentures (Textual)
Debentures offer for sale				$ 1,000,000,000	$ 250,000,000
Maturity period of debentures, Minimum	6 months
Maturity period of debentures, Maximum	7 years
Description of interest payment	Interest is payable monthly, annually or at maturity depending on the terms of the debenture.
Minimum increments	$ 25,000
Weighted average market interest rate of secured notes payable	7.14%		7.18%
Amount outstanding under L Bonds	$ 306,831,000		$ 282,171,000
Amortization of deferred issuance costs	1,568,000	$ 974,000
Future expected amortization of deferred financing costs	$ 952,200
Amortizatoin period of deferred financing cost	8 years
Renewable Secured Debentures [Member] | Maximum [Member]
Renewable Secured Debentures (Textual)
Interest rate	9.50%
Renewable Secured Debentures [Member] | Minimum [Member]
Renewable Secured Debentures (Textual)
Interest rate	4.25%

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Note Payable to Related Party (Details) - USD ($)	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Related Party Transaction [Line Items]
Notes payable to related parties	$ 1,760,000
ISF [Member]
Related Party Transaction [Line Items]
Shares issued of common stock	100,000
Percentage of common stock ownership	74.00%
Interest rate	9.00%
Note payable maturity date, Description	The maturity date of this note is the earlier of (i) December 31, 2016 or (ii) 30 calendar days after the date on which the GWG MCA shall have received net financings proceeds from it's private offer and sale of it's preferred stock equaling the amount of debt for borrowed money then outstanding under this promissory note

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Convertible Preferred Stock (Details) - USD ($)		1 Months Ended	3 Months Ended		12 Months Ended
	Sep. 02, 2012	Jul. 31, 2011	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Convertible Preferred Stock (Textual)
Preferred stock, liquidation preference per share			$ 7.50
Series A preferred stock outstanding			1,449
Gross consideration from convertible preferred stock			$ 20,274,000
Series A preferred stock issuance costs			2,838,000
Warrant outstanding			$ 431,954		$ 431,954
Weighted average remaining life of warrants outstanding			1 year 2 months 5 days		1 year 5 months 5 days
Accrued preferred dividend			$ 507,000	$ 537,000
Redeemed shares of Series A preferred stock			277,000
Minimum 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			$ 507,000
Preferred stock issued in lieu of cash dividend			24,000	26,000
Cash dividend rate, per share			$ 7
Initial public offering [Member]
Convertible Preferred Stock (Textual)
Convertible preferred stock, shares issued upon conversion			677,566
Conversion of stock, shares converted into common stock			508,193
Series A 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			398,000
Series A preferred stock value issued in conversion of dividends			$ 2,788,000
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 at $10 per share.
Conversion price per share			$ 10
Exercise price of warrants			$ 12.50
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 Stock at a price equal to 110% of its liquidation preference ($7.50 per share) at any time.
Series A preferred stock outstanding			2,713,000
Convertible preferred stock, shares issued upon conversion			678,000
Conversion of stock, shares converted into common stock			508,000
Minimum gross proceeds from common stock offering			$ 5,000,000
Exercise price			$ 12.50

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Redeemable Preferred Stock (Details)	3 Months Ended
	Mar. 31, 2016 USD ($) Tradingdays $ / shares shares	Mar. 31, 2015 USD ($)
Subsidiary, Sale of Stock [Line Items]
Offering price of series redeemable preferred stock	$ 6.25
Minimum conversion price	$ 15.00
Number of trading days | Tradingdays	20
Redeemable Preferred Stock For Sale | $		$ 79,000
Redemption, description	? 12% if the redemption is requested before the first anniversary of the original issuance of the shares; and ? 10% if the redemption is requested on or after the first anniversary and before the second anniversary of the original issuance of such shares; and ? 8% if the redemption is requested on or after the second anniversary and before the third anniversary of the original issuance of such shares.
Series A 7% redeemable preferred stocks [Member]
Subsidiary, Sale of Stock [Line Items]
Company offering shares of convertible redeemable preferred stock | shares	100,000
Offering price of series redeemable preferred stock	$ 1,000
Redeemable preferred stock par value per share	$ 0.001
Dividend rate of convertible redeemable preferred stock	7.00%
Preferred stock redemption percentage	15.00%
Redeemable Preferred Stock [Member]
Subsidiary, Sale of Stock [Line Items]
Proceeds from redeemable preferred stock | $	$ 1,449,000
Redeemable preferred stock, shares issued | shares	1,449

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Income Taxes (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Current:
Federal	$ (23,000)	$ (324,000)
State	(6,000)	(103,000)
Total current tax expense	(29,000)	(427,000)	$ 0
Deferred:
Federal	(806,000)	(1,654,000)
State	(250,000)	(528,000)
Total deferred tax expense	1,055,729	2,182,251
Total income tax expense	$ 1,084,717	$ 2,609,371

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Income Taxes (Details Textual) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Income Taxes (Textual)
Income tax liability current	$ (29,000)	$ (427,000)	$ 0
Accrual of non-deductible preferred stock dividend expense	$ 511,000

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Common Stock (Details) - USD ($)		1 Months Ended		3 Months Ended
	Sep. 24, 2014	Mar. 17, 2016	Jun. 24, 2015	Mar. 31, 2016	Mar. 31, 2015
Common Stock (Textual)
Common stock, par value				$ 6.25
Net proceeds				$ 46,545
GWG MCA Capital, Inc. (Member)
Common Stock (Textual)
Restricted Common stock issued	800,000	6,500	60,000
Common stock, par value	$ 12.50	$ 7.16	$ 9.70

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Stock Incentive Plan (Details) - shares	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Outstanding stock options
Beginning Balance	1,053,615	1,000,101
Granted during the year	7,500	353,200
Vested during the year
Exercised during the year		(27,667)
Forfeited during the year	(10,500)	(272,019)
Ending Balance	1,050,615	1,053,615
Vested [Member]
Outstanding stock options
Beginning Balance	483,703	314,288
Granted during the year	7,500	79,500
Vested during the year	14,092	238,999
Exercised during the year		(27,667)
Forfeited during the year	(3,090)	(121,417)
Ending Balance	502,205	483,703
Un-vested [Member]
Outstanding stock options
Beginning Balance	569,912	685,813
Granted during the year		273,700
Vested during the year	(14,092)	(238,999)
Exercised during the year
Forfeited during the year	(7,410)	(150,602)
Ending Balance	548,410	569,912

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Stock Incentive Plan (Details Textual) - USD ($)		1 Months Ended	3 Months Ended	12 Months Ended
	Mar. 27, 2013	Sep. 30, 2014	Mar. 31, 2016	Dec. 31, 2015
Stock Incentive Plan (Textual)
Number of shares issued to employees, officers and directors			7,500	353,200
Options vesting period			3 years
Forfeited during the year			10,500	272,019
Compensation expense related to un-vested options not yet recognized			$ 451,000
Compensation expense related to un-vested options, period of recognition			3 years
Compensation Expense in 2016			$ 214,000
Compensation Expense in 2017			187,000
Compensation Expense in 2018			$ 50,000
Exercised during the year				(27,667)
Share-based options, forfeited			53,000
Share-based options, vested			53,000
Common Stock [Member]
Stock Incentive Plan (Textual)
Number of shares issued to employees, officers and directors			1,050,615
Number of options vested			502,205
Others [Member] | Maximum [Member]
Stock Incentive Plan (Textual)
Exercise Price				$ 10.25
Others [Member] | Minimum [Member]
Stock Incentive Plan (Textual)
Exercise Price				6.00
Owning more than 10% [Member] | Maximum [Member]
Stock Incentive Plan (Textual)
Exercise Price				10.18
Owning more than 10% [Member] | Minimum [Member]
Stock Incentive Plan (Textual)
Exercise Price				$ 6.60
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				20.59%
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			345,685
Forfeited during the year, Percent			15.00%
Exercised during the year			28,001

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Commitments (Details)	Mar. 31, 2016 USD ($)
Summary of Minimum lease payments under the lease agreement
Nine months ending December 31, 2016	$ 130,000
2017	178,000
2018	185,000
2019	191,000
2020	198,000
2021	204,000
2022	210,000
2023	217,000
2024	223,000
2025	230,000
2026	38,000
Total	$ 2,004,000

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Commitments (Details Textual)			3 Months Ended
	Feb. 01, 2016 USD ($)	Sep. 01, 2015 ft²	Mar. 31, 2016 USD ($) ft²	Dec. 31, 2015 USD ($)
Commitments (Textual)
Office space in square feet | ft²		17,687	11,695
Lease term date			Aug. 31, 2015
Rent expenses			$ 224,000	$ 68,000
Description of lessor leasing arrangements		Effective September 1, 2015, the Company entered into a Second Amendment to the office lease with US Bank National Association that extended the term of the lease to 120 months from the effective date and expanded to 17,687 square feet. The Second Amendment provides the right for us to extend the term of the lease for one three-year term, and a right of first offer on space adjacent to our leased premises.
Total rent for sublease term	$ 30,000
Rent paid for monthly installments	5,000
Additional charges for services in sublease	$ 500

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Guarantees of L Bonds (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015	Dec. 31, 2014
A S S E T S
Cash and cash equivalents	$ 10,998,625	$ 34,425,105	$ 36,190,527	$ 30,662,704
Restricted cash	19,828,620	2,341,900
Investment in life insurance contracts, at fair value	387,402,111	$ 356,649,715
Secured MCA advances	4,235,442
Policy benefits receivable	15,912,839
Other assets	$ 3,224,325	$ 2,461,045
Investment in subsidiaries
TOTAL ASSETS	$ 441,601,962	$ 395,877,765
LIABILITIES
Revolving senior credit facility	82,304,099	63,279,596
Series I Secured Notes payable	18,226,541	23,287,704
L Bonds	301,924,332	$ 276,482,796
Notes payable to related parties	1,760,000
Accounts payable	2,119,791	$ 1,517,440
Interest payable	12,915,598	12,340,061
Other accrued expenses	1,397,378	1,060,786
Deferred taxes	2,819,697	1,763,968
TOTAL LIABILITIES	$ 423,467,436	$ 379,732,351
STOCKHOLDERS' EQUITY (DEFICIT)
Member capital
Convertible preferred stock	$ 20,274,155	$ 20,784,841
Redeemable preferred stock	1,369,938
Common stock	5,948	$ 5,942
Additional paid-in capital	17,204,940	17,149,391
Accumulated deficit	(20,720,455)	(21,794,760)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	18,134,526	16,145,414		$ 22,389,936
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	441,601,962	395,877,765
Parent [Member]
A S S E T S
Cash and cash equivalents	$ 6,274,035	$ 32,292,162	34,762,097	30,446,473
Restricted cash
Investment in life insurance contracts, at fair value
Secured MCA advances
Policy benefits receivable
Other assets	$ 4,560,495	$ 1,742,074
Investment in subsidiaries	321,992,234	269,886,254
TOTAL ASSETS	$ 332,826,764	$ 303,920,490
LIABILITIES
Revolving senior credit facility
Series I Secured Notes payable
L Bonds	$ 301,924,332	$ 276,482,796
Notes payable to related parties
Accounts payable	$ 188,894	$ 280,988
Interest payable	8,879,457	8,529,959
Other accrued expenses	879,858	717,365
Deferred taxes	2,819,697	1,763,968
TOTAL LIABILITIES	$ 314,692,238	$ 287,775,076
STOCKHOLDERS' EQUITY (DEFICIT)
Member capital
Convertible preferred stock	$ 20,274,155	$ 20,784,841
Redeemable preferred stock	1,369,938
Common stock	5,948	$ 5,942
Additional paid-in capital	17,204,940	17,149,391
Accumulated deficit	(20,720,455)	(21,794,760)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	18,134,526	16,145,414
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	332,826,764	303,920,490
Guarantor Subsidiary [Member]
A S S E T S
Cash and cash equivalents	4,340,365	1,982,722	1,278,378	$ 216,231
Restricted cash	$ 4,807,637	$ 2,102,257
Investment in life insurance contracts, at fair value
Secured MCA advances
Policy benefits receivable
Other assets	$ 863,833	$ 688,071
Investment in subsidiaries	332,430,230	291,295,951
TOTAL ASSETS	342,442,065	296,069,001
LIABILITIES
Revolving senior credit facility	(2,275,000)	(1,000,000)
Series I Secured Notes payable	$ 18,226,541	$ 23,287,704
L Bonds
Notes payable to related parties
Accounts payable	$ 365,147	$ 157,217
Interest payable	3,714,441	3,544,626
Other accrued expenses	$ 486,943	$ 343,421
Deferred taxes
TOTAL LIABILITIES	$ 20,518,072	$ 26,332,968
STOCKHOLDERS' EQUITY (DEFICIT)
Member capital	$ 321,923,993	$ 269,736,033
Convertible preferred stock
Redeemable preferred stock
Common stock
Additional paid-in capital
Accumulated deficit
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	$ 321,923,993	$ 269,736,033
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	342,442,065	296,069,001
Non-Guarantor Subsidiaries [Member]
A S S E T S
Cash and cash equivalents	384,225	150,221	$ 150,052
Restricted cash	15,020,983	239,643
Investment in life insurance contracts, at fair value	387,402,111	$ 356,649,715
Secured MCA advances	4,235,442
Policy benefits receivable	15,912,839
Other assets	$ 530,899	$ 30,900
Investment in subsidiaries
TOTAL ASSETS	$ 423,486,499	$ 357,070,479
LIABILITIES
Revolving senior credit facility	$ 84,579,099	$ 64,279,596
Series I Secured Notes payable
L Bonds
Notes payable to related parties	$ 4,460,000
Accounts payable	1,565,750	$ 1,079,235
Interest payable	352,602	$ 265,476
Other accrued expenses	$ 30,577
Deferred taxes
TOTAL LIABILITIES	$ 90,988,028	$ 65,624,307
STOCKHOLDERS' EQUITY (DEFICIT)
Member capital	$ 332,498,471	$ 291,446,172
Convertible preferred stock
Redeemable preferred stock
Common stock
Additional paid-in capital
Accumulated deficit
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	$ 332,498,471	$ 291,446,172
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$ 423,486,499	$ 357,070,479
Eliminations [Member]
A S S E T S
Cash and cash equivalents
Restricted cash
Investment in life insurance contracts, at fair value
Secured MCA advances
Policy benefits receivable
Other assets	$ (2,730,902)
Investment in subsidiaries	(645,422,464)	$ (561,182,205)
TOTAL ASSETS	$ (657,153,366)	$ (561,182,205)
LIABILITIES
Revolving senior credit facility
Series I Secured Notes payable
L Bonds
Notes payable to related parties	$ (2,700,000)
Accounts payable
Interest payable	$ (30,902)
Other accrued expenses
Deferred taxes
TOTAL LIABILITIES	$ (2,730,902)
STOCKHOLDERS' EQUITY (DEFICIT)
Member capital	$ (654,422,464)	$ (561,182,205)
Convertible preferred stock
Redeemable preferred stock
Common stock
Additional paid-in capital
Accumulated deficit
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	$ (654,422,464)	$ (561,182,205)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$ (657,153,366)	$ (561,182,205)

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Guarantees of L Bonds (Details 1) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
REVENUE
Contract servicing fees
Gain on life insurance contracts, net	$ 17,713,712	$ 16,783,409
Interest and other income	190,181	49,296
TOTAL REVENUE	$ 17,903,893	$ 16,832,705
EXPENSES
Origination and servicing fees
Interest expense	$ 9,660,386	$ 7,176,534
Employee compensation and benefits	2,466,197	1,727,917
Legal and professional fees	1,206,128	578,144
Other expenses	2,412,160	1,478,848
TOTAL EXPENSES	15,744,871	10,961,443
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES	$ 2,159,022	$ 5,871,262
EQUITY IN INCOME OF SUBSIDIARY
NET INCOME BEFORE INCOME TAXES	$ 2,159,022	$ 5,871,262
INCOME TAX EXPENSE	1,084,717	2,609,371
NET INCOME (LOSS)	$ 1,074,305	$ 3,261,891	$ (7,393,274)
Parent [Member]
REVENUE
Contract servicing fees
Gain on life insurance contracts, net
Interest and other income	$ 34,798	$ 7,543
TOTAL REVENUE	$ 34,798	$ 7,543
EXPENSES
Origination and servicing fees
Interest expense	$ 7,598,824	$ 5,249,962
Employee compensation and benefits	1,536,430	1,305,801
Legal and professional fees	594,739	477,351
Other expenses	1,257,977	951,362
TOTAL EXPENSES	10,987,970	7,984,476
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES	(10,953,172)	(7,976,933)
EQUITY IN INCOME OF SUBSIDIARY	13,112,194	13,848,196
NET INCOME BEFORE INCOME TAXES	2,159,022	5,871,262
INCOME TAX EXPENSE	1,084,717	2,609,371
NET INCOME (LOSS)	1,074,305	3,261,891
Guarantor Subsidiary [Member]
REVENUE
Contract servicing fees	$ 13,417	$ 357,486
Gain on life insurance contracts, net
Interest and other income	$ 306	$ 6,450
TOTAL REVENUE	$ 2,762,748	$ 363,936
EXPENSES
Origination and servicing fees
Interest expense	$ 657,236	$ 774,086
Employee compensation and benefits	829,081	422,116
Legal and professional fees	534,650	100,793
Other expenses	968,674	514,902
TOTAL EXPENSES	2,989,641	1,811,897
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES	(2,975,918)	(1,447,961)
EQUITY IN INCOME OF SUBSIDIARY	16,301,366	15,296,104
NET INCOME BEFORE INCOME TAXES	$ 13,325,448	$ 13,848,144
INCOME TAX EXPENSE
NET INCOME (LOSS)	$ 13,325,448	$ 13,848,144
Non-Guarantor Subsidiaries [Member]
REVENUE
Contract servicing fees
Gain on life insurance contracts, net	$ 17,713,712	$ 16,783,409
Interest and other income	185,979	35,303
TOTAL REVENUE	17,899,691	16,818,712
EXPENSES
Origination and servicing fees	13,417	357,486
Interest expense	1,435,228	$ 1,152,486
Employee compensation and benefits	100,686
Legal and professional fees	76,739
Other expenses	185,509	$ 12,584
TOTAL EXPENSES	1,811,579	1,522,556
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES	$ 16,088,112	$ 15,296,156
EQUITY IN INCOME OF SUBSIDIARY
NET INCOME BEFORE INCOME TAXES	$ 16,088,112	$ 15,296,156
INCOME TAX EXPENSE
NET INCOME (LOSS)	$ 16,088,112	$ 15,296,156
Eliminations [Member]
REVENUE
Contract servicing fees	$ (13,417)	$ (357,486)
Gain on life insurance contracts, net
Interest and other income	$ (30,902)
TOTAL REVENUE	(44,319)	$ (357,486)
EXPENSES
Origination and servicing fees	(13,417)	$ (357,486)
Interest expense	$ (30,902)
Employee compensation and benefits
Legal and professional fees
Other expenses
TOTAL EXPENSES	$ (44,319)	$ (357,486)
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES
EQUITY IN INCOME OF SUBSIDIARY	$ (29,413,560)	$ (29,144,300)
NET INCOME BEFORE INCOME TAXES	$ (29,413,560)	$ (29,144,300)
INCOME TAX EXPENSE
NET INCOME (LOSS)	$ 29,413,560	$ (29,144,300)

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Guarantees of L Bonds (Details 2) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 1,074,305	$ 3,261,891	$ (7,393,274)
Adjustments to reconcile net income to net cash flows from operating activities:
Equity of subsidiaries
Gain on life insurance contracts	$ (11,531,553)	$ 1,893,845
Amortization of deferred financing and issuance costs	784,188	(549,030)
Deferred income taxes	1,055,729	2,182,251
Preferred stock dividends payable	163,577	188,812
(Increase) decrease in operating assets:
Policy benefits receivable	(15,912,839)	(17,890,000)
Other assets	173,426	$ (131,173)
Increase (decrease) in operating liabilities:
Due to related party	1,712,392
Accounts payable and other accrued expenses	1,967,969	$ 2,635,687
NET CASH FLOWS USED IN OPERATING ACTIVITIES	(20,512,806)	(8,407,717)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts	(24,326,322)	(2,446,477)
Proceeds from settlement of life insurance contracts	4,610,479	$ 3,610,595
Investments in Secured MCA advances	(4,353,585)
Proceeds from Secured MCA advances	118,143
NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES	(23,951,285)	$ 1,164,118
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on Senior Revolving Credit Facility	20,000,000
Payments for redemption of Series I Secured notes payable	(5,237,393)	$ (1,273,189)
Proceeds from issuance of L Bonds	34,368,889	27,960,297
Payments for issuance and redemption of L Bonds	(10,909,693)	(6,878,122)
Proceeds from restricted cash	(17,486,720)	$ (7,037,564)
Issuance of common stock	46,545
Payments for issuance and redemption of preferred stock	$ 1,028,536
Issuance of member capital
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES	$ 21,037,611	$ 12,771,422
NET INCREASE IN CASH AND CASH EQUIVALENTS	(23,426,480)	5,527,823
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD	34,425,105	30,662,704	30,662,704
END OF THE PERIOD	10,998,625	36,190,527	34,425,105
Parent [Member]
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	1,074,305	3,261,891
Adjustments to reconcile net income to net cash flows from operating activities:
Equity of subsidiaries	$ (13,112,194)	$ (13,848,196)
Gain on life insurance contracts
Amortization of deferred financing and issuance costs	$ 1,648,891	$ 43,475
Deferred income taxes	1,055,729	2,182,251
Preferred stock dividends payable	$ 163,577	$ 188,812
(Increase) decrease in operating assets:
Policy benefits receivable
Other assets	$ (38,661,205)	$ (10,874,436)
Increase (decrease) in operating liabilities:
Due to related party	(2,731,001)
Accounts payable and other accrued expenses	782,047	$ 2,279,652
NET CASH FLOWS USED IN OPERATING ACTIVITIES	$ (49,779,851)	$ (16,766,551)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts
Proceeds from settlement of life insurance contracts
Investments in Secured MCA advances
Proceeds from Secured MCA advances
NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on Senior Revolving Credit Facility
Payments for redemption of Series I Secured notes payable
Proceeds from issuance of L Bonds	$ 34,368,889	$ 27,960,297
Payments for issuance and redemption of L Bonds	$ (10,909,693)	$ (6,878,122)
Proceeds from restricted cash
Issuance of common stock	$ 46,545
Proceeds from issuance of preferred stock	1,028,536
Payments for issuance and redemption of preferred stock	$ (772,553)
Issuance of member capital
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES	$ 23,761,724	$ 21,082,175
NET INCREASE IN CASH AND CASH EQUIVALENTS	(26,018,127)	4,315,624
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD	32,292,162	30,446,473	30,446,473
END OF THE PERIOD	6,274,035	34,762,097	32,292,162
Guarantor Subsidiary [Member]
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	13,325,448	13,848,144
Adjustments to reconcile net income to net cash flows from operating activities:
Equity of subsidiaries	$ (16,301,366)	$ (15,296,104)
Gain on life insurance contracts
Amortization of deferred financing and issuance costs	$ (1,164,206)	$ 130,188
Deferred income taxes
Preferred stock dividends payable
(Increase) decrease in operating assets:
Policy benefits receivable
Other assets	$ (24,992,068)	$ (5,877,435)
Increase (decrease) in operating liabilities:
Due to related party	(16,607)
Accounts payable and other accrued expenses	586,702	$ 738,084
NET CASH FLOWS USED IN OPERATING ACTIVITIES	$ (28,562,097)	$ (6,457,123)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts
Proceeds from settlement of life insurance contracts
Investments in Secured MCA advances
Proceeds from Secured MCA advances
NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on Senior Revolving Credit Facility
Payments for redemption of Series I Secured notes payable	$ (5,237,393)	$ (1,273,189)
Proceeds from issuance of L Bonds
Payments for issuance and redemption of L Bonds
Proceeds from restricted cash	$ (2,705,379)	$ (1,780,000)
Issuance of common stock
Proceeds from issuance of preferred stock
Payments for issuance and redemption of preferred stock
Issuance of member capital	$ 38,862,512	$ 10,572,459
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES	30,919,740	7,519,270
NET INCREASE IN CASH AND CASH EQUIVALENTS	2,357,643	1,062,147
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD	1,982,722	216,231	216,231
END OF THE PERIOD	4,340,365	1,278,378	$ 1,982,722
Non-Guarantor Subsidiaries [Member]
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 16,088,112	$ 15,296,156
Adjustments to reconcile net income to net cash flows from operating activities:
Equity of subsidiaries
Gain on life insurance contracts	$ (11,531,553)	$ 1,893,845
Amortization of deferred financing and issuance costs	$ 299,503	$ (722,693)
Deferred income taxes
Preferred stock dividends payable
(Increase) decrease in operating assets:
Policy benefits receivable	$ (15,912,839)	$ 17,890,000
Other assets
Increase (decrease) in operating liabilities:
Due to related party	$ 4,460,000
Accounts payable and other accrued expenses	599,220	$ 382,049
NET CASH FLOWS USED IN OPERATING ACTIVITIES	(5,997,557)	(1,804,741)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts	(24,326,322)	(2,446,477)
Proceeds from settlement of life insurance contracts	4,610,479	$ 3,610,595
Investments in Secured MCA advances	(4,353,585)
Proceeds from Secured MCA advances	118,143
NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES	(23,951,285)	$ 1,164,118
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on Senior Revolving Credit Facility	$ 20,000,000
Payments for redemption of Series I Secured notes payable
Proceeds from issuance of L Bonds
Payments for issuance and redemption of L Bonds
Proceeds from restricted cash	$ (14,781,341)	$ (5,257,564)
Issuance of common stock
Proceeds from issuance of preferred stock
Payments for issuance and redemption of preferred stock
Issuance of member capital	$ 24,964,187	$ 6,048,239
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES	30,182,846	790,675
NET INCREASE IN CASH AND CASH EQUIVALENTS	234,004	$ 150,052
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD	150,221
END OF THE PERIOD	384,225	$ 150,052	$ 150,221
Eliminations [Member]
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	29,413,560	(29,144,300)
Adjustments to reconcile net income to net cash flows from operating activities:
Equity of subsidiaries	$ 29,413,560	$ 29,144,300
Gain on life insurance contracts
Amortization of deferred financing and issuance costs
Deferred income taxes
Preferred stock dividends payable
(Increase) decrease in operating assets:
Policy benefits receivable
Other assets	$ 63,826,699	$ 16,620,698
Increase (decrease) in operating liabilities:
Due to related party
Accounts payable and other accrued expenses
NET CASH FLOWS USED IN OPERATING ACTIVITIES	$ 63,826,699	$ 16,620,698
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts
Proceeds from settlement of life insurance contracts
Investments in Secured MCA advances
Proceeds from Secured MCA advances
NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on Senior Revolving Credit Facility
Payments for redemption of Series I Secured notes payable
Proceeds from issuance of L Bonds
Payments for issuance and redemption of L Bonds
Proceeds from restricted cash
Issuance of common stock
Proceeds from issuance of preferred stock
Payments for issuance and redemption of preferred stock
Issuance of member capital	$ (63,826,699)	$ (16,620,698)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES	$ (63,826,699)	$ (16,620,698)
NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD
END OF THE PERIOD

XML

Guarantees of L Bonds (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2016	Jan. 09, 2015	Jan. 31, 2012
Guarantees of L Bonds (Textual)
Debentures offer for sale	$ 325,339,000
Maximum rate of return on equity fund amount	18.00%
Guarantees of L Bonds [Member]
Guarantees of L Bonds (Textual)
Debentures offer for sale		$ 1,000,000,000	$ 250,000,000

XML

Concentrations (Details)	Mar. 31, 2016	Dec. 31, 2015
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	14.01%	14.00%
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	11.64%	12.73%
Transamerica [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	10.38%		[1]

[1] percentage does not exceed 10% of the total face value.

XML

Concentrations (Details 1)	Mar. 31, 2016	Dec. 31, 2015
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	23.66%	25.25%
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	18.92%	19.25%

XML

Concentrations (Details Textual)	3 Months Ended
	Mar. 31, 2016
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

Subsequent Events (Details) - USD ($)		3 Months Ended
	Feb. 04, 2016	Mar. 31, 2016
Subsequent Event [Line Items]
Additional principal amount of L bonds		$ 13,863,000
Preferred stock, sale price per share		$ 6.25
Redeemable preferred stock issued, value		$ 4,214,000
Restricted shares of common stock		25,000
Private Placement [Member]
Subsequent Event [Line Items]
Preferred stock shares sold for cash, shares	2,000,000
Preferred stock, sale price per share	$ 10
Percentage of preferred stock issued	9.00%