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 September 30, 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 November 10, 2016, GWG Holdings, Inc. had 5,980,190 shares of common stock outstanding.

GWG HOLDINGS, INC.

Index to Form 10-Q

for the Quarter Ended September 30, 2016

		Page No.
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of September 30, 2016, and December 31, 2015	1
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015	2
	Condensed Consolidated Statements of Cash Flows for the three and nine months ended September 30, 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	27
Item 4.	Controls and Procedures	54
PART II.	OTHER INFORMATION
Item 1A.	Risk Factors	55
Item 5.	Other Information	56
Item 6.	Exhibits	56
SIGNATURES		57

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GWG HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2016 (unaudited)			December 31, 2015
A S S E T S
Cash and cash equivalents	$	18,773,828		$	34,425,105
Restricted cash		15,688,025			2,341,900
Investment in life insurance contracts, at fair value		477,585,100			356,649,715
Secured MCA advances		6,113,831			-
Life insurance contract benefits receivable		6,129,022			-
Other assets		3,131,107			2,461,045
TOTAL ASSETS	$	527,420,913		$	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
Senior Credit Facilities	$	63,699,385		$	63,279,596
Series I Secured Notes		17,553,307			23,287,704
L Bonds		379,858,737			276,482,796
Accounts payable		2,442,449			1,517,440
Interest payable		13,633,640			12,340,061
Other accrued expenses		645,343			1,060,786
Deferred taxes, net		3,242,586			1,763,968
TOTAL LIABILITIES	$	481,075,447		$	379,732,351
STOCKHOLDERS’ EQUITY
CONVERTIBLE PREFERRED STOCK
(par value $0.001; shares authorized 40,000,000; shares outstanding 2,649,665 and 2,781,735; liquidation preference of $19,872,000 and $20,863,000 on September 30, 2016 and December 31, 2015, respectively)		19,772,931			20,784,841
REDEEMABLE PREFERRED STOCK
(par value $0.001; shares authorized 100,000; shares outstanding 33,201; liquidation preference of $33,176,600 on September 30, 2016)		33,176,600			-
COMMON STOCK
(par value $0.001: shares authorized 210,000,000; shares issued and outstanding 5,980,190 and 5,941,790 on September 30, 2016 and December 31, 2015)		5,980			5,942
Additional paid-in capital		15,226,449			17,149,391
Accumulated deficit		(21,836,494	)		(21,794,760	)
TOTAL STOCKHOLDERS’ EQUITY		46,345,466			16,145,414
TOTAL LIABILITIES & EQUITY	$	527,420,913		$	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						Nine Months Ended
	September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015
REVENUE
Gain on life insurance contracts, net	$	13,509,755		$	8,189,261		$	51,606,815		$	33,446,556
MCA income		286,225			-			654,441			-
Interest and other income		124,998			93,841			341,098			233,516
TOTAL REVENUE		13,920,978			8,283,102			52,602,354			33,680,072
EXPENSES
Interest expense		11,983,968			8,650,149			32,009,934			23,149,030
Employee compensation and benefits		2,912,463			2,308,246			8,450,168			6,180,886
Legal and professional fees		586,830			822,077			3,097,312			1,988,261
Other expenses		2,863,212			2,231,341			7,608,057			5,646,402
TOTAL EXPENSES		18,346,473			14,011,813			51,165,471			36,964,579
INCOME (LOSS) BEFORE INCOME TAXES		(4,425,495	)		(5,728,711	)		1,436,883			(3,284,507	)
INCOME TAX EXPENSE (BENEFIT)		(1,428,130	)		(2,097,633	)		1,478,617			(664,905	)
NET LOSS	$	(2,997,365	)		(3,631,078	)	$	(41,734	)	$	(2,619,602	)
Loss attributable to preferred shareholders		421,026			343,644			1,103,896			1,041,648
INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(2,576,339	)		(3,287,434	)	$	1,062,162		$	(1,577,954	)
NET INCOME (LOSS) PER SHARE
Basic	$	(0.50	)		(0.61	)	$	(0.01	)	$	(0.44	)
Diluted	$	(0.50	)		(0.61	)	$	0.13		$	(0.44	)
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		5,978,322			5,937,320			5,962,938			5,894,956
Diluted		5,978,322			5,937,320			8,092,196			5,894,956

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						Nine Months Ended
	September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(2,997,365	)	$	(3,631,078	)	$	(41,734	)	$	(2,619,602	)
Adjustments to reconcile net loss to net cash flows from operating activities:
Gain on life insurance contracts		(21,073,226	)		(14,516,881	)		(53,846,155	)		(26,651,363	)
Amortization of deferred financing and issuance costs		2,765,743			1,933,776			6,077,905			1,891,772
Deferred income taxes		(1,428,130	)		(1,916,686	)		1,478,617			(664,905	)
Preferred stock dividends payable		333,565			173,993			663,614			509,225
(Increase) decrease in operating assets:
Life insurance contract benefits receivable		700,000			2,142,986			(6,129,022	)		1,392,986
Other assets		419,836			(417,990	)		(617,630	)		(774,539	)
Increase (decrease) in operating liabilities:
Due to related party		(80,949	)		-			(182,730	)		-
Accounts payable and other accrued expenses		(3,216,990	)		2,534,269			(2,024,234	)		3,836,715
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(24,577,516	)		(13,697,611	)		(54,621,369	)		(23,079,711	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts		(25,770,326	)		(13,626,842	)		(74,470,362	)		(23,850,860	)
Carrying value of matured life insurance contracts		1,078,889			80,000			7,381,132			3,822,983
Investment in Secured MCA advances		(1,965,896	)		-			(7,613,310	)		-
Proceeds from Secured MCA advances		220,911			-			1,246,703			-
NET CASH FLOWS USED IN INVESTING ACTIVITIES		(26,436,422	)		(13,546,842	)		(73,455,837	)		(20,027,877	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on (repayments of) Senior Credit Facilities		(10,761,048	)		-			6,238,952			(7,150,000	)
Payments for redemption of Series I Secured Notes		(541,275	)		(890,586	)		(6,264,018	)		(4,508,130	)
Proceeds from issuance of L Bonds		64,350,430			37,122,127			135,477,090			87,620,483
Payments for issuance and redemption of L Bonds		(14,373,447	)		(19,363,047	)		(37,036,922	)		(32,376,104	)
Proceeds from (increase in) restricted cash		(4,527,232	)		651,630			(13,346,126	)		(2,975,507	)
Issuance of common stock		31,515			-			244,185			582,000
Proceeds from issuance of preferred stock		20,786,332			-			31,287,541			-
Payments for issuance and redemption of preferred stock		(2,556,859	)		(21,187	)		(4,174,773	)		(295,185	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		52,408,416			17,498,937			112,425,929			40,897,557
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		1,394,478			(9,745,516	)		(15,651,277	)		(2,210,031	)
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD		17,379,350			38,198,189			34,425,105			30,662,704
END OF PERIOD	$	18,773,828		$	28,452,673		$	18,773,828		$	28,452,673

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				Nine Months Ended
	September 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest and preferred dividends paid	$	11,516,000	$	5,385,000	$	28,683,000	$	18,529,000
Premiums paid	$	11,785,000	$	6,603,000	$	29,225,000	$	19,069,000
Stock-based compensation	$	162,000	$	176,000	$	213,000	$	208,000
NON-CASH INVESTING AND FINANCING ACTIVITIES
Series I Secured Notes:
Conversion of accrued interest and commissions payable to principal	$	47,000	$	61,000	$	234,000	$	188,000
L Bonds:
Conversion of accrued interest and commissions payable to principal	$	854,000	$	491,000	$	1,515,000	$	929,000
Issuance of Series A Preferred Stock in lieu of cash dividends	$	170,000	$	172,000	$	509,000	$	507,000
Investment in life insurance contracts included in accounts payable	$	1,603,000	$	559,000	$	1,603,000	$	559,000

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			372,948			-		-		-			-			372,948
Issuance of stock options		-			-			-		-		193,804			-			193,804
Balance, December 31, 2015		2,781,735		$	20,784,841			5,941,790	$	5,942	$	17,149,391		$	(21,794,760	)	$	16,145,414
Net income		-			-			-		-		-			(41,734	)		(41,734	)
Issuance of common stock		-			-			36,450		36		244,149			-			244,185
Redemption of Series A Preferred Stock		(204,848	)		(1,521,358	)		1,950		2		19,498			-			(1,501,858	)
Issuance of Series A Preferred Stock		72,778			509,448			-		-		-			-			509,448
Issuance of redeemable preferred stock		33,201			33,176,600			-		-		(2,399,219	)		-			30,777,381
Issuance of stock options		-			-			-		-		212,630			-			212,630
Balance, September 30, 2016		2,682,866		$	52,949,531			5,980,190	$	5,980	$	15,226,449		$	(21,836,494	)	$	46,345,466

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 – Through its wholly owned subsidiaries, GWG Holdings, Inc. owns a portfolio of life insurance contracts. As of the date of this report, our portfolio had an aggregate fair value of $477.6 million. We earn income from changes in the fair value of our portfolio and through the benefits we receive from the life insurance contracts we own. We are also involved in other lines of business, including a business that collects commissions for facilitating the conversion of term life insurance contracts into universal, or permanent, life insurance, and a business that participates in the merchant cash advance industry by advancing sums to merchants and lending money to businesses that advance sums to merchants. Operating results for the three- and nine-month periods included in this report are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.

GWG Holdings, Inc. and all of its subsidiaries are incorporated and organized in Delaware. Unless the context otherwise requires or we specifically so indicate, all references in these footnotes to “we,” “us,” “our,” “our Company,” “GWG,” or the “Company” refer to GWG Holdings, Inc. and its subsidiaries collectively and on a consolidated basis. References to the full names of particular entities, such as “GWG Holdings, Inc.” or “GWG Holdings,” are meant to refer only to the particular entity referenced.

Use of Estimates – The preparation of our consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenue during the reporting period. The Company regularly evaluates estimates and assumptions, which are based on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. The most significant estimates with regard to these consolidated financial statements relate to (1) the determination of the assumptions used in estimating the fair value of our investments in life insurance contracts, and (2) the value of our deferred tax assets and liabilities.

Cash and Cash Equivalents – We consider cash in demand deposit accounts and temporary investments purchased with an original maturity of three months or less to be cash equivalents. We maintain our cash and cash equivalents with highly rated financial institutions. The balances in our bank accounts may exceed Federal Deposit Insurance Corporation limits. We periodically evaluate the risk of exceeding insured levels and may transfer funds as we deem appropriate.

Life Insurance Contracts – ASC 325-30, Investments in Insurance Contracts (“ASC 325-30”), permits a reporting entity to account for its investments in life insurance contracts using either the investment method or the fair value method. We elected to use the fair value method to account for our life insurance contracts. Under the fair value method, we recognize our initial investment at the purchase price. At each subsequent reporting period, we re-measure the investment at fair value in its entirety and recognize the change in fair value as revenue in the current period net of premiums paid. We use the term “life insurance contracts” to have the same meaning as “life insurance policies.”

We also recognize realized gain (revenue) from a life insurance contract upon one of the two following events: (1) our receipt of notice or verified mortality of the insured; or (2) our sale of the contract, filing of change-of-ownership forms and receipt of payment. In the case of mortality, the gain (or loss) we recognize is the difference between the contract benefits and the carrying values of the contract once we receive notice or verify the mortality of the insured. In the case of a contract sale, the gain (or loss) we recognize is the difference between the sale price and the carrying value of the contract on the date of our receipt of sale proceeds.

In a case where our acquisition of a contract is not complete as of a reporting date, but we have nonetheless advanced direct costs and deposits for the acquisition, those costs and deposits are recorded as “other assets” on our balance sheet until the acquisition is complete and we secured title to the contract. On September 30, 2016 and December 31, 2015, a total of $34,000 and $31,000, respectively, of our “other assets” comprised direct costs and deposits that we advanced for contract acquisitions. 

Other Assets – GWG acquired the exclusive option to license “DNA Methylation Based Predictor of Mortality” technology from the University of California, Los Angeles (UCLA). The technology was discovered by Dr. Steven Horvath and is featured in the September 2016 edition of Aging. In 2013, Dr. Horvath reported that human cells have a mechanism that records biological aging progression based on DNA methylation that is independent from chronological aging progression. In 2016, Dr. Horvath discovered a specific set of DNA methylation-based bio-markers that are highly predictive of all-cause mortality. The discovery was made through a statistical analysis of bio-markers found in DNA samples from over 13,000 individuals whose health had been studied for decades. The implications of Dr. Horvath’s discovery are simple and profound: A biostatistician can review a specific set of identified bio-markers and develop a highly predictive analytical model of an individual’s lifespan. The cost of entering into this exclusive option agreement is listed as “other assets”.

6

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Deferred Financing and Issuance Costs – Loans advanced to us under our senior credit facilities, as described in Notes 5 and 6, are reported net of financing costs, which are amortized using the straight-line method over the term of the facility.  The Series I Secured Notes and L Bonds, as respectively described in Notes 7 and 8, are reported net of issuance costs, sales commissions and other direct expenses, which are amortized using the interest method over the term of those borrowings. The Series A Preferred Stock, as described in Note 9, is reported net of issuance costs, sales commissions (including the fair value of warrants issued) and other direct expenses, all of which were fully amortized using the interest method as of December 31, 2015. Selling and issuance costs of Redeemable Preferred Stock and MCA Preferred Stock, described in Notes 10 and 11, are netted against additional paid-in-capital.

Earnings (loss) per Share – Basic earnings (loss) per share attributable to non-redeemable interests are calculated using the weighted-average number of shares outstanding during the reported period. Diluted earnings (loss) per share are calculated based on the potential dilutive impact of our outstanding Series A Preferred Stock, Redeemable Preferred Stock, warrants and stock options.

Recently Adopted Pronouncements – On April 7, 2015, the FASB issued Accounting Standards Update No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), as part of its simplification initiative. ASU 2015-03 changes the presentation of debt issuance costs by presenting those costs in the balance sheet as a direct deduction from the related debt liability. Amortization of the costs is reported as interest expense. We adopted ASU 2015-03 effective January 1, 2016, as required for public reporting entities.

Reclassification–Certain 2015 amounts have been reclassified to conform to ASU 2015-03, and that adoption reduced our assets, together with a corresponding reduction to our liabilities, by approximately $2,288,000 as of December 31, 2015. There was no impact on our statements of operations in 2015, and these reclassifications had no effect on our reported consolidated net income or loss for prior periods.

(2)       Restrictions on Cash

Under the terms of our senior credit facilities (discussed in Notes 5 and 6), we are required to maintain collection and escrow accounts that are used to fund the acquisition of contracts, pay annual contract premiums, pay interest and other charges under the facility, and collect contract benefits. The agent for the lender authorizes the disbursements from these accounts. At September 30, 2016 and December 31, 2015, there was a balance of $15,688,000, and $2,342,000, respectively, in these restricted cash accounts.

(3)      Investment in Life Insurance Contracts

Life insurance contracts are valued based on unobservable inputs that are significant to their overall fair value. Changes in the fair value of these contracts are recorded as gain or loss on life insurance contracts, net of cash premiums paid on those contracts, in our consolidated statements of operations. Fair value is determined on a discounted cash flow basis that incorporates life expectancy assumptions derived from reports obtained from widely accepted life expectancy providers, assumptions relating to cost-of-insurance (premium) rates and other assumptions. The discount rate we apply incorporates current information about discount rate applied by other reporting companies owning portfolios of life insurance contracts, the discount rates observed in the life insurance secondary market, market interest rates, our credit exposure to the insurance companies that issued the life insurance contracts and management’s estimate of the risk premium a purchaser would require to receive the future cash flows derived from our portfolio as a whole. As a result of management’s analysis, discount rates of 11.07% and 11.09% were applied to our portfolio as of September 30, 2016 and December 31, 2015, respectively.

7

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited) 

We recognized life insurance benefits of $5,300,000 and $357,000 during the three months ended September 30, 2016 and 2015, respectively, related to contracts with a carrying value of $1,078,000 and $80,000, respectively, and as a result recorded realized gains of $4,221,000 and $277,000. We recognized life insurance benefits of $34,367,000 and $29,732,000 during the nine months ended September 30, 2016 and 2015, respectively, related to contracts with a carrying value of $7,381,000 and $3,823,000, respectively, and as a result recorded realized gains of $26,986,000 and $25,909,000.

Reconciliation of gain on life insurance contracts:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Change in fair value	$	21,073,000		$	14,517,000		$	53,846,000		$	26,651,000
Premiums and other fees		(11,784,000	)		(6,605,000	)		(29,225,000	)		(19,114,000	)
Contract maturities		4,221,000			277,000			26,986,000			25,909,000
Gain on life insurance contracts, net	$	13,510,000		$	8,189,000		$	51,607,000		$	33,446,000

We currently estimate that premium payments and servicing fees required to maintain our current portfolio of life insurance contracts in force for the next five years, assuming no mortalities, are as follows:

Years Ending December 31,	Premiums		Servicing		Premiums and Servicing Fees
Three months ending December 31, 2016	$	10,449,000	$	188,000	$	10,637,000
2017		43,155,000		750,000		43,905,000
2018		46,847,000		750,000		47,597,000
2019		50,813,000		750,000		51,563,000
2020		56,633,000		750,000		57,383,000
2021		63,222,000		750,000		63,972,000
	$	271,119,000	$	3,938,000	$	275,057,000

Management anticipates funding the premium payments estimated above with proceeds from our senior credit facilities, proceeds from additional debt and equity financing, and proceeds from maturities of life insurance contracts. The proceeds of these capital sources may also be used for the purchase, financing, and maintenance of additional life insurance contracts. 

8

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(4)       Fair Value Definition and Hierarchy

ASC 820, Fair Value Measurement (“ASC 820”), establishes a hierarchical disclosure framework that 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 and actively 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 maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring the use of observable inputs whenever available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect assumptions about how market participants price an asset or liability developed based on the best available information. 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 our portfolio of life insurance contracts is determined on a quarterly basis by our 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 (i) current information about discount rate applied by other reporting companies owning portfolios of life insurance contracts, (ii) the discount rates observed in the life insurance secondary market, (iii) market interest rates, (iv) our credit exposure to the insurance company that issued the life insurance contract and (v) management’s estimate of the risk premium a purchaser would require to receive the future cash flows derived from our portfolio as a whole.

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

The following table reconciles the beginning and ending fair value of our Level 3 investments in our portfolio of life insurance contracts for the periods ended September 30, as follows:

	Three months ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
Beginning balance	$	431,820,000		$	301,499,000		$	356,650,000		$	282,883,000
Purchases		25,770,000			13,626,000			74,470,000			23,851,000
Maturities (carrying value)		(1,078,000	)		(80,000	)		(7,381,000	)		(3,823,000	)
Net change in fair value		21,073,000			14,517,000			53,846,000			26,651,000
Ending balance (September 30)	$	477,585,000		$	329,562,000		$	477,585,000		$	329,562,000

9

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

We periodically update the independent life expectancy estimates on the insured lives in our portfolio, other than insured lives covered under small face amount contracts (i.e., $1 million in face value benefits or less), on a continuous rotating three-year cycle.  Accordingly, we update life expectancies for approximately one-twelfth of our portfolio each quarter.

The following table summarizes the inputs utilized in estimating the fair value of our portfolio of life insurance contracts:

	As of  September 30, 2016			As of December 31, 2015
Weighted-average age of insured, years		81.8			82.6
Weighted-average life expectancy, months		81.8			79.3
Average face amount per contract	$	2,035,000		$	2,386,000
Discount rate		11.07	%		11.09	%

These assumptions are, by their nature, inherently uncertain and the effect of changes in estimates may be significant. For example, if the life expectancy estimates were increased or decreased by four and eight months on each outstanding contract, and the discount rates were increased or decreased by 1% and 2%, while all other variables were held constant, the fair value of our investment in life insurance contracts would increase or (decrease) as summarized below:

Change in Fair Value of the Investment in Life Insurance Contracts

	Change in life expectancy estimates
	minus 8 months		minus 4 months		plus  4 months			plus  8 months
September 30, 2016	$	64,713,000	$	32,215,000	$	(31,450,000	)	$	(62,258,000	)
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%
September 30, 2016	$	50,097,000	$	23,990,000	$	(22,096,000	)	$	(42,492,000	)
December 31, 2015	$	35,024,000	$	16,786,000	$	(15,485,000	)	$	(29,803,000	)

Other Fair Value Considerations

The carrying valueof receivables, prepaid expenses,accounts payableandaccruedexpenses approximatefairvalue dueto theirshort-term maturities andlow credit risk.Using the income-based valuation approach, the estimated fairvalue ofourSeriesISecuredNotes and LBonds, having a combined aggregate face value of $402,416,000 as of September 30, 2016, is approximately $414,023,000based onaweighted-average marketinterest rateof 6.36%. The carrying value of the senior credit facilities reflects interestcharged atthe commercial paperrate or 12-month LIBOR, as applicable, plus an applicable margin.The margin represents ourcredit risk,andthestrengthoftheportfolio oflifeinsurancecontracts collateralizing thedebt. Theoverallratereflects market,and thecarryingvalue ofthefacilityapproximates fair value.

Our wholly owned subsidiary GWG MCA Capital, Inc. (“GWG MCA”) participates in the merchant cash advance by directly advancing sums to merchants and lending money, on a secured basis, to companies that advance sums to merchants. Each quarter, we review the carrying value of these advances and loans, and determine if an impairment reserve is necessary. At September 30, 2016, one of our secured loans to Nulook Capital LLC was potentially impaired. The secured loan to Nulook Capital LLC had an outstanding balance of $3,215,000 and a loan loss reserve of $400,000 at September 30, 2016. We deem fair value to be the estimated collectible value on each loan or advance made from GWG MCA. Where we estimate the collectible amount to be less than the outstanding balance, we record a reserve for the difference. 

10

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The following table summarizes outstanding warrants as of September 30, 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

(5)       Credit Facility – Autobahn Funding Company LLC

Through our subsidiaries GWG DLP Funding II, LLC (“DLP II”) and GWG DLP Funding III, LLC (“DLP III”), we are party to a $105 million revolving senior credit facility with Autobahn Funding Company LLC (“Autobahn”), with a maturity date of June 30, 2018. The facility is governed by a Credit and Security Agreement (the “Agreement”), and DZ Bank AG Deutsche Zentral-Genossenschaftsbank (“DZ Bank”) acts as the agent for Autobahn under the Agreement. On September 14, 2016, we paid off the revolving senior credit facility in full with funds received from a new senior secured term loan with LNV Corporation as described in Note 6.

Advances under the facility bear interest at a commercial paper rate of the lender at the time of the advance, or at the lender’s cost of borrowing plus 4.25%. We make interest payments on a monthly basis. The effective rate of interest was 5.42% at September 14, 2016 and 5.58% at December 31, 2015. The weighted-average effective interest rate, after excluding an unused line fee, was 5.46% and 5.42% for the three months ended September 30, 2016 and 2015, respectively, and 5.54% and 5.81% for the nine months ended September 30, 2016 and 2015, respectively.

The amount outstanding under this facility was $0 and $65,011,000 at September 30, 2016 and December 31, 2015, respectively. GWG Holdings is a performance guarantor of the various obligations of GWG Life, LLC (“GWG Life”), as servicer, under the Agreement. Obligations under the facility are secured by our pledge of ownership in our life insurance contracts to DZ Bank through an arrangement under which Wells Fargo serves as a securities intermediary.

The Agreement has certain financial (as described below) and non-financial covenants, and we were in compliance with these covenants at September 30, 2016 and December 31, 2015.

We have 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, (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 September 30, 2016, as calculated under the Agreement, was $33,877,000 and $149,361,000, respectively.

Total funds available for additional borrowings under the facility at December 31, 2015, was $39,989,000. At September 30, 2016, the amount outstanding was $0 and there were no policies pledged to the facility.

(6)       Credit Facility – LNV Corporation

On September 14, 2016, we entered into a senior secured term loan with LNV Corporation (“LNV”) as lender through our subsidiary GWG DLP Funding IV, LLC (“DLP IV”) as borrower. The facility is governed by a Loan and Security Agreement (the “Loan Agreement”), with CLMG Corp. (“CLMG”) acting as administrative agent on behalf of the lender under the Loan Agreement. The Loan Agreement makes available a total of up to $172,300,000 in credit with a maturity date of September 14, 2026. Additional quarterly advances are available under the Loan Agreement. Interest will accrue on amounts borrowed under the agreement at an annual interest rate, determined as of each date of borrowing, equal to (A) the greater of 12-month LIBOR or the federal funds rate (as defined in the agreement) plus one-half of one percent per annum, plus (B) 5.75% per annum. Interest payments are made on a quarterly basis.

At September 30, 2016, the amount outstanding under this facility was $71,250,000 and total funds available for additional borrowing, net of required reserve, was $76,629,000.

11

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Obligations under the facility are secured by a security interest in DLP IV’s assets, for the benefit of the lenders under the Loan Agreement, through an arrangement under which Wells Fargo serves as security intermediary.

The Loan Agreement requires DLP IV to maintain a reserve account in an amount sufficient to pay 12 months of servicing, administrative and third party expenses identified under the Loan Agreement, and 12 months of debt service as calculated under the Loan Agreement. As of November 10, 2016, the amount set aside in the reserve account is $27,500,000.

The Agreement has no financial covenants and certain non-financial reporting covenants, and we were in compliance with these covenants at September 30, 2016.

(7)       Series I Secured Notes

Series I Secured Notes (“Notes”) are legal obligations of GWG Life and were privately offered and sold from August 2009 through June 2011. The Notes are secured by the assets of GWG Life and are subordinate to obligations under our senior credit facilities (see Notes 5 and 6). We are party to a Third Amended and Restated Note Issuance and Security Agreement dated November 1, 2011, as amended, under which GWG Life is obligor, GWG Holdings is guarantor, and Lord Securities Corporation serves as trustee of the GWG Life Trust (“Trust”). This agreement contains certain financial and non-financial covenants, and we were in compliance with these covenants at September 30, 2016 and December 31, 2015.

The Notes were sold with original maturity dates ranging from six months to seven years, and with fixed interest rates varying from 5.65% to 9.55% depending on the term of the Note. The Notes have renewal features under which we may elect to permit their renewal, subject to the right of bondholders to elect to receive payment at maturity. Effective September 1, 2016, we no longer anticipate renewing the Notes.

Interest on the Notes is payable monthly, quarterly, annually or at maturity depending on the election of the investor. At September 30, 2016 and December 31, 2015, the weighted-average interest rate of our Notes was 8.63% and 8.47%, respectively. The principal amount of Notes outstanding was $17,830,000 and $23,578,000 at September 30, 2016 and December 31, 2015, respectively. The difference between the amount outstanding on the Notes and the carrying amount on our balance sheet is due to netting of unamortized deferred issuance costs. Overall, interest expense includes amortization of deferred financing and issuance costs of $82,000 and $275,000 for the three and nine months ended September 30, 2016 and $49,000 and $260,000 for the three and nine months ended September 30, 2015. Future expected amortization of deferred financing costs is $277,000 in total over the next six years.

Future contractual maturities of Notes payable and future amortization of their deferred financing costs at September 30, 2016 are as follows: 

Years Ending December 31,	Contractual Maturities		Amortization of Deferred Financing Costs
Three months ending December 31 ,2016	$	1,177,000	$	5,000
2017		10,522,000		88,000
2018		2,401,000		49,000
2019		1,023,000		22,000
2020		1,766,000		55,000
Thereafter		941,000		58,000
	$	17,830,000	$	277,000

12

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited) 

(8)       L Bonds

Our L Bonds are legal obligations of GWG Holdings. Obligations under the L Bonds are secured by the assets of GWG Holdings and by GWG Life, as a guarantor, and are subordinate to the obligations under our senior credit facilities (see Notes 5 and 6). We began publicly offering and selling L Bonds in January 2012 under the name “Renewable Secured Debentures.” These debt securities were re-named “L Bonds” in January 2015. L Bonds are publicly offered and sold on a continuous basis under a registration statement permitting us to sell up to $1.0 billion in principal amount of L Bonds. We are party to an indenture governing the L Bonds dated October 19, 2011, as amended (“Indenture”), under which GWG Holdings is obligor, GWG Life is guarantor, and Bank of Utah serves as indenture trustee. The Indenture contains certain financial and non-financial covenants, and we were in compliance with these covenants at September 30, 2016 and December 31, 2015.

Effective September 1, 2016, we discontinued the sales of 6-month and 1-year L Bonds. In addition, effective September 1, 2016, the L Bond interest rates changed to 5.50%, 6.25%, 7.50% and 8.50% for the 2-, 3-, 5- and 7-year L Bonds, respectively. The bonds have renewal features under which we may elect to permit their renewal, subject to the right of bondholders to elect to receive payment at maturity. Interest is payable monthly or annually depending on the election of the investor.

At September 30, 2016 and December 31, 2015, the weighted-average interest rate of our L Bonds was 7.16% and 7.18%, respectively. The principal amount of L Bonds outstanding was $384,586,000 and $282,171,000 at September 30, 2016 and December 31, 2015, respectively. The difference between the amount of outstanding L Bonds and the carrying amount on our 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 $2,073,000 and $5,362,000 for the three and nine months ended September 30, 2016 and $1,892,000 and $4,232,000 for the three and nine months ended September 30, 2015. Future expected amortization of deferred financing costs as of September 30, 2016 is $11,622,000 in total over the next eight years.

Future contractual maturities of L Bonds, and future amortization of their deferred financing costs, at September 30, 2016 are as follows: 

Years Ending December 31,	Contractual Maturities		Amortization of Deferred Financing Costs
Three months ending December 31, 2016	$	23,548,000	$	115,000
2017		112,987,000		1,708,000
2018		101,130,000		3,106,000
2019		78,098,000		3,222,000
2020		19,291,000		784,000
Thereafter		49,532,000		2,687,000
	$	384,586,000	$	11,622,000

(9)       Convertible Preferred Stock

From July 2011 until September 2012, we privately offered shares of Series A Preferred Stock (“Series A”) of GWG Holdings at $7.50 per share. In the offering, we sold an aggregate of 3,278,000 shares for gross consideration of $24,582,000. Holders of Series A are entitled to cumulative dividends at the rate of 10% per annum, paid quarterly. Dividends on the Series A are included as interest expense in the statements of operations. Under certain circumstances described in the Certificate of Designation for the Series A, additional Series A shares may be issued in lieu of cash dividends at the rate of $7.00 per share.

Holders of Series A are entitled to a liquidation preference equal to the stated value of their preferred shares (i.e., $7.50 per share) plus accrued but unpaid dividends. Holders of Series A may presently convert each share of their Series A into 0.75 shares of our common stock at the rate of $10.00 per share.

As of September 30, 2016, we issued an aggregate of 447,000 shares of Series A in satisfaction of $3,129,000 in dividends on the Series A, and an aggregate of 696,000 shares of Series A were converted into 522,000 shares of our common stock. As of September 30, 2016, we had 2,650,000 Series A shares outstanding with respect to which we incurred aggregate issuance costs of $2,838,000, all of which is included as a component of additional paid-in capital.

13

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Purchasers of Series A in our offering received warrants to purchase an aggregate of 431,954 shares of our common stock at an exercise price of $12.50 per share. The grant date fair value of these warrants was $428,000. As of September 30, 2016 and December 31, 2015, none of these warrants were exercised, and the weighted-average remaining life of these warrants was 0.68 and 1.43 years, respectively.

In September 2012, we completed a public offering of our common stock and, as a result, the Series A was reclassified from temporary equity to permanent equity. We may redeem Series A shares under the Certificate of Designation at a price equal to 110% of their liquidation preference ($7.50 per share) at any time. As of September 30, 2016, we have redeemed an aggregate of 277,000 shares of Series A.

(10)       Redeemable Preferred Stock

Beginning November 30, 2015, we began publicly offering up to 100,000 shares of Redeemable Preferred Stock (“RPS”) at $1,000 per share. Holders of RPS are entitled to cumulative dividends at the rate of 7% per annum, paid monthly. Dividends on the RPS are included as interest expense in the statements of operations. Under certain circumstances described in the Certificate of Designation for the RPS, additional shares of RPS may be issued in lieu of cash dividends.

The RPS ranks senior to our common stock and pari passu with our Series A, and entitles its holders to a liquidation preference equal to the stated value per share (i.e., $1,000) plus accrued but unpaid dividends. Holders of RPS may presently convert their RPS into our 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 of conversion, subject to a minimum conversion price of $15.00 and in an aggregate amount limited to 15% of the stated value of RPS originally purchased by such holder from us and still held by such holder.

Holders of RPS may request that we redeem their RPS at a price equal to their liquidation preference at a price equal to their stated value plus accrued but unpaid dividends, less an applicable redemption fee, if any. Nevertheless, the Certificate of Designation for RPS permits us to decline requests for redemption in certain circumstances. Subject to certain restrictions and conditions, we may also redeem shares of RPS without a redemption fee upon a holder’s death, total disability or bankruptcy. In addition, after one year from the date of original issuance, we may, at our option, call and redeem shares of RPS at a price equal to their liquidation preference.

As of September 30, 2016, we had sold 33,201 shares of RPS for aggregate gross consideration of $33,177,000, and incurred approximately $2,399,000 of selling costs related to the sale of those shares.

(11)       GWG MCA Capital, Inc - 9% Preferred Stock

Beginning March 31, 2016, GWG MCA began privately offering up to 2,000,000 shares of GWG MCA 9% Preferred Stock (“MCA Preferred”) at $10.00 per share. Holders of MCA Preferred are entitled to cumulative dividends at a rate of 9% per annum, paid monthly. Dividends on the MCA Preferred are included as interest expense in the statements of operations. As of September 30, 2016, a total of 7,155 shares of MCA Preferred had been sold for aggregate gross consideration of $72,000 and approximately $7,000 of selling costs related to the sale of these shares were incurred.

Holders of MCA Preferred were redeemed as of September 30, 2016 at the stated value of their shares plus accrued but unpaid dividends.

14

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(12)       Income Taxes

We had a current income tax liability of $0 as of both September 30, 2016 and December 31, 2015. The components of current and deferred income tax expense for the three and nine months ended September 30, 2016 and 2015, respectfully, consisted of the following:

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,		September 30,
	2016			2015			2016		2015
Income tax provision (benefit):
Current:
Federal	$	-		$	(141,000	)	$	-	$	-
State	$	-		$	(40,000	)	$	-	$	-
Total current tax expense (benefit)		-			(181,000	)		-		-
Deferred:
Federal	$	(1,082,000	)	$	(1,488,000	)	$	1,121,000	$	(504,000	)
State	$	(346,000	)	$	(429,000	)	$	358,000	$	(161,000	)
Total deferred tax expense (benefit)		(1,428,000	)		(1,917,000	)		1,479,000		(665,000	)
Total income tax expense (benefit)		(1,428,000	)		(2,098,000	)		1,479,000		(665,000	)

We provided a valuation allowance against the deferred tax asset related to a note receivable, which was 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.

Wealsoprovided avaluation allowance againstthe deferred taxassetrelated to ataxbasiscapital lossgenerated withrespect tooursettlement and subsequentdisposalofanearlier investment in Athena Structured FundsPLC. Aswe have no expectation ofgenerating capital gains with theapplicable carryforwardperiod,we donot believe thatit is “more likely thannot”that the deferredasset will berealized.

The primary differences between the September 30, 2016 effective tax rate and the statutory federal rate are the accrual of non-deductible preferred stock dividend expense of $2,153,000, 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 contracts and revenue recognition with respect to the mark-to-market of our life insurance portfolio.

(13)       Common Stock

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 payment of underwriting commissions, discounts and expense reimbursements. In connection with this offering, we listed our common stock on the Nasdaq Capital Market under the ticker symbol “GWGH.”

On June 24, 2015 we issued 60,000 restricted common shares at $9.70 per share, determined by the closing market price on the date of grant, to a vendor as payment for services to be rendered over three years. The cost of these shares is amortized over a 12-month period. On March 17, 2016, we issued an additional 6,500 restricted common shares at an average price of $7.16 per share, determined by the closing market price on the date of grant, to this same vendor for additional services provided to us. On April 25, 2016, we issued 25,000 restricted shares of common stock at $6.25 per share, determined by the closing market price on the date of grant, to a vendor as a form of payment for services the vendor is providing to us, which is expensed in the current period.

15

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(14)       Stock Incentive Plan

We adopted our GWG Holdings 2013 Stock Incentive Plan in March 2013. The Compensation Committee of our Board of Directors administers the plan. Incentives under the plan may be granted incentive stock options and non-statutory stock options; stock appreciation rights; stock awards; restricted stock; restricted stock units; and performance shares. Eligible participants include officers and employees of GWG Holdings and its subsidiaries, members of our Board of Directors, and consultants. 2,000,000 common shares are presently issuable under the plan.

Stock Options – Through September 30, 2016, we issued stock options for 1,237,000 shares of common stock to employees, officers, and directors under the plan. Options for 687,000 shares have vested, and the remaining options are scheduled to vest over three years. The options were issued with an exercise price between $6.35 and $10.18 for those beneficially owning more than 10% of our common stock, and between $6.00 and $10.25 for all others, which is equal to the estimated market price of the shares on the date of grant using Black-Scholes binomial option pricing model. The expected annualized volatility used in the Black-Scholes model valuation of options issued during the period was 25.5%. 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. A forfeiture rate of 15% is based on historical information and expected future trend. As of September 30, 2016, stock options for 415,000 shares were forfeited and stock options for 28,000 shares were exercised.

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 year		22,500			239,948			262,448
Vested during the year		187,473			(187,473	)		-
Forfeited during the year		(6,676	)		(72,824	)		(79,500	)
Balance as of September 30, 2016		687,000			549,563			1,236,563

Compensation expense related to un-vested options not yet recognized is $420,000. We expect to recognize this compensation expense over the next three years ($14,000 in 2016, $240,000 in 2017, $109,000 in 2018, and $57,000 in 2019).

Stock Appreciation Rights (SARs) - On September 19, 2016 we issued SARs for 145,388 shares of the common stock to employees. The strike price of the SARs was $8.76, which was equal to the market price of the common stock at the close of business on September 19, 2016. 56,358 of the SARs were vested as of September 30, 2016, on which date the market price of the common stock was $8.82. A forfeiture rate of 15% was used in calculating our liability for the SARs.

Outstanding Stock Appreciation Rights:

	Vested		Un-vested		Total
Balance as of December 31, 2015		-		-		-
Granted during the year		56,358		89,030		145,388
Vested during the year		56,358		89,030		145,388
Forfeited during the year		-		-		-
Balance as of September 30, 2016		56,358		89,030		145,388

A liability for Stock Appreciation Rights - Compensation Expense was recorded on September 30, 2016 in the amount of $3,381 and Compensation Expense was charged for the same amount.

(15)       Net Income per Common Share

We have outstanding Series A, as described in Note 9. The Series A are dilutive to our net income per common share calculation for the nine-month period ended September 30, 2016. They are anti-dilutive for the three-month period ended September 30, 2016 and for both three and nine-month periods ended September 30, 2015. We also issued warrants to purchase common stock in conjunction with the sale of Series A (see Note 9). Both those warrants and our vested stock options are anti-dilutive for both three and nine-month periods ended September 30, 2016 and 2015 and have not been included in the fully diluted net loss per common share calculation. We issued RPS (see Note 10). The RPS is dilutive for the nine-month period ended September 30, 2016 and anti-dilutive for the three-month period ended September 30, 2016.

16

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(16)       Commitments

We are party to an office lease with U.S. Bank National Association as the landlord. On September 1, 2015, we entered into an amendment to our original lease that expanded the leased space to 17,687 square feet and extended the term through August 31, 2025. Under the amended lease, we are obligated to pay base rent plus common area maintenance and a share of building operating costs. Rent expenses under these lease arrangements were $102,000 and $71,000 for the three months ended September 30, 2016 and 2015, respectively, and $306,000 and $193,000 for the nine months ended September 30, 2016 and 2015, respectively.

Minimum lease payments under the amended lease are as follows:

Three months ending December 31, 2016	$	44,000
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
	$	1,918,000

(17)       Contingencies

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

(18)       Guarantee of L Bonds

We are publicly offering and selling L Bond under a registration statement declared effective by the SEC, as described in Note 8. Our obligations under the L Bonds are secured by substantially all the assets of GWG Holdings, a pledge of all the common stock held individually by our largest stockholders, and by a guarantee and corresponding grant of a security interest in substantially all the assets of GWG Life. As a guarantor, GWG Life has fully and unconditionally guaranteed the payment of principal and interest on the L Bonds. Substantially all of GWG’s life insurance contracts are held by wholly owned subsidiaries of GWG Life: DLP III, DLP IV and the Trust. GWG Life’s equity ownership in these subsidiaries serves as collateral for the L Bond obligation. The life insurance contracts held by DLP III and DLP IV are not direct collateral for the L Bond obligations but do serve as direct collateral for the senior credit facilities.

The consolidating financial statements are presented in lieu of separate financial statements and other related disclosures of the subsidiary guarantor 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 provided herein. A majority of insurance contracts we own are subject to a collateral arrangement with LNV described in Note 6. Under this arrangement, collection and escrow accounts are used to fund premiums for the insurance contracts and to pay interest and other charges under the senior credit facility.

The following represents consolidating financial information as of September 30, 2016 and December 31, 2015, with respect to the financial position, and for the three and nine months ended September 30, 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 for 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 III, DLP IV and the Trust under the equity method. The non-guarantor subsidiaries column presents the financial information of all non-guarantor subsidiaries, including DLP III, DLP IV and the Trust.

17

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Condensed Consolidating Balance Sheets 

September 30, 2016	Parent			Guarantor Subsidiary		Non-Guarantor Subsidiaries		Eliminations			Consolidated
A S S E T S
Cash and cash equivalents	$	13,312,751		$	4,372,845	$	1,088,232	$	-		$	18,773,828
Restricted cash		-			4,438,025		11,250,000		-			15,688,025
Investment in life insurance contracts, at fair value		-			-		477,585,100		-			477,585,100
Secured MCA advances		-			-		6,113,831		-			6,113,831
Life insurance contract benefits receivable		-			-		6,129,022		-			6,129,022
Other assets		4,706,121			1,224,386		54,726		(2,854,126	)		3,131,107
Investment in subsidiaries		422,185,881			429,441,035		-		(851,626,916	)		-
TOTAL ASSETS	$	440,204,753		$	439,476,291	$	502,220,911	$	(854,481,042	)	$	527,420,913
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
Senior credit facilities	$	-		$	-	$	63,699,385	$	-		$	63,699,385
Series I Secured Notes		-			17,553,307		-		-			17,553,307
L Bonds		379,858,737			-		-		-			379,858,737
Notes payable to related parties		-			-		2,700,000		(2,700,000	)		-
Accounts payable		699,507			99,705		1,643,237		-			2,442,449
Interest payable		9,798,735			3,588,954		400,077		(154,126	)		13,633,640
Other accrued expenses		259,722			351,896		33,725		-			645,343
Deferred taxes, net		3,242,586			-		-		-			3,242,586
TOTAL LIABILITIES		393,859,287			21,593,862		68,476,424		(2,854,126	)		481,075,447
STOCKHOLDERS’ EQUITY (DEFICIT)
Member capital		-			417,882,429		433,744,487		(851,626,916	)		-
Convertible preferred stock		19,772,931			-		-		-			19,772,931
Redeemable preferred stock		33,176,600			-		-		-			33,176,600
Common stock		5,980			-		-		-			5,980
Additional paid-in capital		15,226,449			-		-		-			15,226,449
Accumulated deficit		(21,836,494	)		-		-		-			(21,836,494	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		46,345,466			417,882,429		433,744,487		(851,626,916	)		46,345,466
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	440,204,753		$	439,476,291	$	502,220,911	$	(854,481,042	)	$	527,420,913

18

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
Senior credit facilities	$	-		$	(1,000,000	)	$	64,279,596	$	-		$	63,279,596
Series I Secured Notes		-			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, net		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

19

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Condensed Consolidating Statements of Operations

For the nine months ended September 30, 2016	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Origination and servicing income	$	-		$	13,417		$	-	$	(13,417	)	$	-
Gain on life insurance contracts, net		-			-			51,606,815		-			51,606,815
MCA income		-			-			654,441		-			654,441
Interest and other income		181,828			31,137			282,259		(154,126	)		341,098
TOTAL REVENUE		181,828			44,554			52,543,515		(167,543	)		52,602,354
EXPENSES
Origination and servicing fees		-			-			13,417		(13,417	)		-
Interest expense		25,477,320			1,856,909			4,829,831		(154,126	)		32,009,934
Employee compensation and benefits		4,894,006			3,151,107			405,055		-			8,450,168
Legal and professional fees		1,642,252			1,308,959			146,101		-			3,097,312
Other expenses		4,241,825			2,197,133			1,169,099		-			7,608,057
TOTAL EXPENSES		36,255,403			8,514,108			6,563,503		(167,543	)		51,165,471
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(36,073,575	)		(8,469,554	)		45,980,012		-			1,436,883
EQUITY IN INCOME OF SUBSIDIARY		37,510,458			46,497,731			-		(84,008,189	)		-
INCOME BEFORE INCOME TAXES		1,436,883			38,028,177			45,980,012		(84,008,189	)		1,436,883
INCOME TAX EXPENSE		1,478,617			-			-		-			1,478,617
NET INCOME (LOSS)	$	(41,734	)	$	38,028,177		$	45,980,012	$	(84,008,189	)	$	(41,734	)

For the nine months ended September 30, 2015	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Origination and servicing income	$	-		$	2,022,774		$	-	$	(2,022,774	)	$	-
Gain on life settlements, net		-			-			33,446,556		-			33,446,556
Interest and other income		38,944			61,694			132,878		-			233,516
TOTAL REVENUE		38,944			2,084,468			33,579,434		(2,022,774	)		33,680,072
EXPENSES
Origination and servicing fees		-			-			2,022,774		(2,022,774	)		-
Interest expense		18,011,890			1,984,356			3,152,784		-			23,149,030
Employee compensation and benefits		4,671,183			1,509,703			-		-			6,180,886
Legal and professional fees		1,427,388			560,873			-		-			1,988,261
Other expenses		3,251,606			2,297,063			97,733		-			5,646,402
TOTAL EXPENSES		27,362,067			6,351,995			5,273,291		(2,022,774	)		36,964,579
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(27,323,123	)		(4,267,527	)		28,306,143		-			(3,284,507	)
EQUITY IN INCOME OF SUBSIDIARY		24,038,616			28,305,979			-		(52,344,595	)		-
NET INCOME (LOSS) BEFORE INCOME TAXES		(3,284,507	)		24,038,452			28,306,143		(52,344,595	)		(3,284,507	)
INCOME TAX BENEFIT		(664,905	)		-			-		-			(664,905	)
NET INCOME (LOSS)	$	(2,619,602	)	$	24,038,452		$	28,306,143	$	(52,344,595	)	$	(2,619,602	)

20

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Condensed Consolidating Statements of Operations (continued)

For the three months ended September 30, 2016	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Gain on life insurance contracts, net		-			-			13,509,755		-			13,509,755
MCA income		-			-			286,225		-			286,225
Interest and other income		75,808			30,126			83,313		(64,249	)		124,998
TOTAL REVENUE		75,808			30,126			13,879,293		(64,249	)		13,920,978
EXPENSES
Interest expense		9,747,128			554,938			1,746,151		(64,249	)		11,983,968
Employee compensation and benefits		1,718,683			1,038,058			155,722		-			2,912,463
Legal and professional fees		263,917			297,804			25,109		-			586,830
Other expenses		1,464,498			803,106			595,608		-			2,863,212
TOTAL EXPENSES		13,194,226			2,693,906			2,522,590		(64,249	)		18,346,473
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(13,118,418	)		(2,663,780	)		11,356,703		-			(4,425,495	)
EQUITY IN INCOME OF SUBSIDIARY		8,692,923			11,361,329			-		(20,054,252	)		-
INCOME (LOSS) BEFORE INCOME TAXES		(4,425,495	)		8,697,549			11,356,703		(20,054,252	)		(4,425,495	)
INCOME TAX BENEFIT		(1,418,130	)		-			-		-			(1,428,130	)
NET INCOME (LOSS)	$	(2,997,365	)	$	8,697,549		$	11,356,703	$	(20,054,252	)	$	(2,997,365	)

For the three months ended September 30, 2015	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Origination and servicing income	$	-		$	1,004,024		$	-	$	(1,004,024	)	$	-
Gain on life settlements, net		-			-			8,189,261		-			8,189,261
Interest and other income		13,922			54,813			25,106		-			93,841
TOTAL REVENUE		13,922			1,058,837			8,214,367		(1,004,024	)		8,283,102
EXPENSES
Origination and servicing fees		-			-			1,004,024		(1,004,024	)		-
Interest expense		6,980,132			525,391			1,144,626		-			8,650,149
Employee compensation and benefits		1,759,589			548,657			-		-			2,308,246
Legal and professional fees		598,530			223,547			-		-			822,077
Other expenses		1,195,417			995,026			40,898		-			2,231,341
TOTAL EXPENSES		10,533,668			2,292,621			2,189,548		(1,004,024	)		14,011,813
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(10,519,746	)		(1,233,784	)		6,024,819		-			(5,728,711	)
EQUITY IN INCOME OF SUBSIDIARY		4,791,035			6,024,762			-		(10,815,797	)		-
NET INCOME (LOSS) BEFORE INCOME TAXES		(5,728,711	)		4,790,978			6,024,819		(10,815,797	)		(5,728,711	)
INCOME TAX BENEFIT		(2,097,633	)		-			-		-			(2,097,633	)
NET INCOME (LOSS)	$	(3,631,078	)	$	4,790,978		$	6,024,819	$	(10,815,797	)	$	(3,631,078	)

21

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Condensed Consolidating Statements of Cash Flows 

For the nine months ended September 30, 2016	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	(41,734	)	$	38,028,177		$	45,980,012		$	(84,008,189	)	$	(41,734	)
Adjustments to reconcile net income to net cash flows from operating activities:
(Equity) of subsidiaries		(37,510,459	)		(46,497,730	)		-			84,008,189			-
Gain on life insurance contracts		-			-			(53,846,155	)		-			(53,846,155	)
Amortization of deferred financing and issuance costs		5,982,802			(1,364,614	)		1,459,717			-			6,077,905
Deferred income taxes		1,478,617			-			-			-			1,478,617
Preferred stock dividends payable		663,614			-			-			-			663,614
(Increase) in operating assets:
Life insurance contract benefits receivable		-			-			(6,129,022	)					(6,129,022	)
Other assets		(114,885,990	)		(92,168,163	)		-			206,436,523			(617,630	)
Increase (decrease) in operating liabilities:
Due to related party		(2,867,225	)		(15,505	)		2,700,000			-			(182,730	)
Accounts payable and accrued expenses		2,396,503			2,889,525			(7,310,262	)		-			(2,024,234	)
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(144,783,872	)		(99,128,310	)		(17,145,710	)		206,436,523			(54,621,369	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts		-			-			(74,470,362	)		-			(74,470,362	)
Carrying value of matured life insurance contracts		-			-			7,381,132			-			7,381,132
Investment in Secured MCA advances		-			-			(7,613,310	)		-			(7,613,310	)
Proceeds from Secured MCA advances		-			-			1,246,703			-			1,246,703
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(73,455,837	)		-			(73,455,837	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on Senior Credit Facilities		-			-			6,238,952			-			6,238,952
Payments for redemption of Series I Secured Notes		-			(6,264,018	)		-			-			(6,264,018	)
Proceeds from issuance of L Bonds		135,477,090			-			-			-			135,477,090
Payments for redemption and issuance of L Bonds		(37,036,922	)		-			-			-			(37,036,922	)
Proceeds from (increase in) restricted cash		-			(2,335,768	)		(11,010,358	)		-			(13,346,126	)
Issuance of common stock		244,185			-			-			-			244,185
Proceeds from issuance of preferred stock		31,215,986			-			71,555			-			31,287,541
Payments for issuance and redemption of preferred stock		(4,095,878	)		-			(78,895	)		-			(4,174,773	)
Issuance of member capital		-			110,118,219			96,318,304			(206,436,523	)		-
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		125,804,461			101,518,433			91,539,558			(206,436,523	)		112,425,929
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(18,979,411	)		2,390,123			938,011			-			(15,651,277	)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		32,292,162			1,982,722			150,221			-			34,425,105
END OF THE PERIOD	$	13,312,751		$	4,372,845		$	1,088,232		$	-		$	18,773,828

22

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Consolidating Statements of Cash Flows (continued)

For the nine months ended September 30, 2015	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(2,619,602	)	$	24,038,452		$	28,306,143		$	(52,344,595	)	$	(2,619,602	)
Adjustments to reconcile net income to net cash flows from operating activities:
(Equity) of subsidiaries		(24,038,617	)		(28,305,978	)		-			52,344,595			-
Gain on life settlements		-			-			(26,651,363	)		-			(26,651,363	)
Amortization of deferred financing and issuance costs		2,832,487			260,455			(1,201,170	)		-			1,891,772
Deferred income taxes		(664,905	)		-			-			-			(664,905	)
Convertible, redeemable preferred dividends payable		509,225			-			-			-			509,225
(Increase) decrease in operating assets:
Policy benefits receivable		-			-			1,392,986						1,392,986
Other assets		(40,145,769	)		(26,745,888	)		-			66,117,118			(774,539	)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		4,503,624			123,222			(790,131	)		-			3,836,715
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(30,425,246	)		(30,629,737	)		1,056,465			66,117,118			(23,079,711	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(23,850,860	)		-			(23,850,860	)
Carrying value of matured life insurance contracts		-			-			3,822,983			-			3,822,983
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(20,027,877	)		-			(20,027,877	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of senior credit facilities		-			-			(7,150,000	)		-			(7,150,000	)
Payments for redemption of Series I Secured Notes		-			(4,508,130	)		-			-			(4,508,130	)
Proceeds from issuance of L Bonds		87,620,483			-			-			-			87,620,483
Payments for redemption and issuance of L Bonds		(32,376,104	)		-			-			-			(32,376,104	)
Payments from restricted cash		-			(2,306,300	)		(669,207	)		-			(2,975,507	)
Issuance of common stock		582,000			-			-			-			582,000
Payments for redemption preferred stock		(295,185	)		-			-			-			(295,185	)
Issuance of member capital		-			39,176,335			26,940,783			(66,117,118	)		-
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		55,531,194			32,361,905			19,121,576			(66,117,118	)		40,897,557
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(4,092,363	)		1,732,168			150,164			-			(2,210,031	)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		30,446,473			216,231			-			-			30,662,704
END OF THE PERIOD	$	26,354,110		$	1,948,399		$	150,164		$	-		$	28,452,673

23

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Consolidating Statements of Cash Flows (continued)

For the three months ended September 30, 2016	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	(2,997,365	)	$	8,697,549		$	11,356,703		$	(20,054,252	)	$	(2,997,365	)
Adjustments to reconcile net loss to net cash flows from operating activities:
(Equity) of subsidiaries		(8,692,924	)		(11,361,328	)		-			20,054,252			-
Gain on life insurance contracts		-			-			(21,073,226	)		-			(21,073,226	)
Amortization of deferred financing and issuance costs		2,072,879			81,849			611,015			-			2,765,743
Deferred income taxes		(1,428,130	)		-			-			-			(1,428,130	)
Preferred stock dividends payable		333,565			-			-			-			333,565
(Increase) in operating assets:
Life insurance contract benefits receivable		-			-			700,000			-			700,000
Other assets		(54,428,152	)		(54,272,589	)		-			109,120,577			419,836
Increase (decrease) in operating liabilities:
Due to related party		(64,249	)		(16,700	)		-			-			(80,949	)
Accounts payable and other accrued expenses		155,980			2,172,227			(5,545,197	)		-			(3,216,990	)
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(65,048,396	)		(54,698,992	)		(13,950,705	)		109,120,577			(24,577,516	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts		-			-			(25,770,326	)		-			(25,770,326	)
Carrying value of matured life insurance contracts		-			-			1,078,889			-			1,078,889
Investment in Secured MCA advances		-			-			(1,965,896	)					(1,965,896	)
Proceeds from Secured MCA advances		-			-			220,911			-			220,911
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(26,436,422	)		-			(26,436,422	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net repayment of Senior Credit Facilities		-			-			(10,761,048	)					(10,761,048	)
Payments for redemption of Series I Secured Notes		-			(541,275	)		-			-			(541,275	)
Proceeds from issuance of L Bonds		64,350,430			-			-			-			64,350,430
Payments for redemption and issuance of L Bonds		(14,373,447	)		-			-			-			(14,373,447	)
Proceeds from (increase in) restricted cash		-			486,283			(5,013,515	)		-			(4,527,232	)
Issuance of member capital		-			52,304,345			56,816,232			(109,120,577	)		-
Issuance of common stock		31,515			-			-			-			31,515
Proceeds from issuance of preferred stock		20,786,332			-			-			-			20,786,332
Payments for issuance and redemption of preferred stock		(2,485,304	)		-			(71,555	)		-			(2,556,859	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		68,309,526			52,249,353			40,970,114			(109,120,577	)		52,408,416
NET INCREASE IN CASH AND CASH EQUIVALENTS		3,261,130			(2,449,639	)		582,987			-			1,394,478
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		10,051,621			6,822,484			505,245			-			17,379,350
END OF THE PERIOD	$	13,312,751		$	4,372,845		$	1,088,232		$	-		$	18,773,828

24

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Consolidating Statements of Cash Flows (continued)

For the three months ended September 30, 2015	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(3,631,078	)	$	4,790,978		$	6,024,819		$	(10,815,797	)	$	(3,631,078	)
Adjustments to reconcile net loss to net cash flows from operating activities:
(Equity) of subsidiaries		(4,791,035	)		(6,024,762	)		-			10,815,797			-
Gain on life settlements		-			-			(14,516,881	)		-			(14,516,881	)
Amortization of deferred financing and issuance costs		1,103,312			49,339			781,125			-			1,933,776
Deferred income taxes		(1,916,686	)		-			-			-			(1,916,686	)
Convertible, redeemable preferred stock dividends payable		173,993			-			-			-			173,993
(Increase) decrease in operating assets:
Policy benefits receivable		-			-			2,142,986			-			2,142,986
Other assets		(22,146,946	)		(15,631,849	)		-			37,360,805			(417,990	)
Increase (decrease) in operating liabilities:
Accounts payable and other accrued expenses		2,010,129			(105,418	)		629,558			-			2,534,269
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(29,198,311	)		(16,921,712	)		(4,938,393	)		37,360,805			(13,697,611	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(13,626,842	)		-			(13,626,842	)
Carrying value of matured life insurance contracts		-			-			80,000			-			80,000
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(13,546,842	)		-			(13,546,842	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for redemption of Series I Secured Notes		-			(890,586	)		-			-			(890,586	)
Proceeds from issuance of L Bonds		37,122,127			-			-			-			37,122,127
Payments for redemption and issuance of L Bonds		(19,363,047	)		-			-			-			(19,363,047	)
Proceeds (payments) from restricted cash		-			(2,203,800	)		2,855,430			-			651,630
Issuance of member capital		-			21,730,944			15,629,861			(37,360,805	)		-
Payments for redemption preferred stock		(21,187	)		-			-			-			(21,187	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		17,737,893			18,636,558			18,485,291			(37,360,805	)		17,498,937
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(11,460,418	)		1,714,846			56			-			(9,745,516	)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		37,814,528			233,553			150,108			-			38,198,189
END OF THE PERIOD	$	26,354,110		$	1,948,399		$	150,164		$	-		$	28,452,673

25

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(19)       Concentrations

We purchase life insurance contracts written by life insurance companies having investment grade ratings by independent rating agencies. As a result, there may be concentrations of contracts with certain 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 us.

Life insurance company	September 30,			December 31,
	2016			2015
AXA Equitable		14.3	%		14.0	%
John Hancock		13.0	%		12.7	%
Lincoln National		11.5	%		*
Transamerica		10.1	%		*

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

The following summarizes the number of insurance contracts insuring the lives of persons living in specific states exceeding 10% of the total face value held by us:

State of Residence	September 30,			December 31,
	2016			2015
California		21.1	%		25.2	%
Florida		19.0	%		20.0	%

(20)       Subsequent events

Subsequent to September 30, 2016, two policies covering two individual matured. The life insurance contract benefits of these policies were $3,240,000 and we recorded realized gains of $2,539,000 on these policies.

Subsequent to September 30, 2016, we have issued approximately $6,911,000 in additional principal amount of L Bonds, and 7,350 shares of RPS for gross consideration of approximately $7,350,000.

On October 28, 2016, DLP IV completed the closing of the second of two initial advances contemplated under a Loan and Security Agreement with LNV. At this closing, a total of $92,900,000 in loan proceeds were obtained by DLP IV, of which approximately $16,250,000 was used to fund a reserve account required under the Loan and Security Agreement.

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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.

Risk Relating to Forward-Looking Statements

This report contains forward-looking statements that reflect our current expectations and projections about future events. Actual results could differ materially from those described in these forward-looking statements.

The words “believe,” “could,” “possibly,” “probably,” “anticipate,” “estimate,” “project,” “expect,” “may,” “will,” “should,” “seek,” “intend,” “plan” or “consider,” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from such statements.

Such factors include, but are not limited to: 

● 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 contracts 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 contracts;

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

● 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 contracts;

● financing requirements;

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

● litigation risks; and

● restrictive covenants contained in borrowing agreements.

We caution you that the foregoing list of factors is not exhaustive. Forward-looking statements 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 financial services company participating in the life insurance secondary market. We create opportunities for consumers owning life insurance to obtain significant value for their contracts as compared to the traditional options offered by insurance companies. We also create opportunities for investors to participate in the life insurance alternative investment asset class, 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. To grow our portfolio and achieve diversification, 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 believe we are well positioned to continue providing investors with yield participation opportunities from the life insurance alternative asset class. 

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 valuing our investments in life insurance contracts 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 Contracts—Fair Value Option

We account for thepurchase of life insurance contracts in accordance with ASC325-30, Investments in Insurance Contracts, whichrequires us touseeither theinvestment methodor thefairvalue method. Wehaveelected toaccount for all of our lifeinsurancecontracts usingthe fair value method.

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

We initially record our purchase of life insurance contracts at the transaction price, which is the amount paid for the contract, inclusive of all external fees and costs associated with the acquisition. The fair value of our investment in our portfolio of insurance contracts is evaluated at the end of each subsequent reporting period. Changes in the fair value of our portfolio are based on periodic evaluations and are recorded in our consolidated and combined statement of operations as changes in fair value of life insurance contracts. 

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 contracts. We currently use a probabilistic method of estimating and valuing the projected cash flows of our portfolio, 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.

The Society of Actuaries recently finalized the 2015 Valuation Basic Table (“2015 VBT”). The 2015 VBT is based on a much larger dataset of insured lives, face amount of contracts and more current information compared to the dataset underlying the 2008 Valuation Basic Table. The new 2015 VBT dataset includes 266 million contracts compared to the 2008 VBT dataset of 75 million. The experience data in the 2015 VBT dataset includes 2.55 million claims on contracts from 51 insurance carriers. Life expectancies implied by the 2015 VBT are generally longer for male and female nonsmokers between the ages of 65 and 80, while smokers and insureds of both genders over the age of 85 have significantly lower life expectancies. We adopted the 2015 VBT in our valuation process in June 2016.

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In September 2015, Equitable Life Insurance Company (“AXA”) announced pending cost-of-insurance rate increases for certain universal life contracts which were effected on March 1, 2016.  We identified 14 affected contracts in our portfolio. In April 2016, we received updated contract illustrations from AXA and calculated the change in the fair value of our portfolio resulting from the increased premiums to be a reduction of $2,395,000. This reduction was reflected in our balance sheet as of March 31, 2016. Our review of AXA’s cost-of-insurance rate increases is complete as of September 30, 2016.

We are aware of additional pending cost of insurance increases affecting approximately 1.1% of our portfolio by face amount of benefits. We will adjust our premium schedules and resultant valuation when we have received the required information from the related carriers.

Fair Value Components – Required Premium Payments

We must pay the premiums on the life insurance contracts within our portfolio in order to collect the contract benefit. The same probabilistic model and methodologies used to generate expected cash inflows from the life insurance contract 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 contract 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 contracts for the period ending:

September 30, 2016	December 31, 2015
11.07%	11.09%

The change in the discount rate incorporates current information about discount rates applied by other reporting companies owning portfolios of life insurance contracts, 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 contracts. 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 contracts 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 Model Actuarial Pricing Systems (“MAPS”), to prepare a calculation of our life insurance portfolio. MAPS owns and maintains the portfolio pricing software we use. MAPS processed contract data, future premium data, life expectancy estimate data, and other actuarial information to calculate a net present value for our portfolio using the specified discount rate of 11.07%. MAPS independently calculated the net present value of our portfolio of 625 contracts to be $477.6 million and furnished us with a letter documenting its calculation. A copy of such letter is filed as Exhibit 99.1 to this report.

Deferred Income Taxes

Under ASC 740, Income Taxes, deferred tax assets and liabilities are recognized 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 deferred tax assets that are not considered 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. After assessing the realization of the net deferred tax assets, 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.

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Deferred Financing and Issuance Costs

Financing costs incurred under the senior credit facilities were capitalized and are amortized using the straight-line method over the term of the senior credit facilities. 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, 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.  Selling and issuance costs of RPS and MCA Preferred Stock, described in Notes 10 and 11, are netted against additional paid-in-capital.

Principal Revenue and Expense Items

We earn revenues from the following three primary sources.

● Life Insurance Contract Benefits Realized. We recognize the difference between the face value of the contract benefits and carrying value when an insured’s mortality event occurs. We generally collect the face value of the life insurance contract benefit from the insurance company within 45 days of recognizing the revenue.

● Change in Fair Value of Life Insurance Contracts. We value our portfolio investments for each reporting period in accordance with the fair value principles discussed herein, which includes the expected payment of premiums for future periods as shown in our consolidated financial statements net premium costs.

● Sale of a Life Insurance Contract. In the event of a sale of a contract, we recognize gain or loss as the difference between the sale price and the carrying value of the contract 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 contracts. 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 senior credit facilities, interest paid on our L Bonds and other outstanding indebtedness such as our Series I Secured Notes, and dividends on our Series A and our RPS. When we issue debt, 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 and Nine Months Ended September 30, 2016 Compared to the Same Periods 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 September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Revenue recognized from the receipt of contract benefits	$	4,221,000	$	277,000	$	26,986,000	$	25,909,000
Revenue (expense) recognized from the change in fair value of life insurance contracts, net of premiums and carrying costs (1)		9,289,000		7,912,000		24,621,000		7,538,000
Gain on life insurance contracts, net	$	13,510,000	$	8,189,000	$	51,607,000	$	33,447,000
Number of contracts matured		4		1		16		8
The change in fair value related to new contracts acquired	$	11,668,000	$	7,423,000	$	29,509,000	$	12,546,000

(1) The discount rate applied to estimate the fair value of the portfolio of life insurance contracts we own was 11.07% as of both September 30, 2016 and September 30, 2015.  The carrying value of contracts acquired during each quarterly reporting period is adjusted to current fair value using the fair value discount rate applied to the entire portfolio as of that reporting date (see Note 4 to our condensed consolidated financial statements).

Expenses.

	Three Months Ended September 30,							Nine Months Ended September 30,
	2016		2015		Increase (Decrease)			2016		2015		Increase
Employee compensation and benefits (1)	$	2,912,000	$	2,308,000	$	604,000		$	8,450,000	$	6,181,000	$	2,269,000
Interest expense (including amortization of deferred financing costs and preferred stock dividends) (2)		11,984,000		8,650,000		3,334,000			32,010,000		23,149,000		8,861,000
Legal and professional expenses (3)		587,000		822,000		(235,000	)		3,097,000		1,988,000		1,109,000
Other expenses (4)		2,863,000		2,232,000		631,000			7,608,000		5,646,000		1,962,000
Total expenses	$	18,346,000	$	14,012,000	$	4,334,000		$	51,165,000	$	36,964,000	$	14,201,000

(1)	We hired additional members to our sales, marketing, legal and information technology teams.  At the end of 2015 we employed approximately 50 employees, and at September 30, 2016 we employed approximately 67 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 on-going 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.

The following table reconciles our income tax expense at the statutory federal tax rate to our actual income tax expense: 

	Three Months Ended										Nine Months Ended
	September 30, 2016					September 30, 2015					September 30, 2016				September 30, 2015
Statutory federal income tax (benefit)	$	(1,561,000	)	34.0	%	$	(1,948,000	)	34.0	%	$	489,000	34.0	%	$	1,117,000	34.0	%
State income taxes (benefit), net of federal benefit		(227,000	)	4.	9%		(334,000	)	5.8	%		240,000	16.7	%		(105,000)	3.2	%
Series A preferred stock dividends		354,000		(7.7	)%		175,000		(3.1	)%		732,000	51.0	%		526,000	16.0	%
Other permanent differences		15,000		(0.3	)%		9,000		(0.1	)%		18,000	1.3	%		31,000	1.0	%
Total income tax expense (benefit)	$	(1,419,000	)	30.9	%	$	(2,098,000	)	36.6	%	$	1,479,000	102.9	%	$	665,000	20.2	%

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 contracts and revenue recognition with respect to the fair value of life insurance portfolio.

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 $1.0 million and $0.5 million during the three months ended September 30, 2016 and 2015, respectively, and $2.2 million and $1.5 million during the nine months ended September 30, 2016 and 2015, respectively.

Liquidity and Capital Resources

We finance our business through a combination of life insurance contract benefit receipts, origination fees, equity offerings, debt offerings, and our senior credit facilities. We have used our debt offerings and our senior credit facilities primarily for contract acquisition, contract servicing, and portfolio-related financing expenditures including paying principal and interest.

As of September 30, 2016 and December 31, 2015, we had approximately $117.2 million and $74.4 million, respectively, in combined available cash, cash equivalents, policy benefits receivable, if any, and available borrowing base surplus capacity, if any, under our senior credit facilities for the purpose of purchasing additional life insurance contracts, paying premiums on existing contracts, paying portfolio servicing expenses, and paying principal and interest on our outstanding financing obligations.

Debt Financings Summary

We had the following outstanding debt balances as of September 30, 2016 and December 31, 2015:

	As of September 30, 2016					As of December 31, 2015
Issuer/Borrower	Principal Amount Outstanding		Weighted Average Interest Rate			Principal Amount Outstanding		Weighted Average Interest Rate
GWG Holdings, Inc. – L Bonds	$	384,586,000		7.16	%	$	282,171,000		7.18	%
GWG Life, LLC – Series I Secured Notes		17,830,000		8.63	%		23,578,000		8.47	%
Credit Facility – Autobahn Funding Company LLC (See Note 5 to our consolidated financial statements)		-		-			65,011,000		5.58	%
Credit Facility – LNV Corporation (See Note 6 to our consolidated financial statements)		71,250,000		6.45	%		-		-
Total	$	473,666,000		7.10	%	$	370,760,000		6.98	%

Our total senior credit facilities and other indebtedness balance as of September 30, 2016 and December 31, 2015 was $473.7 million and $370.8 million, respectively. At September 30, 2016, the total outstanding face amount of our Series I Secured Notes outstanding was $17.8 million, less unamortized selling costs of $0.3 million, resulting in a carrying amount of $17.5 million. At December 31, 2015, the total outstanding face amount of 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 September 30, 2016, the total outstanding face amount of L Bonds was $384.6 million plus $6.9 million of subscriptions in process, less unamortized selling costs of $11.6 million resulting in a carrying amount of $379.9 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 amount of $277.0 million.

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The weighted-average interest rate of our outstanding Series I Secured Notes as of September 30, 2016 and December 31, 2015 was 8.63% and 8.47%, respectively, and the weighted-average maturity at those dates was 1.31 and 1.06 years, respectively. The Series I Secured Notes have renewal features. Since we first issued our Series I Secured Notes, we experienced $165.1 million in maturities, of which $125.0 million renewed for an additional term as of September 30, 2016. This provided us with an aggregate renewal rate of approximately 76% for investments in these securities. Effective September 1, 2016, we no longer renew the Series I Secured Notes.

The weighted-average interest rate of our outstanding L Bonds as of September 30, 2016 and December 31, 2015 was 7.16% and 7.18%, respectively, and the weighted-average maturity at those dates was 2.10 and 2.02 years, respectively. Our L Bonds have renewal features. As of September 30, 2016, $252.4 million in aggregate principal amount of our L Bonds had matured since issuance, of which $168.3 million renewed for an additional term. The aggregate renewal rate is approximately 67% 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	$	1,177,000	$	23,548,000	$	24,725,000
2017		10,522,000		112,987,000		123,509,000
2018		2,401,000		101,130,000		103,531,000
2019		1,023,000		78,098,000		79,121,000
2020		1,766,000		19,291,000		21,057,000
Thereafter		941,000		49,532,000		50,473,000
	$	17,830,000	$	384,586,000	$	402,416,000

The L Bonds and Series I Secured Notes are secured by all of our assets, and are subordinate to our senior credit facilities. 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 7 and 8 to our consolidated financial statements). 

We maintain a $105 million revolving senior credit facility with Autobahn/DZ Bank through DLP III. The revolving senior credit facility is used to pay the premium expenses related to our portfolio of life insurance contracts. As of September 30, 2016 and December 31, 2015, we had approximately $0 million and $65.0 million, respectively, outstanding under the revolving senior credit facility, and maintained an available borrowing base surplus of $76.6 million and $40.0 million, respectively.

On September 14, 2016, we entered into a $172 million senior secured term loan with LNV Corp. through GWG Funding DLP IV. We intend to use the proceeds from this facility primarily to grow and maintain our portfolio of life insurance contracts, for liquidity and for general corporate purposes. As of September 30, 2016 we had approximately $71.2 million outstanding under the senior credit facility.

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 September 30, 2016 and December 31, 2015, we had approximately $17.8 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, having received an aggregate $24.6 million in subscriptions for our Series A. These subscriptions consisted of $14.0 million in conversions of outstanding Series I Secured Notes and $10.6 million of new investments. As of September 30, 2016 and December 31, 2015, respectively, we had approximately $19.8 million and $20.8 million stated value of Series A outstanding.

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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 in 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 September 30, 2016, the total amount of these L Bonds sold, including renewals, was $637.1 million. As of September 30, 2016 and December 31, 2015, respectively, we had approximately $384.6 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 RPS at a per-share price of $1,000. As of September 30, 2016 we had issued approximately $33.2 million stated value of RPS.

Portfolio Assets and Secured Indebtedness 

At September 30, 2016, the fair value of our investments in life insurance contracts of $477.6 million plus our cash balance of $18.8 million, our restricted cash balance of $15.7 million and our life insurance contract benefits receivable of $6.1 million, totaled $518.2 million, representing an excess of portfolio assets over secured indebtedness of $44.5 million. At December 31, 2015, the fair value of our investments in life insurance contracts 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 senior credit facilities. 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.

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 September 30, 2016. In all cases, the sale of the life insurance assets owned by DLP III and DLP IV will be used first to satisfy all amounts owing under the respective senior credit facilities. The net sale proceeds remaining after satisfying all obligations under the senior credit facilities 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	$	503,331,000	$	479,200,000	$	456,979,000	$	436,470,000	$	417,501,000
Cash, cash equivalents and life insurance contract benefits receivable		40,591,000		40,591,000		40,591,000		40,591,000		40,591,000
Total assets		543,922,000		519,791,000		497,570,000		477,061,000		458,092,000
Revolving senior credit facility		71,250,000		71,250,000		71,250,000		71,250,000		71,250,000
Net after revolving senior credit facility		472,672,000		448,541,000		426,320,000		405,811,000		386,842,000
Series I Secured Notes and L Bonds		402,416,000		402,416,000		402,416,000		402,416,000		402,416,000
Net after Series I Secured Notes and L Bonds		70,256,000		46,125,000		23,904,000		3,395,000		(15,574,000	)
Impairment to Series I Secured Notes and L Bonds		No impairment		No impairment		No impairment		No impairment		Impairment

The table illustrates that our ability to fully satisfy amounts owing under the L Bonds and Series I Secured Notes would likely be impaired upon the sale of all of our life insurance assets at a price equivalent to a discount rate of approximately 13.18% 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 11.07% and 11.09% as of September 30, 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 significant 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 contracts represents our most significant requirement for cash disbursement. When a contract is purchased, we are able to calculate the minimum premium payments required to maintain the contract in-force. As the insured ages, premium payments increase (see Note 3 to our consolidated financial statements). 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 contract 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 contract benefits, we intend to pay these costs from our senior credit facilities, when permitted, and through the issuance of debt securities, including the L Bonds, and equity securities including our RPS.

The amount of payments for anticipated premiums and servicing costs (excluding debt 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
Three months ending December 31, 2016	$	10,449,000	$	188,000	$	10,637,000
2017		43,155,000		750,000		43,905,000
2018		46,847,000		750,000		47,597,000
2019		50,813,000		750,000		51,563,000
2020		56,633,000		750,000		57,383,000
2021		63,222,000		750,000		63,972,000
	$	271,119,000	$	3,938,000	$	275,057,000

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

Quarter End Date	Portfolio Face Amount		12-Month Trailing Benefits Collected		12-Month Trailing Premiums Paid		12-Month Trailing Benefits/ Premium Coverage Ratio
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	%
June 30, 2016		1,154,798,000		30,924,000		31,891,000		97.0	%
September 30, 2016		1,272,078,000		35,867,000		37,055,000		96.8	%

We believe that the portfolio cash flow results set forth above are consistent with our general investment thesis: that the life insurance contract 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 contracts. As our receipt of life insurance contract benefits increases, we expect to increasingly use these cash flows to begin paying down our outstanding indebtedness and purchase additional life insurance contracts. 

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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 is party to an office lease with U.S. Bank National Association as the landlord. Effective September 1, 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 Note 16 to our consolidated financial statements).

Credit Risk

We review the credit risk associated with our portfolio of life insurance contracts when estimating its fair value. In evaluating the contracts’ 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 contracts by generally purchasing life insurance contracts issued only from companies with an investment-grade credit rating by Standard & Poor’s, Moody’s, or A.M. Best Company. See “Portfolio Credit Risk Management” below.

Interest Rate Risk

Our senior credit facilities are 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, rising interest rates could materially impact our business by increasing our borrowing costs, and reducing availability under our debt financing arrangements. Furthermore, we calculate our portfolio earnings based upon the spread generated between the return on our life insurance portfolio and the cost of our financing. As a result, increases in interest rates will reduce the earnings we expect to achieve from our investments in life insurance contracts.

Non-GAAP Financial Measures

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 our financial statements and related notes contained herein.

We use non-GAAP financial measures for maintaining compliance with covenants contained in our borrowing agreements and for planning and forecasting purposes. 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.

Therefore, in contrast to a GAAP fair valuation (mark-to-market), we seek to measure the accrual of the actuarial gain occurring within the portfolio of life insurance contracts 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 contracts according to a mortality table as the insureds’ age increases. By comparing the actuarial gain accruing within our portfolio of life insurance contracts against our adjusted 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 contract 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 could have a disproportionately positive or negative impact on GAAP results in any particular period.

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Our senior credit facility with Autobahn/DZ Bank 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 with Autobahn/DZ Bank 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 contracts 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 governing our L Bonds and the note issuance and security agreement governing our Series I Secured Notes require us to maintain a “debt coverage ratio” designed to ensure that the expected cash flows from our portfolio of life insurance contracts is able to adequately service our total outstanding indebtedness. This ratio is calculated using non-GAAP measures in the method described below, again without regard to GAAP-based fair value measures.

Adjusted Non-GAAP Net Income. Our senior credit facility with Autobahn/DZ Bank 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 contracts at the expected internal rate of return of the contracts we own without regard to fair value. We net this actuarial gain against our adjusted costs during the same period to calculate our net income on a non-GAAP basis. 

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
GAAP net income (loss)	$	(2,997,000	)	$	(3,631,000	)	$	(42,000	)	$	(2,620,000	)
Unrealized fair value gain (1)		(21,073,000	)		(14,517,000	)		(53,846,000	)		(26,651,000	)
Adjusted cost basis increase (2)		19,948,000			13,345,000			51,689,000			37,988,000
Accrual of unrealized actuarial gain (3)		11,769,000			9,201,000			29,339,000			21,417,000
Total adjusted non-GAAP net income (4)	$	7,647,000		$	4,398,000		$	27,140,000		$	30,134,000

(1)	Reversal of unrealized GAAP fair value gain of life insurance contracts for current period.
(2)	Adjusted cost basis is increased to include interest, premiums and servicing fees which are not capitalized under GAAP (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 Autobahn/DZ Bank.

Adjusted Non-GAAP Tangible Net Worth. Our revolving senior credit facility with Autobahn/DZ Bank 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 contracts at the expected internal rate of return of the contracts we own without regard to fair value. We net this actuarial gain against our adjusted costs during the same period to calculate our tangible net worth on a non-GAAP basis.

	As of September 31, 2016			As of December  31, 2015
GAAP net worth	$	46,345,000		$	16,145,000
Less intangible assets (1)		(20,320,000	)		(11,562,000	)
GAAP tangible net worth		26,025,000			4,583,000
Unrealized fair value gain (2)		(247,889,000	)		(194,043,000	)
Adjusted cost basis increase (3)		230,532,000			190,645,000
Accrual of unrealized actuarial gain (4)		140,693,000			111,355,000
Total adjusted non-GAAP tangible net worth	$	149,361,000		$	112,540,000

(1)	Unamortized portion of deferred financing costs and pre-paid insurance.
(2)	Reversal of cumulative unrealized GAAP fair value gain on life insurance contracts.
(3)	Adjusted cost basis is increased to include interest, premiums and servicing fees, which are not capitalized under GAAP.
(4)	Accrual of cumulative actuarial gain at expected internal rate of return based the non-GAAP cost basis.

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Excess Spread. Our revolving senior credit facility with Autobahn/DZ Bank requires us to maintain a 2.00% “excess spread” between our weighted-average expected internal rate of return of our portfolio of life insurance contracts 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 projected occurrence.  Expected future cash flows represent the size of each potential payment (premiums and contract 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 contract 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 contract benefit amount on the same contract is $1 million, then during the next five years, the probable expected cash-inflow of contract 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.

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 September 30, 2016			As of December 31, 2015
Weighted-average expected IRR (1)		11.65	%		11.11	%
Weighted-average senior credit facility interest rate (2)		6.45	%		5.58	%
Excess spread		5.20	%		5.53	%
Total weighted-average interest rate on indebtedness for borrowed money (3)		7.10	%		6.98	%
Total excess spread (4)		4.55	%		4.13	%

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

Investment Cost Basis	As of September 30, 2016			As of December 31, 2015
GAAP fair value	$	477,585,000		$	356,650,000
Unrealized fair value gain (A)		(247,889,000	)		(194,043,000	)
Adjusted cost basis increase (B)		230,532,000			190,645,000
Investment cost basis (C)	$	460,228,000		$	353,252,000

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

(2) This is the weighted-average interest rate for both senior credit facilities as of the measurement date.

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(3) Represents the weighted-average interest rate paid on all interest-bearing indebtedness as of the measurement date, determined as follows:

Indebtedness	As of September 30, 2016		As of December 31, 2015
Senior credit facilities	$	71,250,000	$	65,011,000
Series I Secured Notes		17,830,000		23,578,000
L Bonds		384,586,000		282,171,000
Total	$	473,666,000	$	370,760,000

Interest Rates on Indebtedness
Senior credit facilities	6.45	%	5.58	%
Series I Secured Notes	8.63	%	8.47	%
L Bonds	7.16	%	7.18	%
Weighted-average interest rates paid on indebtedness	7.10	%	6.98	%

(4) Calculated as the weighted-average expected IRR (1) minus the weighted-average interest rate on interest-bearing indebtedness (3).

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.

	As of September 30, 2016			As of December 31, 2015
Life insurance portfolio contract benefits	$	1,272,078,000		$	944,844,000
Discount rate of future cash flows		7.10	%		6.98	%
Net present value of Life insurance portfolio contract benefits	$	586,332,000		$	435,738,000
Cash and cash equivalents		34,462,000			36,767,000
Life insurance contract benefits receivable		6,129,000			-
Total Coverage		626,923,000			472,505,000
Senior credit facilities		71,250,000			65,011,000
Series I Secured Notes		17,830,000			23,578,000
L Bonds		384,586,000			282,171,000
Total Indebtedness	$	473,666,000		$	370,760,000
Debt Coverage Ratio		75.55	%		78.47	%
Subordination Ratio		11.36	%		13.76	%

As of September 30, 2016, we were in compliance with both the debt coverage ratio and the subordination ratio.

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Non-GAAP Expected Portfolio Internal Rate of Return at Purchase. The non-GAAP expected portfolio internal rate of return (IRR) at purchase is calculated as the weighted average (by face amount of contract benefits) of the IRR expected at the time of purchase for all life insurance contracts 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, financing costs, and the effective life expectancy which changes over time, both of which are used to calculate our expected portfolio IRR.  

	As of September 30,			As of December 31,
	2016			2015
Life insurance portfolio contract benefits	$	1,272,078,000		$	944,844,000
Total number of polices		625			396
Non-GAAP Expected Portfolio Internal Rate of Return at Purchase		15.70	%		15.71	%

We have in the past reported non-GAAP net asset value among our other non-GAAP financial measures. We have determined, however, to cease reporting this measure primarily because we do not believe that it is sufficiently additive to our existing non-GAAP measures in aiding users of our financial statements and disclosures to measure and evaluate our financial condition or operating results. Moreover, we are not aware of other reporting companies in our industry that use this measure to evaluate their financial condition or operating results.

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Portfolio Information

Our portfolio of life insurance contracts, owned by our subsidiaries as of September 30, 2016, is summarized below:

Life Insurance Portfolio Summary

Total portfolio face value of contract benefits	$	1,272,078,000
Average face value per contract	$	2,035,000
Average face value per insured life	$	2,263,000
Weighted average age of insured (yrs.)*		81.8
Weighted average life expectancy estimate (yrs.)*		6.8
Total number of contracts		625
Number of unique lives		562
Demographics		73%  Males; 27% Females
Number of smokers		24
Largest contract as % of total portfolio		0.79	%
Average contract as % of total portfolio		0.16	%
Average annual premium as % of face value		3.33	%

* Averages presented in the table are weighted averages.

Our portfolio of life insurance contracts, owned by our wholly owned subsidiaries as of September 30, 2016, organized by the insured’s current age and the associated number of contracts and contract benefits, is summarized below:

 Distribution of Contracts and Contract Benefits by Current Age of Insured

							Percentage of Total
Min Age	Max Age	Contracts		Contract Benefits		Wtd. Avg. Life Expectancy (yrs.)	Number of Contracts			Contract Benefits
90	96		55	$	105,815,000	2.4		8.8	%		8.3	%
85	89		155	$	331,989,000	4.8		24.8	%		26.1	%
80	84		152	$	385,904,000	6.7		24.3	%		30.3	%
75	79		115	$	251,466,000	9.2		18.4	%		19.8	%
70	74		87	$	120,791,000	9.8		13.9	%		9.5	%
65	69		61	$	76,113,000	10.1		9.8	%		6.0	%
Total			625	$	1,272,078,000	6.8		100.0	%		100.0	%

Our portfolio of life insurance contracts, owned by our wholly owned subsidiaries as of September 30, 2016, organized by the insured’s estimated life expectancy estimates and associated contract benefits, is summarized below:

Distribution of Contracts by Current Life Expectancies of Insured

						Percentage of Total
Min LE (Months)	Max LE (Months)	Contracts		Contract Benefits		Number of Contracts	Contract Benefits
6	47		160	$	275,036,000	25.6%		21.6	%
48	71		145		300,501,000	23.2%		23.6	%
72	95		112		249,118,000	17.9%		19.6	%
96	119		97		223,012,000	15.5%		17.6	%
120	143		63		134,822,000	10.1%		10.6	%
144	202		48		89,589,000	7.7%		7.0	%
Total			625	$	1,272,078,000	100.0%		100.0	%

41

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 21.25% of the value of our portfolio.

Portfolio Credit Risk Management

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

As of September 30, 2016, 97.0% of our life insurance contracts, 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	Contract Benefits		Percentage of Contract Benefit Amount			Insurance Company	Ins. Co. S&P Rating
1	$	182,494,000		14.3	%	AXA Equitable Life Insurance Company	A+
2	$	165,255,000		13.0	%	John Hancock Life Insurance Company (U.S.A.)	AA-
3	$	145,721,000		11.5	%	Lincoln National Life Insurance Company	AA-
4	$	129,116,000		10.1	%	Transamerica Life Insurance Company	AA-
5	$	89,806,000		7.1	%	Metropolitan Life Insurance Company	A+
6	$	57,250,000		4.5	%	Massachusetts Mutual Life Insurance Company	AA+
7	$	50,975,000		4.0	%	American General Life Insurance Company	A+
8	$	48,095,000		3.8	%	Pacific Life Insurance Company	A+
9	$	45,300,000		3.6	%	Reliastar Life Insurance Company	A
10	$	44,990,000		3.5	%	West Coast Life Insurance Company	AA-
		959,002,000		75.4	%

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 track 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 contracts for our financial statements according to GAAP.  Also we believe that these yields provide investors a market-based perspective on the financial strength of the largest life insurance companies backing our portfolio.

Name of Bond	Maturity		YTM			Duration (Years)		Bond S&P Rating
AXA 7.125%		12/15/2020		1.54	%		4.2	BBB
Manulife Finl 4.15%		3/4/2026		2.83	%		9.4	A
Lincoln National Corp Ind 3.35%		3/9/2025		3.05	%		8.7	A-
Amer Intl Grp 4.875%		6/1/2022		2.48	%		5.7	A-
Protective Life 7.375%		10/15/2019		2.18	%		3.0	A-
Metro Life Gbl Fd1 4.75%		9/17/2021		3.01	%		5.0	AA-
Prudential Finl Inc Mtns Book 4.5%		5/15/2024		2.97	%		7.9	A
Average yield on insurance bonds				2.58	%		6.3

The table above indicates the current yields to maturity (YTM) for the senior bonds of selected life insurance carriers with durations, on average, that are 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 contract 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 life insurance contract will collect the insurance contract benefit upon the mortality of the insured.

42

The complete detail of our portfolio of life insurance contracts, owned by our wholly owned subsidiaries as of September 30, 2016, organized by the current age of the insured and the associated contract benefits, sex, estimated life expectancy, issuing insurance carrier, and the credit rating of the issuing insurance carrier, is set forth below.

Life Insurance Portfolio Detail

(as of September 30, 2016)

	Face Amount		Gender	Age (ALB)  (1)	LE (mo.)  (2)	Insurance Company	S&P Rating
1	$	1,100,000	Male	96	17	Reliastar Life Insurance Company	A
2	$	184,000	Male	95	38	Reliastar Life Insurance Company	A
3	$	219,000	Male	95	38	Reliastar Life Insurance Company	A
4	$	8,000,000	Female	95	14	Massachusetts Mutual Life Insurance Company	AA+
5	$	4,000,000	Male	95	25	Metropolitan Life Insurance Company	A+
6	$	1,500,000	Female	95	24	Accordia Life and Annuity Company	A-
7	$	3,200,000	Male	95	15	West Coast Life Insurance Company	AA-
8	$	1,000,000	Female	94	22	Transamerica Life Insurance Company	AA-
9	$	250,000	Male	94	23	North American Company for Life and Health Insurance	A+
10	$	264,000	Female	94	11	Lincoln Benefit Life Company	BBB+
11	$	125,000	Female	94	6	Lincoln National Life Insurance Company	AA-
12	$	3,500,000	Male	93	29	Reliastar Life Insurance Company	A
13	$	500,000	Male	93	7	John Hancock Life Insurance Company (U.S.A.)	AA-
14	$	2,000,000	Female	93	7	Pruco Life Insurance Company	AA-
15	$	500,000	Female	93	41	Sun Life Assurance Company of Canada (U.S.)	AA-
16	$	250,000	Male	93	7	Transamerica Life Insurance Company	AA-
17	$	1,682,773	Female	92	40	Hartford Life and Annuity Insurance Company	BBB+
18	$	572,429	Female	92	26	Reliastar Life Insurance Company	A
19	$	3,000,000	Male	92	31	West Coast Life Insurance Company	AA-
20	$	500,000	Female	92	55	John Hancock Life Insurance Company (U.S.A.)	AA-
21	$	5,000,000	Female	92	43	American General Life Insurance Company	A+
22	$	400,000	Female	92	59	Principal Life Insurance Company	A+
23	$	5,000,000	Female	92	23	John Hancock Life Insurance Company (U.S.A.)	AA-
24	$	1,000,000	Female	92	26	Lincoln National Life Insurance Company	AA-
25	$	300,000	Female	92	17	West Coast Life Insurance Company	AA-
26	$	3,845,000	Female	92	36	Pacific Life Insurance Company	A+
27	$	500,000	Male	91	40	Massachusetts Mutual Life Insurance Company	AA+
28	$	5,000,000	Male	91	23	John Hancock Life Insurance Company (U.S.A.)	AA-
29	$	500,000	Female	91	15	Lincoln National Life Insurance Company	AA-
30	$	3,500,000	Female	91	62	John Hancock Life Insurance Company (U.S.A.)	AA-
31	$	3,100,000	Female	91	25	Lincoln Benefit Life Company	BBB+
32	$	1,500,000	Female	91	54	Lincoln National Life Insurance Company	AA-
33	$	3,000,000	Female	91	25	Lincoln National Life Insurance Company	AA-
34	$	5,000,000	Female	91	31	Reliastar Life Insurance Company	A
35	$	5,000,000	Female	91	12	Lincoln National Life Insurance Company	AA-
36	$	500,000	Male	91	41	Reliastar Life Insurance Company	A
37	$	1,000,000	Male	91	7	Voya Retirement Insurance and Annuity Company	A
38	$	1,203,520	Male	91	33	Columbus Life Insurance Company	AA
39	$	1,350,000	Female	91	27	Lincoln National Life Insurance Company	AA-
40	$	600,000	Female	91	15	Columbus Life Insurance Company	AA
41	$	5,000,000	Female	90	38	Massachusetts Mutual Life Insurance Company	AA+
42	$	2,500,000	Female	90	38	American General Life Insurance Company	A+
43	$	2,500,000	Male	90	45	Pacific Life Insurance Company	A+
44	$	1,000,000	Female	90	40	United of Omaha Life Insurance Company	AA-
45	$	375,000	Male	90	33	Lincoln National Life Insurance Company	AA-
46	$	1,103,922	Female	90	51	Sun Life Assurance Company of Canada (U.S.)	AA-

43

	Face Amount		Gender	Age (ALB) (1)	LE (mo.) (2)	Insurance Company	S&P Rating
47	$	1,000,000	Female	90	54	Transamerica Life Insurance Company	AA-
48	$	250,000	Female	90	54	Transamerica Life Insurance Company	AA-
49	$	500,000	Female	90	34	Transamerica Life Insurance Company	AA-
50	$	2,500,000	Female	90	4	AXA Equitable Life Insurance Company	A+
51	$	2,500,000	Female	90	4	AXA Equitable Life Insurance Company	A+
52	$	500,000	Female	90	27	Nationwide Life and Annuity Insurance Company	A+
53	$	715,000	Female	90	45	Lincoln National Life Insurance Company	AA-
54	$	2,225,000	Female	90	74	Transamerica Life Insurance Company	AA-
55	$	3,500,000	Female	90	32	Lincoln National Life Insurance Company	AA-
56	$	1,000,000	Female	89	45	Metropolitan Life Insurance Company	A+
57	$	248,859	Female	89	25	Lincoln National Life Insurance Company	AA-
58	$	500,000	Female	89	57	Sun Life Assurance Company of Canada (U.S.)	AA-
59	$	250,000	Male	89	60	Metropolitan Life Insurance Company	A+
60	$	4,000,000	Female	89	61	Transamerica Life Insurance Company	AA-
61	$	5,000,000	Male	89	42	AXA Equitable Life Insurance Company	A+
62	$	1,200,000	Male	89	42	Massachusetts Mutual Life Insurance Company	AA+
63	$	1,200,000	Male	89	42	Massachusetts Mutual Life Insurance Company	AA+
64	$	1,050,000	Male	89	34	John Hancock Life Insurance Company (U.S.A.)	AA-
65	$	3,000,000	Male	89	85	Transamerica Life Insurance Company	AA-
66	$	1,000,000	Male	89	44	AXA Equitable Life Insurance Company	A+
67	$	500,000	Male	89	52	Lincoln National Life Insurance Company	AA-
68	$	4,785,380	Female	89	32	John Hancock Life Insurance Company (U.S.A.)	AA-
69	$	1,803,455	Female	89	55	Metropolitan Life Insurance Company	A+
70	$	1,529,270	Female	89	55	Metropolitan Life Insurance Company	A+
71	$	800,000	Male	89	54	Lincoln National Life Insurance Company	AA-
72	$	5,000,000	Male	89	41	John Hancock Life Insurance Company (U.S.A.)	AA-
73	$	500,000	Female	89	41	Transamerica Life Insurance Company	AA-
74	$	400,000	Female	89	41	Lincoln Benefit Life Company	BBB+
75	$	3,000,000	Female	89	70	Massachusetts Mutual Life Insurance Company	AA+
76	$	200,000	Male	89	40	Lincoln Benefit Life Company	BBB+
77	$	4,445,467	Male	89	47	Penn Mutual Life Insurance Company	A+
78	$	1,500,000	Male	89	35	Union Central Life Insurance Company	A+
79	$	7,500,000	Male	89	39	Lincoln National Life Insurance Company	AA-
80	$	3,600,000	Female	89	54	AXA Equitable Life Insurance Company	A+
81	$	3,000,000	Male	89	33	Lincoln National Life Insurance Company	AA-
82	$	2,000,000	Male	89	36	John Hancock Life Insurance Company (U.S.A.)	AA-
83	$	100,000	Female	89	46	American General Life Insurance Company	A+
84	$	100,000	Female	89	46	American General Life Insurance Company	A+
85	$	396,791	Male	89	26	Lincoln National Life Insurance Company	AA-
86	$	1,500,000	Male	89	93	Transamerica Life Insurance Company	AA-
87	$	1,000,000	Male	88	45	John Hancock Life Insurance Company (U.S.A.)	AA-
88	$	2,000,000	Male	88	45	John Hancock Life Insurance Company (U.S.A.)	AA-
89	$	5,000,000	Male	88	41	Lincoln National Life Insurance Company	AA-
90	$	5,000,000	Female	88	27	Transamerica Life Insurance Company	AA-
91	$	3,000,000	Male	88	36	Transamerica Life Insurance Company	AA-
92	$	1,200,000	Male	88	62	Transamerica Life Insurance Company	AA-
93	$	6,000,000	Female	88	46	Sun Life Assurance Company of Canada (U.S.)	AA-
94	$	250,000	Male	88	40	Wilton Reassurance Life Insurance Company	N/A
95	$	330,000	Male	88	60	AXA Equitable Life Insurance Company	A+
96	$	175,000	Male	88	60	Metropolitan Life Insurance Company	A+
97	$	335,000	Male	88	60	Metropolitan Life Insurance Company	A+
98	$	3,000,000	Male	88	65	AXA Equitable Life Insurance Company	A+
99	$	2,000,000	Female	88	40	Beneficial Life Insurance Company	N/A
100	$	250,000	Female	88	40	John Hancock Life Insurance Company (U.S.A.)	AA-
101	$	1,000,000	Female	88	30	New York Life Insurance Company	AA+
102	$	1,250,000	Male	88	27	Columbus Life Insurance Company	AA
103	$	300,000	Male	88	27	Columbus Life Insurance Company	AA
104	$	10,000,000	Female	88	61	West Coast Life Insurance Company	AA-
105	$	2,500,000	Male	88	37	Transamerica Life Insurance Company	AA-
106	$	8,500,000	Male	88	68	Massachusetts Mutual Life Insurance Company	AA+

44

	Face Amount		Gender	Age (ALB)  (1)	LE (mo.)  (2)	Insurance Company	S&P Rating
107	$	1,000,000	Female	88	41	West Coast Life Insurance Company	AA-
108	$	2,000,000	Female	88	41	West Coast Life Insurance Company	AA-
109	$	500,000	Female	88	45	Beneficial Life Insurance Company	N/A
110	$	800,000	Male	88	44	National Western Life Insurance Company	A
111	$	1,269,017	Male	88	25	Hartford Life and Annuity Insurance Company	BBB+
112	$	5,000,000	Male	88	68	Lincoln National Life Insurance Company	AA-
113	$	4,513,823	Female	88	18	Accordia Life and Annuity Company	A-
114	$	2,000,000	Male	88	78	Security Life of Denver Insurance Company	A
115	$	2,000,000	Male	88	78	Security Life of Denver Insurance Company	A
116	$	2,000,000	Male	88	78	Security Life of Denver Insurance Company	A
117	$	309,000	Male	88	27	Transamerica Life Insurance Company	AA-
118	$	2,000,000	Female	88	64	U.S. Financial Life Insurance Company	A+
119	$	1,365,000	Female	87	82	Transamerica Life Insurance Company	AA-
120	$	1,000,000	Female	87	76	Security Life of Denver Insurance Company	A
121	$	200,000	Female	87	75	Lincoln National Life Insurance Company	AA-
122	$	1,000,000	Male	87	38	Sun Life Assurance Company of Canada (U.S.)	AA-
123	$	1,000,000	Male	87	29	Massachusetts Mutual Life Insurance Company	AA+
124	$	1,000,000	Female	87	19	State Farm Life Insurance Company	AA-
125	$	2,000,000	Male	87	85	Transamerica Life Insurance Company	AA-
126	$	209,176	Male	87	81	Lincoln National Life Insurance Company	AA-
127	$	2,328,547	Male	87	34	Metropolitan Life Insurance Company	A+
128	$	2,000,000	Male	87	34	Metropolitan Life Insurance Company	A+
129	$	1,000,000	Male	87	23	Transamerica Life Insurance Company	AA-
130	$	500,000	Male	87	69	Metropolitan Life Insurance Company	A+
131	$	750,000	Female	87	71	Lincoln National Life Insurance Company	AA-
132	$	1,500,000	Female	87	71	Lincoln National Life Insurance Company	AA-
133	$	400,000	Female	87	71	Lincoln National Life Insurance Company	AA-
134	$	1,250,000	Female	87	71	Lincoln National Life Insurance Company	AA-
135	$	2,000,000	Male	87	50	Lincoln National Life Insurance Company	AA-
136	$	3,000,000	Female	87	54	Transamerica Life Insurance Company	AA-
137	$	347,211	Male	87	30	Pruco Life Insurance Company	AA-
138	$	1,800,000	Male	87	41	John Hancock Life Insurance Company (U.S.A.)	AA-
139	$	2,000,000	Male	87	51	AXA Equitable Life Insurance Company	A+
140	$	1,750,000	Male	87	51	AXA Equitable Life Insurance Company	A+
141	$	4,000,000	Male	87	41	Metropolitan Life Insurance Company	A+
142	$	2,000,000	Male	87	25	Transamerica Life Insurance Company	AA-
143	$	1,425,000	Male	87	63	John Hancock Life Insurance Company (U.S.A.)	AA-
144	$	1,500,000	Male	87	48	AXA Equitable Life Insurance Company	A+
145	$	1,500,000	Male	86	27	Transamerica Life Insurance Company	AA-
146	$	1,500,000	Female	86	96	Lincoln Benefit Life Company	BBB+
147	$	3,750,000	Male	86	63	AXA Equitable Life Insurance Company	A+
148	$	2,000,000	Male	86	43	Metropolitan Life Insurance Company	A+
149	$	3,000,000	Male	86	43	Metropolitan Life Insurance Company	A+
150	$	1,000,000	Male	86	29	John Hancock Life Insurance Company (U.S.A.)	AA-
151	$	2,000,000	Female	86	73	AXA Equitable Life Insurance Company	A+
152	$	1,000,000	Male	86	43	Security Life of Denver Insurance Company	A
153	$	3,000,000	Female	86	71	Sun Life Assurance Company of Canada (U.S.)	AA-
154	$	125,000	Male	86	53	Jackson National Life Insurance Company	AA
155	$	1,500,000	Male	86	66	AXA Equitable Life Insurance Company	A+
156	$	1,000,000	Male	86	45	AXA Equitable Life Insurance Company	A+
157	$	5,000,000	Male	86	75	Security Life of Denver Insurance Company	A
158	$	1,500,000	Male	86	38	Reliastar Life Insurance Company	A
159	$	1,500,000	Male	86	38	Reliastar Life Insurance Company	A
160	$	5,000,000	Male	86	60	Security Life of Denver Insurance Company	A
161	$	500,000	Male	86	31	Genworth Life Insurance Company	BB
162	$	1,980,000	Male	86	40	New York Life Insurance Company	AA+
163	$	1,000,000	Male	86	36	John Hancock Life Insurance Company (U.S.A.)	AA-
164	$	500,000	Male	86	39	New England Life Insurance Company	AA-
165	$	4,000,000	Female	86	41	Reliastar Life Insurance Company	A
166	$	284,924	Male	86	51	Transamerica Life Insurance Company	AA-
167	$	5,000,000	Female	86	80	American General Life Insurance Company	A+

45

	Face Amount		Gender	Age (ALB)  (1)	LE (mo.)  (2)	Insurance Company	S&P Rating
168	$	500,000	Female	86	25	Transamerica Life Insurance Company	AA-
169	$	3,500,000	Female	86	95	Lincoln Benefit Life Company	BBB+
170	$	800,000	Male	86	40	Metropolitan Life Insurance Company	A+
171	$	5,000,000	Female	85	88	AXA Equitable Life Insurance Company	A+
172	$	1,000,000	Female	85	71	John Hancock Life Insurance Company (U.S.A.)	AA-
173	$	6,000,000	Female	85	98	American General Life Insurance Company	A+
174	$	5,000,000	Male	85	53	AXA Equitable Life Insurance Company	A+
175	$	1,433,572	Male	85	44	Security Mutual Life Insurance Company of NY	N/A
176	$	2,000,000	Male	85	42	National Life Insurance Company	A
177	$	1,000,000	Female	85	34	Metropolitan Life Insurance Company	A+
178	$	2,147,816	Female	85	107	John Hancock Life Insurance Company (U.S.A.)	AA-
179	$	4,200,000	Female	85	105	Transamerica Life Insurance Company	AA-
180	$	750,000	Male	85	75	West Coast Life Insurance Company	AA-
181	$	4,000,000	Male	85	26	John Hancock Life Insurance Company (U.S.A.)	AA-
182	$	1,000,000	Male	85	65	John Hancock Life Insurance Company (U.S.A.)	AA-
183	$	2,000,000	Female	85	86	Lincoln Benefit Life Company	BBB+
184	$	2,000,000	Female	85	62	New York Life Insurance Company	AA+
185	$	5,000,000	Male	85	62	Lincoln National Life Insurance Company	AA-
186	$	2,400,000	Male	85	27	Genworth Life Insurance Company	BB
187	$	3,000,000	Male	85	80	Transamerica Life Insurance Company	AA-
188	$	8,500,000	Male	85	93	John Hancock Life Insurance Company (U.S.A.)	AA-
189	$	600,000	Male	85	88	AXA Equitable Life Insurance Company	A+
190	$	7,600,000	Female	85	85	Transamerica Life Insurance Company	AA-
191	$	250,000	Male	85	18	Midland National Life Insurance Company	A+
192	$	250,000	Male	85	41	Transamerica Life Insurance Company	AA-
193	$	2,500,000	Female	85	58	American General Life Insurance Company	A+
194	$	2,500,000	Male	85	47	AXA Equitable Life Insurance Company	A+
195	$	3,000,000	Male	85	47	Lincoln National Life Insurance Company	AA-
196	$	2,000,000	Male	85	73	Pacific Life Insurance Company	A+
197	$	7,600,000	Male	85	89	Transamerica Life Insurance Company	AA-
198	$	3,000,000	Female	85	36	AXA Equitable Life Insurance Company	A+
199	$	250,000	Male	85	68	Voya Retirement Insurance and Annuity Company	A
200	$	1,800,000	Female	85	50	Lincoln National Life Insurance Company	AA-
201	$	1,703,959	Male	85	58	Lincoln National Life Insurance Company	AA-
202	$	3,000,000	Male	85	49	Metropolitan Life Insurance Company	A+
203	$	500,000	Male	85	11	Great Southern Life Insurance Company	N/A
204	$	2,247,450	Female	85	49	Transamerica Life Insurance Company	AA-
205	$	1,000,000	Male	85	46	Hartford Life and Annuity Insurance Company	BBB+
206	$	400,000	Male	85	39	Transamerica Life Insurance Company	AA-
207	$	1,000,000	Male	85	81	Lincoln National Life Insurance Company	AA-
208	$	1,000,000	Male	85	51	Metropolitan Life Insurance Company	A+
209	$	3,500,000	Male	85	54	Pacific Life Insurance Company	A+
210	$	2,500,000	Male	85	54	AXA Equitable Life Insurance Company	A+
211	$	10,000,000	Male	84	116	Pacific Life Insurance Company	A+
212	$	87,677	Female	84	47	Protective Life Insurance Company	AA-
213	$	1,000,000	Male	84	51	Texas Life Insurance Company	N/A
214	$	500,000	Male	84	92	Metropolitan Life Insurance Company	A+
215	$	1,000,000	Male	84	57	Lincoln National Life Insurance Company	AA-
216	$	3,000,000	Male	84	30	U.S. Financial Life Insurance Company	A+
217	$	325,000	Male	84	53	Genworth Life and Annuity Insurance Company	BB
218	$	175,000	Male	84	53	Genworth Life and Annuity Insurance Company	BB
219	$	850,000	Male	84	48	American General Life Insurance Company	A+
220	$	600,000	Male	84	61	Massachusetts Mutual Life Insurance Company	AA+
221	$	1,900,000	Male	84	54	American National Insurance Company	A
222	$	500,000	Male	84	35	New York Life Insurance Company	AA+
223	$	500,000	Male	84	35	New York Life Insurance Company	AA+
224	$	5,000,000	Male	84	46	AXA Equitable Life Insurance Company	A+
225	$	385,000	Male	84	62	Metropolitan Life Insurance Company	A+
226	$	500,000	Male	84	62	Metropolitan Life Insurance Company	A+
227	$	75,000	Male	84	39	Fidelity and Guaranty Insurance Company	BBB-
228	$	10,000,000	Male	84	62	Lincoln National Life Insurance Company	AA-

46

	Face Amount		Gender	Age (ALB)  (1)	LE (mo.) (2)	Insurance Company	S&P Rating
229	$	1,500,000	Male	84	67	Lincoln National Life Insurance Company	AA-
230	$	250,000	Male	84	41	The Ohio State Life Insurance Company	N/A
231	$	3,500,000	Female	84	77	AXA Equitable Life Insurance Company	A+
232	$	1,000,000	Female	84	89	West Coast Life Insurance Company	AA-
233	$	1,000,000	Female	84	66	American General Life Insurance Company	A+
234	$	5,000,000	Female	84	65	Sun Life Assurance Company of Canada (U.S.)	AA-
235	$	3,000,000	Female	84	57	Metropolitan Life Insurance Company	A+
236	$	750,000	Male	84	67	John Hancock Life Insurance Company (U.S.A.)	AA-
237	$	4,500,000	Male	84	61	AXA Equitable Life Insurance Company	A+
238	$	1,250,000	Female	84	51	Columbus Life Insurance Company	AA
239	$	2,275,000	Male	84	80	Reliastar Life Insurance Company	A
240	$	10,000,000	Male	84	72	AXA Equitable Life Insurance Company	A+
241	$	340,000	Female	84	75	Jackson National Life Insurance Company	AA
242	$	2,300,000	Male	84	13	American General Life Insurance Company	A+
243	$	3,500,000	Male	84	60	AXA Equitable Life Insurance Company	A+
244	$	6,217,200	Female	84	94	Phoenix Life Insurance Company	B+
245	$	2,500,000	Female	84	62	Reliastar Life Insurance Company	A
246	$	5,000,000	Female	84	48	Massachusetts Mutual Life Insurance Company	AA+
247	$	1,275,000	Male	84	44	General American Life Insurance Company	A+
248	$	2,000,000	Female	84	86	Lincoln National Life Insurance Company	AA-
249	$	1,000,000	Male	84	41	American General Life Insurance Company	A+
250	$	750,000	Male	84	78	AXA Equitable Life Insurance Company	A+
251	$	5,000,000	Male	84	71	Lincoln National Life Insurance Company	AA-
252	$	3,000,000	Male	83	56	Protective Life Insurance Company	AA-
253	$	1,500,000	Male	83	56	American General Life Insurance Company	A+
254	$	2,000,000	Female	83	94	Transamerica Life Insurance Company	AA-
255	$	1,500,000	Male	83	61	Pacific Life Insurance Company	A+
256	$	2,000,000	Male	83	75	New York Life Insurance Company	AA+
257	$	5,000,000	Male	83	97	American General Life Insurance Company	A+
258	$	250,000	Male	83	132	Reliastar Life Insurance Company	A
259	$	1,995,000	Female	83	69	Transamerica Life Insurance Company	AA-
260	$	4,000,000	Male	83	46	Lincoln National Life Insurance Company	AA-
261	$	10,000,000	Male	83	69	New York Life Insurance Company	AA+
262	$	1,000,000	Male	83	59	Hartford Life and Annuity Insurance Company	BBB+
263	$	1,000,000	Male	83	59	Jackson National Life Insurance Company	AA
264	$	417,300	Male	83	90	Jackson National Life Insurance Company	AA
265	$	5,000,000	Male	83	68	Transamerica Life Insurance Company	AA-
266	$	2,000,000	Male	83	59	Ohio National Life Assurance Corporation	AA-
267	$	1,000,000	Male	83	59	Ohio National Life Assurance Corporation	AA-
268	$	500,000	Female	83	92	AXA Equitable Life Insurance Company	A+
269	$	350,000	Male	83	26	Jackson National Life Insurance Company	AA
270	$	5,000,000	Female	82	68	Security Mutual Life Insurance Company of NY	N/A
271	$	5,000,000	Male	82	80	AXA Equitable Life Insurance Company	A+
272	$	6,000,000	Male	82	96	Transamerica Life Insurance Company	AA-
273	$	8,000,000	Male	82	73	AXA Equitable Life Insurance Company	A+
274	$	850,000	Female	82	89	Zurich Life Insurance Company	AA-
275	$	550,000	Male	82	106	Genworth Life Insurance Company	BB
276	$	500,000	Male	82	54	West Coast Life Insurance Company	AA-
277	$	1,680,000	Female	82	59	AXA Equitable Life Insurance Company	A+
278	$	1,000,000	Female	82	86	Lincoln National Life Insurance Company	AA-
279	$	1,250,000	Male	82	89	Metropolitan Life Insurance Company	A+
280	$	3,000,000	Female	82	61	AXA Equitable Life Insurance Company	A+
281	$	1,000,000	Male	82	55	AXA Equitable Life Insurance Company	A+
282	$	1,250,000	Female	82	75	Principal Life Insurance Company	A+
283	$	1,000,000	Male	82	47	AXA Equitable Life Insurance Company	A+
284	$	1,500,000	Male	82	60	Lincoln Benefit Life Company	BBB+
285	$	700,000	Male	82	91	Banner Life Insurance Company	AA-
286	$	3,000,000	Male	82	88	John Hancock Life Insurance Company (U.S.A.)	AA-
287	$	10,000,000	Male	82	60	Hartford Life and Annuity Insurance Company	BBB+
288	$	1,750,000	Male	82	72	AXA Equitable Life Insurance Company	A+
289	$	5,000,000	Male	82	62	AXA Equitable Life Insurance Company	A+
290	$	300,000	Female	82	64	Hartford Life and Annuity Insurance Company	BBB+

47

	Face Amount		Gender	Age (ALB)  (1)	LE (mo.) (2)	Insurance Company	S&P Rating
291	$	250,000	Male	82	70	American General Life Insurance Company	A+
292	$	3,500,000	Male	82	76	Metropolitan Life Insurance Company	A+
293	$	2,502,000	Male	82	136	Transamerica Life Insurance Company	AA-
294	$	10,000,000	Male	82	102	John Hancock Life Insurance Company (U.S.A.)	AA-
295	$	250,000	Female	82	93	Accordia Life and Annuity Company	A-
296	$	3,000,000	Male	82	115	Principal Life Insurance Company	A+
297	$	1,700,000	Male	82	54	Lincoln National Life Insurance Company	AA-
298	$	1,210,000	Male	82	56	Lincoln National Life Insurance Company	AA-
299	$	3,000,000	Female	82	96	West Coast Life Insurance Company	AA-
300	$	7,000,000	Male	82	76	Genworth Life Insurance Company	BB
301	$	8,000,000	Male	81	118	Metropolitan Life Insurance Company	A+
302	$	3,000,000	Male	81	81	Reliastar Life Insurance Company	A
303	$	4,000,000	Male	81	72	Lincoln National Life Insurance Company	AA-
304	$	500,000	Male	81	46	Genworth Life and Annuity Insurance Company	BB
305	$	3,000,000	Male	81	136	Metropolitan Life Insurance Company	A+
306	$	300,000	Female	81	90	Metropolitan Life Insurance Company	A+
307	$	200,000	Male	81	64	Protective Life Insurance Company	AA-
308	$	150,000	Male	81	64	Protective Life Insurance Company	AA-
309	$	150,000	Male	81	64	Protective Life Insurance Company	AA-
310	$	350,000	Male	81	64	Lincoln National Life Insurance Company	AA-
311	$	1,187,327	Male	81	88	Transamerica Life Insurance Company	AA-
312	$	5,000,000	Male	81	99	John Hancock Life Insurance Company (U.S.A.)	AA-
313	$	800,000	Male	81	70	North American Company for Life And Health Insurance	A+
314	$	2,000,000	Male	81	20	Metropolitan Life Insurance Company	A+
315	$	1,000,000	Female	81	80	Lincoln Benefit Life Company	BBB+
316	$	6,000,000	Male	81	113	AXA Equitable Life Insurance Company	A+
317	$	320,987	Female	81	96	John Hancock Life Insurance Company (U.S.A.)	AA-
318	$	130,000	Male	81	43	Genworth Life Insurance Company	BB
319	$	5,500,000	Male	81	113	Metropolitan Life Insurance Company	A+
320	$	1,000,000	Male	81	114	Protective Life Insurance Company	AA-
321	$	2,000,000	Female	81	80	Pacific Life Insurance Company	A+
322	$	4,000,000	Male	81	87	Lincoln National Life Insurance Company	AA-
323	$	2,000,000	Male	81	74	Metropolitan Life Insurance Company	A+
324	$	2,000,000	Male	81	74	Metropolitan Life Insurance Company	A+
325	$	4,300,000	Female	81	101	American National Insurance Company	A
326	$	200,000	Male	81	59	Kansas City Life Insurance Company	N/A
327	$	2,000,000	Female	81	67	Transamerica Life Insurance Company	AA-
328	$	1,500,000	Female	81	68	Protective Life Insurance Company	AA-
329	$	1,000,000	Male	81	49	Pacific Life Insurance Company	A+
330	$	200,000	Male	81	40	Pruco Life Insurance Company	AA-
331	$	500,000	Male	81	40	Transamerica Life Insurance Company	AA-
332	$	3,000,000	Male	80	35	Pacific Life Insurance Company	A+
333	$	3,000,000	Male	80	35	Minnesota Life Insurance Company	A+
334	$	3,000,000	Male	80	35	Pruco Life Insurance Company	AA-
335	$	5,000,000	Male	80	89	Pacific Life Insurance Company	A+
336	$	5,000,000	Male	80	89	Pacific Life Insurance Company	A+
337	$	3,601,500	Male	80	85	Transamerica Life Insurance Company	AA-
338	$	1,000,000	Male	80	87	Sun Life Assurance Company of Canada (U.S.)	AA-
339	$	5,000,000	Male	80	80	John Hancock Life Insurance Company (U.S.A.)	AA-
340	$	5,000,000	Male	80	120	Principal Life Insurance Company	A+
341	$	150,000	Male	80	85	MetLife Insurance Company USA	A+
342	$	1,009,467	Male	80	51	John Hancock Life Insurance Company (U.S.A.)	AA-
343	$	7,000,000	Male	80	77	Lincoln Benefit Life Company	BBB+
344	$	100,000	Male	80	57	North American Company for Life And Health Insurance	A+
345	$	1,000,000	Male	80	108	Lincoln National Life Insurance Company	AA-
346	$	5,000,000	Male	80	49	John Hancock Life Insurance Company (U.S.A.)	AA-
347	$	6,799,139	Male	80	114	AXA Equitable Life Insurance Company	A+
348	$	476,574	Male	80	64	Transamerica Life Insurance Company	AA-
349	$	2,250,000	Male	80	85	Massachusetts Mutual Life Insurance Company	AA+
350	$	775,000	Male	80	115	Lincoln National Life Insurance Company	AA-

48

	Face Amount		Gender	Age (ALB)  (1)	LE (mo.) (2)	Insurance Company	S&P Rating
351	$	1,000,000	Female	80	115	John Hancock Life Insurance Company (U.S.A.)	AA-
352	$	6,000,000	Male	80	111	AXA Equitable Life Insurance Company	A+
353	$	1,445,000	Female	80	97	AXA Equitable Life Insurance Company	A+
354	$	1,500,000	Female	80	97	AXA Equitable Life Insurance Company	A+
355	$	1,000,000	Male	80	78	Lincoln National Life Insurance Company	AA-
356	$	200,000	Male	80	50	Lincoln National Life Insurance Company	AA-
357	$	1,000,000	Male	80	102	Metropolitan Life Insurance Company	A+
358	$	6,000,000	Male	80	98	AXA Equitable Life Insurance Company	A+
359	$	5,000,000	Female	80	108	Reliastar Life Insurance Company	A
360	$	750,000	Male	80	61	Lincoln National Life Insurance Company	AA-
361	$	5,000,000	Male	80	170	West Coast Life Insurance Company	AA-
362	$	3,000,000	Male	80	87	Principal Life Insurance Company	A+
363	$	5,000,000	Male	79	129	Lincoln National Life Insurance Company	AA-
364	$	3,000,000	Male	79	78	American General Life Insurance Company	A+
365	$	5,000,000	Male	79	71	John Hancock Life Insurance Company (U.S.A.)	AA-
366	$	500,000	Male	79	60	John Hancock Life Insurance Company (U.S.A.)	AA-
367	$	1,000,000	Male	79	106	Metropolitan Life Insurance Company	A+
368	$	1,250,000	Male	79	91	AXA Equitable Life Insurance Company	A+
369	$	3,000,000	Female	79	81	New York Life Insurance Company	AA+
370	$	4,000,000	Male	79	43	Metropolitan Life Insurance Company	A+
371	$	2,500,000	Male	79	79	Massachusetts Mutual Life Insurance Company	AA+
372	$	2,500,000	Male	79	79	Massachusetts Mutual Life Insurance Company	AA+
373	$	500,000	Female	79	108	Columbus Life Insurance Company	AA
374	$	4,000,000	Female	79	86	Transamerica Life Insurance Company	AA-
375	$	4,000,000	Male	79	140	John Hancock Life Insurance Company (U.S.A.)	AA-
376	$	325,000	Male	79	36	American General Life Insurance Company	A+
377	$	1,750,000	Male	79	56	John Hancock Life Insurance Company (U.S.A.)	AA-
378	$	5,000,000	Male	79	96	Transamerica Life Insurance Company	AA-
379	$	3,750,000	Male	79	52	AXA Equitable Life Insurance Company	A+
380	$	550,000	Male	79	72	Pruco Life Insurance Company	AA-
381	$	300,000	Male	79	72	Pruco Life Insurance Company	AA-
382	$	2,000,000	Female	79	50	Transamerica Life Insurance Company	AA-
383	$	1,200,000	Female	78	126	Athene Annuity & Life Assurance Company	A-
384	$	1,000,000	Male	78	98	Accordia Life and Annuity Company	A-
385	$	2,840,000	Male	78	91	Transamerica Life Insurance Company	AA-
386	$	750,000	Male	78	82	North American Company for Life and Health Insurance	A+
387	$	1,000,000	Male	78	82	John Hancock Life Insurance Company (U.S.A.)	AA-
388	$	500,000	Male	78	82	North American Company for Life and Health Insurance	A+
389	$	50,000	Male	78	40	Lincoln National Life Insurance Company	AA-
390	$	4,000,000	Male	78	62	Massachusetts Mutual Life Insurance Company	AA+
391	$	1,000,000	Female	78	68	John Hancock Life Insurance Company (U.S.A.)	AA-
392	$	1,000,000	Female	78	123	John Hancock Life Insurance Company (U.S.A.)	AA-
393	$	2,000,000	Male	78	94	Lincoln National Life Insurance Company	AA-
394	$	2,000,000	Male	78	94	Lincoln National Life Insurance Company	AA-
395	$	5,000,000	Male	78	113	Lincoln National Life Insurance Company	AA-
396	$	1,000,000	Male	78	115	Principal Life Insurance Company	A+
397	$	2,000,000	Male	78	100	Genworth Life Insurance Company	BB
398	$	6,250,000	Male	78	185	John Hancock Life Insurance Company (U.S.A.)	AA-
399	$	490,620	Male	78	80	Ameritas Life Insurance Corporation	A+
400	$	600,000	Male	78	77	Protective Life Insurance Company	AA-
401	$	400,000	Male	78	113	John Hancock Life Insurance Company (U.S.A.)	AA-
402	$	730,000	Male	77	96	Transamerica Life Insurance Company	AA-
403	$	5,000,000	Male	77	142	Pruco Life Insurance Company	AA-
404	$	300,000	Male	77	73	Penn Mutual Life Insurance Company	A+
405	$	5,000,000	Male	77	131	AXA Equitable Life Insurance Company	A+
406	$	3,000,000	Male	77	91	Pruco Life Insurance Company	AA-
407	$	3,000,000	Female	77	101	John Hancock Life Insurance Company (U.S.A.)	AA-
408	$	5,000,000	Male	77	136	Massachusetts Mutual Life Insurance Company	AA+
409	$	5,000,000	Male	77	136	Massachusetts Mutual Life Insurance Company	AA+
410	$	200,000	Female	77	139	West Coast Life Insurance Company	AA-
411	$	1,100,000	Male	77	133	Accordia Life and Annuity Company	A-
412	$	3,000,000	Male	77	97	Protective Life Insurance Company	AA-

49

	Face Amount		Gender	Age (ALB)  (1)	LE (mo.) (2)	Insurance Company	S&P Rating
413	$	2,000,000	Female	77	113	Accordia Life and Annuity Company	A-
414	$	10,000,000	Male	77	127	AXA Equitable Life Insurance Company	A+
415	$	2,500,000	Male	77	134	John Hancock Life Insurance Company (U.S.A.)	AA-
416	$	2,500,000	Male	77	134	John Hancock Life Insurance Company (U.S.A.)	AA-
417	$	1,000,000	Male	77	98	Athene Annuity & Life Assurance Company of New York	A-
418	$	7,000,000	Female	77	116	Pacific Life Insurance Company	A+
419	$	100,946	Female	77	154	Genworth Life and Annuity Insurance Company	BB
420	$	350,000	Male	77	106	AXA Equitable Life Insurance Company	A+
421	$	600,000	Male	77	106	AXA Equitable Life Insurance Company	A+
422	$	1,000,000	Male	77	77	Pacific Life Insurance Company	A+
423	$	2,000,000	Male	77	113	Transamerica Life Insurance Company	AA-
424	$	200,000	Male	77	111	Prudential Insurance Company of America	AA-
425	$	2,000,000	Female	77	162	Lincoln National Life Insurance Company	AA-
426	$	150,000	Male	77	99	Genworth Life Insurance Company	BB
427	$	2,000,000	Male	77	58	Athene Annuity & Life Assurance Company	A-
428	$	7,097,434	Male	77	153	Lincoln National Life Insurance Company	AA-
429	$	5,000,000	Male	77	54	West Coast Life Insurance Company	AA-
430	$	1,000,000	Male	76	122	Transamerica Life Insurance Company	AA-
431	$	750,000	Male	76	107	Protective Life Insurance Company	AA-
432	$	250,000	Male	76	98	Midland National Life Insurance Company	A+
433	$	3,000,000	Male	76	51	Accordia Life and Annuity Company	A-
434	$	200,000	Male	76	65	Reliastar Life Insurance Company	A
435	$	500,000	Male	76	96	AXA Equitable Life Insurance Company	A+
436	$	3,000,000	Male	76	108	John Hancock Life Insurance Company (U.S.A.)	AA-
437	$	5,000,000	Male	76	108	John Hancock Life Insurance Company (U.S.A.)	AA-
438	$	8,000,000	Male	76	94	Metropolitan Life Insurance Company	A+
439	$	100,000	Male	76	53	AXA Equitable Life Insurance Company	A+
440	$	4,000,000	Female	76	137	American General Life Insurance Company	A+
441	$	500,000	Male	76	88	AIG Life Insurance Company	A+
442	$	1,000,000	Male	76	155	Security Mutual Life Insurance Company of NY	N/A
443	$	355,700	Male	76	103	Security Life of Denver Insurance Company	A
444	$	5,000,000	Male	76	54	Lincoln Benefit Life Company	BBB+
445	$	250,000	Male	76	135	West Coast Life Insurance Company	AA-
446	$	1,000,000	Male	76	112	Transamerica Life Insurance Company	AA-
447	$	2,000,000	Male	76	146	John Hancock Life Insurance Company (U.S.A.)	AA-
448	$	7,500,000	Female	76	173	Security Life of Denver Insurance Company	A
449	$	3,000,000	Female	76	110	General American Life Insurance Company	A+
450	$	100,000	Male	76	67	Transamerica Life Insurance Company	AA-
451	$	300,000	Female	76	133	Minnesota Life Insurance Company	A+
452	$	250,000	Male	76	88	United of Omaha Life Insurance Company	AA-
453	$	600,000	Male	75	69	United of Omaha Life Insurance Company	AA-
454	$	500,000	Male	75	87	Protective Life Insurance Company	AA-
455	$	1,000,000	Male	75	93	Security Life of Denver Insurance Company	A
456	$	1,000,000	Male	75	96	Transamerica Life Insurance Company	AA-
457	$	500,000	Male	75	89	AXA Equitable Life Insurance Company	A+
458	$	500,000	Male	75	103	United of Omaha Life Insurance Company	AA-
459	$	750,000	Male	75	27	North American Company for Life And Health Insurance	A+
460	$	8,000,000	Female	75	131	West Coast Life Insurance Company	AA-
461	$	250,000	Female	75	155	AXA Equitable Life Insurance Company	A+
462	$	300,000	Male	75	36	Lincoln National Life Insurance Company	AA-
463	$	172,245	Female	75	54	Symetra Life Insurance Company	A
464	$	5,004,704	Male	75	133	American General Life Insurance Company	A+
465	$	2,000,000	Male	75	119	Pruco Life Insurance Company	AA-
466	$	190,000	Male	75	103	Protective Life Insurance Company	AA-
467	$	100,000	Male	75	151	Protective Life Insurance Company	AA-
468	$	5,000,000	Male	75	129	AIG Life Insurance Company	A+
469	$	4,000,000	Male	75	108	Security Mutual Life Insurance Company of NY	N/A
470	$	89,626	Female	75	117	Union Central Life Insurance Company	A+
471	$	2,000,000	Male	75	94	American General Life Insurance Company	A+
472	$	10,000,000	Female	75	134	Reliastar Life Insurance Company	A

50

	Face Amount		Gender	Age (ALB)  (1)	LE (mo.) (2)	Insurance Company	S&P Rating
473	$	1,000,000	Female	75	150	John Hancock Life Insurance Company (U.S.A.)	AA-
474	$	500,000	Male	75	72	American General Life Insurance Company	A+
475	$	250,000	Male	75	73	Genworth Life and Annuity Insurance Company	BB
476	$	500,000	Male	75	95	Delaware Life Insurance Company	BBB+
477	$	370,000	Female	75	125	Minnesota Life Insurance Company	A+
478	$	500,000	Male	74	33	Midland National Life Insurance Company	A+
479	$	3,000,000	Male	74	71	AXA Equitable Life Insurance Company	A+
480	$	500,000	Male	74	61	William Penn Life Insurance Company of New York	AA-
481	$	2,500,000	Male	74	103	John Hancock Life Insurance Company (U.S.A.)	AA-
482	$	500,000	Male	74	134	Pruco Life Insurance Company	AA-
483	$	8,600,000	Male	74	152	AXA Equitable Life Insurance Company	A+
484	$	3,000,000	Male	74	103	Transamerica Life Insurance Company	AA-
485	$	800,000	Male	74	122	John Hancock Life Insurance Company (U.S.A.)	AA-
486	$	1,500,000	Male	74	126	Lincoln National Life Insurance Company	AA-
487	$	1,500,000	Male	74	126	Lincoln National Life Insurance Company	AA-
488	$	1,500,000	Male	74	126	Lincoln National Life Insurance Company	AA-
489	$	2,500,000	Male	74	136	Banner Life Insurance Company	AA-
490	$	400,000	Male	74	80	Protective Life Insurance Company	AA-
491	$	10,000,000	Male	74	144	John Hancock Life Insurance Company (U.S.A.)	AA-
492	$	1,784,686	Male	74	153	Transamerica Life Insurance Company	AA-
493	$	250,000	Female	74	171	Protective Life Insurance Company	AA-
494	$	500,000	Male	73	122	Ameritas Life Insurance Corporation	A+
495	$	370,000	Male	73	122	Ameritas Life Insurance Corporation	A+
496	$	750,000	Male	73	130	Security Life of Denver Insurance Company	A
497	$	1,000,000	Female	73	120	United of Omaha Life Insurance Company	AA-
498	$	500,000	Male	73	106	William Penn Life Insurance Company of New York	AA-
499	$	250,000	Male	73	18	Security Life of Denver Insurance Company	A
500	$	100,000	Male	73	110	Protective Life Insurance Company	AA-
501	$	500,000	Male	73	128	Metropolitan Life Insurance Company	A+
502	$	2,000,000	Male	73	120	Voya Retirement Insurance and Annuity Company	A
503	$	1,500,000	Male	73	120	Voya Retirement Insurance and Annuity Company	A
504	$	300,000	Male	73	114	Protective Life Insurance Company	AA-
505	$	250,000	Male	73	68	American General Life Insurance Company	A+
506	$	2,500,000	Male	73	104	American General Life Insurance Company	A+
507	$	2,000,000	Male	73	131	John Hancock Life Insurance Company (U.S.A.)	AA-
508	$	800,000	Male	73	84	Commonwealth Annuity and Life Insurance Company	A-
509	$	267,988	Male	73	52	Minnesota Life Insurance Company	A+
510	$	300,000	Male	73	111	New England Life Insurance Company	AA-
511	$	1,167,000	Male	73	50	Transamerica Life Insurance Company	AA-
512	$	1,500,000	Male	73	108	Metropolitan Life Insurance Company	A+
513	$	1,000,000	Female	73	144	Reliastar Life Insurance Company	A
514	$	10,000,000	Male	73	118	AXA Equitable Life Insurance Company	A+
515	$	1,000,000	Male	72	130	AIG Life Insurance Company	A+
516	$	2,500,000	Male	72	51	Transamerica Life Insurance Company	AA-
517	$	400,000	Male	72	195	Protective Life Insurance Company	AA-
518	$	3,000,000	Male	72	75	John Hancock Life Insurance Company (U.S.A.)	AA-
519	$	2,000,000	Male	72	100	New York Life Insurance Company	AA+
520	$	2,000,000	Male	72	100	New York Life Insurance Company	AA+
521	$	5,000,000	Male	72	128	John Hancock Life Insurance Company (U.S.A.)	AA-
522	$	250,000	Female	72	108	Protective Life Insurance Company	AA-
523	$	2,500,000	Male	72	114	Lincoln National Life Insurance Company	AA-
524	$	2,500,000	Male	72	114	John Hancock Life Insurance Company (U.S.A.)	AA-
525	$	1,350,000	Male	72	100	Lincoln National Life Insurance Company	AA-
526	$	230,000	Male	72	117	Transamerica Life Insurance Company	AA-
527	$	139,398	Female	72	23	Lincoln National Life Insurance Company	AA-
528	$	190,000	Female	72	191	Protective Life Insurance Company	AA-
529	$	420,000	Male	72	131	Protective Life Insurance Company	AA-
530	$	75,000	Female	72	102	American General Life Insurance Company	A+
531	$	600,000	Male	72	84	AXA Equitable Life Insurance Company	A+
532	$	4,000,000	Male	72	141	MONY Life Insurance Company of America	A+

51

	Face Amount		Gender	Age (ALB)  (1)	LE (mo.)  (2)	Insurance Company	S&P Rating
533	$	420,000	Male	72	122	RiverSource Life Insurance Company	A+
534	$	100,000	Male	72	137	Protective Life Insurance Company	AA-
535	$	250,000	Male	71	50	Protective Life Insurance Company	AA-
536	$	650,000	Female	71	72	Security Life of Denver Insurance Company	A
537	$	500,000	Male	71	120	Ohio National Life Assurance Corporation	AA-
538	$	232,000	Male	71	179	Protective Life Insurance Company	AA-
539	$	185,000	Male	71	131	Genworth Life and Annuity Insurance Company	BB
540	$	40,000	Male	71	31	Banner Life Insurance Company	AA-
541	$	750,000	Male	71	125	Transamerica Life Insurance Company	AA-
542	$	1,250,000	Male	71	99	West Coast Life Insurance Company	AA-
543	$	1,500,000	Female	71	153	Pruco Life Insurance Company	AA-
544	$	5,000,000	Male	71	91	Transamerica Life Insurance Company	AA-
545	$	500,000	Male	71	92	Transamerica Life Insurance Company	AA-
546	$	500,000	Male	71	92	North American Company for Life And Health Insurance	A+
547	$	300,000	Male	71	195	John Hancock Life Insurance Company (U.S.A.)	AA-
548	$	100,000	Male	71	44	Genworth Life and Annuity Insurance Company	BB
549	$	150,000	Male	71	34	Protective Life Insurance Company	AA-
550	$	150,000	Male	71	34	AXA Equitable Life Insurance Company	A+
551	$	1,000,000	Male	71	54	John Hancock Life Insurance Company (U.S.A.)	AA-
552	$	202,700	Male	71	117	Farmers New World Life Insurance Company	N/A
553	$	5,000,000	Male	71	151	Metropolitan Life Insurance Company	A+
554	$	250,000	Female	70	120	Ohio National Life Assurance Corporation	AA-
555	$	2,000,000	Male	70	172	John Hancock Life Insurance Company (U.S.A.)	AA-
556	$	400,000	Male	70	161	Lincoln National Life Insurance Company	AA-
557	$	100,000	Male	70	101	Massachusetts Mutual Life Insurance Company	AA+
558	$	92,000	Female	70	199	Protective Life Insurance Company	AA-
559	$	175,000	Female	70	111	Lincoln National Life Insurance Company	AA-
560	$	1,500,000	Male	70	71	Lincoln National Life Insurance Company	AA-
561	$	250,000	Male	70	184	Lincoln National Life Insurance Company	AA-
562	$	1,500,000	Male	70	105	Midland National Life Insurance Company	A+
563	$	500,000	Male	70	111	Lincoln Benefit Life Company	BBB+
564	$	700,000	Male	70	116	Massachusetts Mutual Life Insurance Company	AA+
565	$	750,000	Male	69	134	North American Company for Life And Health Insurance	A+
566	$	1,000,000	Male	69	191	AXA Equitable Life Insurance Company	A+
567	$	1,200,000	Male	69	126	Massachusetts Mutual Life Insurance Company	AA+
568	$	2,500,000	Male	69	161	Pruco Life Insurance Company	AA-
569	$	2,500,000	Male	69	161	Pruco Life Insurance Company	AA-
570	$	4,000,000	Male	69	133	MetLife Insurance Company USA	A+
571	$	500,000	Male	69	42	Voya Retirement Insurance and Annuity Company	A
572	$	1,000,000	Male	69	87	Protective Life Insurance Company	AA-
573	$	2,000,000	Male	69	113	Transamerica Life Insurance Company	AA-
574	$	1,000,000	Male	69	113	Genworth Life Insurance Company	BB
575	$	250,000	Female	69	158	Protective Life Insurance Company	AA-
576	$	1,000,000	Male	69	163	Accordia Life and Annuity Company	A-
577	$	1,000,000	Male	69	61	Protective Life Insurance Company	AA-
578	$	1,000,000	Male	69	131	Transamerica Life Insurance Company	AA-
579	$	1,000,000	Male	69	131	Protective Life Insurance Company	AA-
580	$	156,538	Female	69	107	New York Life Insurance Company	AA+
581	$	2,000,000	Male	69	51	Metropolitan Life Insurance Company	A+
582	$	2,000,000	Male	69	51	Metropolitan Life Insurance Company	A+
583	$	1,000,000	Male	69	153	John Hancock Life Insurance Company (U.S.A.)	AA-
584	$	400,000	Female	69	142	AXA Equitable Life Insurance Company	A+
585	$	300,000	Male	69	90	Protective Life Insurance Company	AA-
586	$	1,000,000	Male	68	138	Transamerica Life Insurance Company	AA-
587	$	250,000	Female	68	75	Transamerica Life Insurance Company	AA-
588	$	750,000	Male	68	161	Northwestern Mutual Life Insurance Company	AA+
589	$	2,000,000	Male	68	173	John Hancock Life Insurance Company (U.S.A.)	AA-
590	$	150,000	Male	68	117	Protective Life Insurance Company	AA-
591	$	600,000	Male	68	88	William Penn Life Insurance Company of New York	AA-
592	$	5,616,468	Male	68	180	John Hancock Life Insurance Company (U.S.A.)	AA-
593	$	1,100,000	Male	68	156	John Hancock Life Insurance Company (U.S.A.)	AA-
594	$	3,000,000	Male	68	193	John Hancock Life Insurance Company (U.S.A.)	AA-

52

	Face Amount		Gender	Age (ALB)  (1)	LE (mo.) (2)	Insurance Company	S&P Rating
595	$	400,000	Male	67	191	Lincoln National Life Insurance Company	AA-
596	$	3,000,000	Male	67	100	Reliastar Life Insurance Company	A
597	$	2,000,000	Male	67	100	AXA Equitable Life Insurance Company	A+
598	$	2,000,000	Male	67	100	AXA Equitable Life Insurance Company	A+
599	$	1,000,000	Male	67	48	Lincoln National Life Insurance Company	AA-
600	$	1,000,000	Male	67	78	Transamerica Life Insurance Company	AA-
601	$	350,000	Female	67	85	Assurity Life Insurance Company	N/A
602	$	5,000,000	Male	67	105	Athene Annuity & Life Assurance Company	A-
603	$	1,000,000	Male	67	149	Sun Life Assurance Company of Canada (U.S.)	AA-
604	$	800,000	Male	67	129	Lincoln National Life Insurance Company	AA-
605	$	800,000	Male	67	129	Lincoln National Life Insurance Company	AA-
606	$	229,725	Female	67	107	Hartford Life and Annuity Insurance Company	BBB+
607	$	490,000	Male	67	97	AXA Equitable Life Insurance Company	A+
608	$	220,581	Male	67	25	American General Life Insurance Company	A+
609	$	1,000,000	Male	67	109	The Savings Bank Life Insurance Company of Massachusetts	A-
610	$	320,000	Male	67	162	Transamerica Life Insurance Company	AA-
611	$	250,000	Male	67	163	Pruco Life Insurance Company	AA-
612	$	125,000	Male	67	50	Genworth Life and Annuity Insurance Company	BB
613	$	250,000	Male	67	199	Zurich Life Insurance Company	AA-
614	$	650,000	Male	67	185	Lincoln National Life Insurance Company	AA-
615	$	400,000	Male	66	132	Jackson National Life Insurance Company	AA
616	$	500,000	Female	66	171	Banner Life Insurance Company	AA-
617	$	350,000	Male	66	97	RiverSource Life Insurance Company	A+
618	$	200,000	Male	66	163	Prudential Insurance Company of America	AA-
619	$	200,000	Male	66	163	Prudential Insurance Company of America	AA-
620	$	750,000	Male	66	128	Pacific Life Insurance Company	A+
621	$	500,000	Male	66	136	Transamerica Life Insurance Company	AA-
622	$	500,000	Female	66	132	AIG Life Insurance Company	A+
623	$	265,000	Male	65	159	Protective Life Insurance Company	AA-
624	$	10,000,000	Male	65	65	Lincoln National Life Insurance Company	AA-
625	$	540,000	Male	65	172	West Coast Life Insurance Company	AA-
		1,272,077,891

(1)	Person’s age on last birthday (ALB)
(2)	The insured’s life expectancy estimate, other than for a small face value insurance contract (i.e., a contract 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.

53

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 September 30, 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. 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 September 30, 2016 based on criteria for effective control over financial reporting set forth by the Committee of Sponsoring Organizations of the Treadway Commission 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.

54

PART II – OTHER INFORMATION

ITEM 1A. RISK FACTORS

Other than as noted below, there are no material changes to the risk factors disclosed in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2015.

Accuracy of the life expectancy estimates and mortality curves we use for small face contracts could have a material and adverse effect on our results of operation and financial condition.

As of September 30, 2016, we owned 306 “small face” life insurance policies (i.e., a contract with $1 million in face value benefits or less) having $164 million in face value of insurance benefits. The underwriting processes and mortality curves we use to evaluate, price and purchase small face contracts may be different from, and, as a result, may not be as reliable as, the processes we use for life insurance contracts with larger face values of benefits. While we obtain life expectancy reports from third-party evaluators based on medical evidence, the processes used to develop these life expectancy reports are less extensive than traditional methods. Although we have professional actuarial guidance in the use and application of mortality curves to price and value small face contracts, the application of these mortality curves may not be as reliable as or more subject to adjustment than the processes we use for larger face value of benefits. As the face value of our small face contracts increases relative to the size of our total portfolio, the accuracy with which we have estimated life expectancies and mortality curves for these contracts will become increasingly material to our business. Any shortcomings in the processes we have used to evaluate, price, purchase and value the small face contracts we own could have a material and adverse effect on our results of operation and financial condition. Any such outcomes would likely have a negative and possibly material effect on the price of our common stock and our ability to satisfy our debts.

We may in the future rely, in part, on new and unproven technology as part of our underwriting processes. If the mortality predictions we obtain through use of this technology proves inaccurate, our results of operation and financial condition could be materially and adversely affected.

We recently exercised our option to license, on an exclusive basis, new technology that we believe may be applied to assist us with the mortality predictions in the course of underwriting and valuing life insurance contracts. This technology, however, has not yet been commercially applied in the manner we envision, and it possible that we will be unable to elicit more accurate mortality predictions through its use. It is also possible that the mortality predictions we obtain through the use of this technology will prove inaccurate, and perhaps materially so. In such a case, our failure to accurately forecast mortalities could have a material and adverse effect on our results of operation and financial condition, which could in turn materially and negatively affect the price of our common stock and our ability to satisfy our debts.

The technology we license may subject us to claims of infringement or invalidity from third parties, and the magnitude of this risk to our business generally rises if and as we become more successful in employing and relying on the technology. Any such claims would be complex and costly, and adverse outcomes could undermine the competitive advantages we seek.

Our reliance on technology will subject us to the risk that other parties may assert, rightly or wrongly, that our intellectual property rights are invalid or violate the rights of those parties, as well as the risk that our intellectual property rights will be infringed upon by third parties. Any outcome that invalidates our intellectual property rights or that otherwise diminishes the competitive advantages obtained, at least in part, through the use of those rights could have a material and adverse effect on our competitive position and our prospects.

55

ITEM 5. OTHER INFORMATION

Origination, Underwriting and Technology

We focus on purchasing high quality life insurance assets through our origination practices and underwriting procedures. In general, these practices and procedures strive to meet published guidelines for rated securitizations of life insurance portfolios. At the same time, we seek innovative value-added tools, services, and methodologies to improve both the accuracy and efficiency with which we evaluate and acquire life insurance assets.

Since 2013, we have focused on developing our direct origination channels through which we may purchase life insurance policies without the involvement of a life settlement broker, thereby eliminating commission costs and timing delays in the acquisition. We expect to continue allocating considerable resources towards developing our direct origination channels, primarily by outreach and relationship building with financial advisors (who may also sell our investment securities), life insurance agents, and consumers.

Our success in direct origination has presented us with the opportunity to purchase a greater number of “small face” life insurance policies with a face value benefit of $1,000,000 or less. We believe this opportunity is meaningful since the majority of life insurance policies outstanding are small face policies, and policy diversification is critical in obtaining normalized actuarial performance. Historically, however, small face policies have not been available to purchasers of life insurance contracts because the secondary market industry participants have significantly relied on life settlement brokers who are paid a commission determined as a percentage of the face value benefit of the purchased policy, to present purchase opportunities. Not surprisingly, because larger commissions are associated with larger face value life insurance contracts, brokers have focused on larger contracts and the industry has developed origination practices and underwriting procedures to accommodate such practices. As a result, the industry’s traditional approaches to underwriting and purchasing life insurance assets are ill suited for small face policies. For example, procuring complete medical records, two separate life expectancy reports, and engaging in related activities, can be time consuming and expensive, and these same costs cannot be justified when purchasing smaller life insurance assets.

To more fully realize the potential of the direct origination channel we have built, we have developed what we believe to be an efficient, cost-effective, and reliable method of underwriting and purchasing small face policies. In sum, our method is focused on obtaining enough medical information to generate reliable life expectancy estimates, and thereby make informed purchase decisions. We expect to refine this process over time and, to the extent possible, use new technologies to enhance this process and our overall business.

To that end, we have recently announced the execution of our option to exclusively license “DNA Methylation Based Predictor of Mortality” technology from the University of California, Los Angeles (UCLA) and discovered by Dr. Steven Horvath. In 2013, Dr. Horvath reported that human cells have a mechanism that records “biological age” progression, based on DNA methylation that is independent from “chronological age.” In 2016, Dr. Horvath discovered a specific set of DNA methylation-based bio-markers that are highly predictive of all-cause mortality. The discovery was made through a statistical analysis of bio-markers found in DNA samples from over 13,000 individuals whose health was studied for decades. The implications of Dr. Horvath’s discovery are simple and profound: Individual lifespans can now be estimated with significantly greater precision. We intend to implement aspects of this technology in our underwriting protocols and to explore how this technology may have commercial value to the primary life insurance, long-term care, and annuity businesses.

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 October 14, 2016 (filed herewith).
101.INS	XBRL Instance Document (filed herewith).
101.SCH	XBRL Taxonomy Extension Schema Document (filed herewith).
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).
101.LAB	XBRL Taxonomy Extension Label Linkbase Document (filed herewith).
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).

56

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:  November 10, 2016	By:	/s/ Jon R. Sabes
		Chief Executive Officer
Date:  November 10, 2016	By:	/s/ William B. Acheson
		Chief Financial Officer

57

EXHIBIT INDEX

31.1	Section 302 Certification of the Chief Executive Officer
31.2	Section 302 Certification of the Chief Financial Officer
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
99.1	Letter from Model Actuarial Pricing Systems, dated October 14, 2016
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

58

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: November 10, 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: November 10, 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 September 30, 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

November 10, 2016

/s/ William B. Acheson

William B. Acheson

Chief Financial Officer

November 10, 2016

EX-99.1

Exhibit 99.1

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

October 14, 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 10/12/2016 to project potential cash flows monthly following the 9/30/2016 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 09/30/2016 file had 625 policies with total face amounts of $1,272,077,891, a net increase of 78 policies and net increase of $117,280,345 in face amount over the prior quarter. The 06/30/2016 file had 547 policies with total face amounts of $1,154,797,546.

● 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, ISC Services and/or Predictive Resources.

Results

Using the assumptions stated below, we calculated the net present values as of the valuation dates using the specified discount rates of 11.07% and 7.10%. These results will be e-mailed to you in the Excel reports generated, including a Portfolio Summary and List of Policies, from the MAPS Portfolio valuation model.

GWG Portfolio as of 6/30/2016

Number of Policies	625
Total Net Death Benefit ($)	1,272,077,891
Discount Rate	11.07	%	7.10	%	12.00	%	15.00	%
Expected Net Present Value ($)	477,585,100		586,331,645		456,978,604		399,921,592
Stochastic Analysis – 10,000 Scenarios
95th Percentile Net Present Value ($)	445,519,193		554,296,755		424,961,839		368,277,024
95% CTE Net Present Value ($)	437,099,525		545,833,581		416,612,879		360,125,319

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: 2015 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: 11.07% and 7.10% 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

2

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 financial services firm) providing life settlement software and services worldwide to a variety of customers including life settlement brokers, providers, consultants and investors.

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

Very truly yours,

/s/ Lisa Simms

Lisa Simms

Model Actuarial Pricing Systems, LP

 Model Actuarial Pricing Systems, LP

3

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Nov. 10, 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	Sep. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		5,980,190

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Condensed Consolidated Balance Sheets - USD ($)	Sep. 30, 2016	Dec. 31, 2015
A S S E T S
Cash and cash equivalents	$ 18,773,828	$ 34,425,105
Restricted cash	15,688,025	2,341,900
Investment in life insurance contracts, at fair value	477,585,100	356,649,715
Secured MCA advances	6,113,831
Life insurance contract benefits receivable	6,129,022
Other assets	3,131,107	2,461,045
TOTAL ASSETS	527,420,913	395,877,765
LIABILITIES
Senior credit facilities	63,699,385	63,279,596
Series I Secured Notes	17,553,307	23,287,704
L Bonds	379,858,737	276,482,796
Accounts payable	2,442,449	1,517,440
Interest payable	13,633,640	12,340,061
Other accrued expenses	645,343	1,060,786
Deferred taxes, net	3,242,586	1,763,968
TOTAL LIABILITIES	481,075,447	379,732,351
STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK (par value $0.001; shares authorized 40,000,000; shares outstanding 2,649,665 and 2,781,735; liquidation preference of $19,872,000 and $20,863,000 on September 30, 2016 and December 31, 2015, respectively)	19,772,931	20,784,841
REDEEMABLE PREFERRED STOCK (par value $0.001; shares authorized 100,000; shares outstanding 33,201; liquidation preference of $33,176,600 on September 30, 2016)	33,176,600
COMMON STOCK (par value $0.001: shares authorized 210,000,000; shares issued and outstanding 5,980,190 and 5,941,790 on September 30, 2016 and December 31, 2015)	5,980	5,942
Additional paid-in capital	15,226,449	17,149,391
Accumulated deficit	(21,836,494)	(21,794,760)
TOTAL STOCKHOLDERS' EQUITY	46,345,466	16,145,414
TOTAL LIABILITIES & EQUITY	$ 527,420,913	$ 395,877,765

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 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	2,649,665	2,781,735
Convertible preferred stock, liquidation preference	$ 19,872,000	$ 20,863,000
Redeemable preferred stock, par value	$ 0.001	$ 0.001
Redeemable preferred stock, shares authorized	100,000	100,000
Redeemable preferred stock, shares outstanding	33,201	33,201
Redeemable preferred stock, liquidation preference	$ 33,176,600
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	210,000,000	210,000,000
Common stock, shares issued	5,980,190	5,941,790
Common stock, shares outstanding	5,980,190	5,941,790

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
REVENUE
Gain on life insurance contracts, net	$ 13,509,755	$ 8,189,261	$ 51,606,815	$ 33,446,556
MCA income	286,225		654,441
Interest and other income	124,998	93,841	341,098	233,516
TOTAL REVENUE	13,920,978	8,283,102	52,602,354	33,680,072
EXPENSES
Interest expense	11,983,968	8,650,149	32,009,934	23,149,030
Employee compensation and benefits	2,912,463	2,308,246	8,450,168	6,180,886
Legal and professional fees	586,830	822,077	3,097,312	1,988,261
Other expenses	2,863,212	2,231,341	7,608,057	5,646,402
TOTAL EXPENSES	18,346,473	14,011,813	51,165,471	36,964,579
INCOME (LOSS) BEFORE INCOME TAXES	(4,425,495)	(5,728,711)	1,436,883	(3,284,507)
INCOME TAX EXPENSE (BENEFIT)	(1,428,130)	(2,097,633)	1,478,617	(664,905)
NET LOSS	(2,997,365)	(3,631,078)	(41,734)	(2,619,602)
Loss attributable to preferred shareholders	421,026	343,644	1,103,896	1,041,648
INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS	$ (2,576,339)	$ (3,287,434)	$ 1,062,162	$ (1,577,954)
NET INCOME (LOSS) PER SHARE
Basic	$ (0.50)	$ (0.61)	$ (0.01)	$ (0.44)
Diluted	$ (0.50)	$ (0.61)	$ 0.13	$ (0.44)
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic	5,978,322	5,937,320	5,962,938	5,894,956
Diluted	5,978,322	5,937,320	8,092,196	5,894,956

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Condensed Consolidated Statement of Cash Flows (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (2,997,365)	$ (3,631,078)	$ (41,734)	$ (2,619,602)
Adjustments to reconcile net loss to net cash flows from operating activities:
Gain on life insurance contracts	(21,073,226)	(14,516,881)	(53,846,155)	(26,651,363)
Amortization of deferred financing and issuance costs	2,765,743	1,933,776	6,077,905	1,891,772
Deferred income taxes	(1,428,130)	(1,916,686)	1,478,617	(664,905)
Preferred stock dividends payable	333,565	173,993	663,614	509,225
(Increase) decrease in operating assets:
Life insurance contract benefits receivable	700,000	2,142,986	(6,129,022)	1,392,986
Other assets	419,836	(417,990)	(617,630)	(774,539)
Increase (decrease) in operating liabilities:
Due to related party	(80,949)		(182,730)
Accounts payable and other accrued expenses	(3,216,990)	2,534,269	(2,024,234)	3,836,715
NET CASH FLOWS USED IN OPERATING ACTIVITIES	(24,577,516)	(13,697,611)	(54,621,369)	(23,079,711)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts	(25,770,326)	(13,626,842)	(74,470,362)	(23,850,860)
Carrying value of matured life insurance contracts	1,078,889	80,000	7,381,132	3,822,983
Investment in Secured MCA advances	(1,965,896)		(7,613,310)
Proceeds from Secured MCA advances	220,911		1,246,703
NET CASH FLOWS USED IN INVESTING ACTIVITIES	(26,436,422)	(13,546,842)	(73,455,837)	(20,027,877)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on (repayments of) Senior Credit Facilities	(10,761,048)		6,238,952	(7,150,000)
Payments for redemption of Series I Secured Notes	(541,275)	(890,586)	(6,264,018)	(4,508,130)
Proceeds from issuance of L Bonds	64,350,430	37,122,127	135,477,090	87,620,483
Payments for issuance and redemption of L Bonds	(14,373,447)	(19,363,047)	(37,036,922)	(32,376,104)
Proceeds from (increase in) restricted cash	(4,527,232)	651,630	(13,346,126)	(2,975,507)
Issuance of common stock	31,515		244,185	582,000
Proceeds from issuance of preferred stock	20,786,332		31,287,541
Payments for issuance and redemption of preferred stock	(2,556,859)	(21,187)	(4,174,773)	(295,185)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES	52,408,416	17,498,937	112,425,929	40,897,557
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	1,394,478	(9,745,516)	(15,651,277)	(2,210,031)
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD	17,379,350	38,198,189	34,425,105	30,662,704
END OF PERIOD	18,773,828	28,452,673	18,773,828	28,452,673
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest and preferred dividends paid	11,516,000	5,385,000	28,683,000	18,529,000
Premiums paid	11,785,000	6,603,000	29,225,000	19,069,000
Stock-based compensation	162,000	176,000	213,000	208,000
Series I Secured Notes:
Conversion of accrued interest and commissions payable to principal	47,000	61,000	234,000	188,000
L Bonds:
Conversion of accrued interest and commissions payable to principal	854,000	491,000	1,515,000	929,000
Issuance of Series A Preferred Stock in lieu of cash dividends	170,000	172,000	509,000	507,000
Investment in life insurance contracts included in accounts payable	$ 1,603,000	$ 559,000	$ 1,603,000	$ 559,000

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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, shares			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	372,948	$ 372,948
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	(41,734)				(41,734)
Issuance of common stock	244,185		$ 36	244,149
Issuance of common stock, shares			36,450
Redemption of Series A Preferred Stock	(1,501,858)	$ (1,521,358)	$ 2	19,498
Redemption of Series A Preferred Stock, shares		(204,848)	1,950
Issuance of Series A Preferred Stock	509,448	$ 509,448
Issuance of Series A Preferred Stock, shares		72,778
Issuance of redeemable preferred stock	30,777,381	$ 33,176,600		(2,399,219)
Issuance of redeemable preferred stock, shares		33,201
Issuance of stock options	212,630			212,630
Ending balance at Sep. 30, 2016	$ 46,345,466	$ 52,949,531	$ 5,980	$ 15,226,449	$ (21,836,494)
Ending balance, shares at Sep. 30, 2016		2,682,866	5,980,190

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Nature of Business and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 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 – Through its wholly owned subsidiaries, GWG Holdings, Inc. owns a portfolio of life insurance contracts. As of the date of this report, our portfolio had an aggregate fair value of $477.6 million. We earn income from changes in the fair value of our portfolio and through the benefits we receive from the life insurance contracts we own. We are also involved in other lines of business, including a business that collects commissions for facilitating the conversion of term life insurance contracts into universal, or permanent, life insurance, and a business that participates in the merchant cash advance industry by advancing sums to merchants and lending money to businesses that advance sums to merchants. Operating results for the three- and nine-month periods included in this report are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.

GWG Holdings, Inc. and all of its subsidiaries are incorporated and organized in Delaware. Unless the context otherwise requires or we specifically so indicate, all references in these footnotes to “we,” “us,” “our,” “our Company,” “GWG,” or the “Company” refer to GWG Holdings, Inc. and its subsidiaries collectively and on a consolidated basis. References to the full names of particular entities, such as “GWG Holdings, Inc.” or “GWG Holdings,” are meant to refer only to the particular entity referenced.

Use of Estimates – The preparation of our consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenue during the reporting period. The Company regularly evaluates estimates and assumptions, which are based on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. The most significant estimates with regard to these consolidated financial statements relate to (1) the determination of the assumptions used in estimating the fair value of our investments in life insurance contracts, and (2) the value of our deferred tax assets and liabilities.

Cash and Cash Equivalents – We consider cash in demand deposit accounts and temporary investments purchased with an original maturity of three months or less to be cash equivalents. We maintain our cash and cash equivalents with highly rated financial institutions. The balances in our bank accounts may exceed Federal Deposit Insurance Corporation limits. We periodically evaluate the risk of exceeding insured levels and may transfer funds as we deem appropriate.

Life Insurance Contracts – ASC 325-30, Investments in Insurance Contracts (“ASC 325-30”), permits a reporting entity to account for its investments in life insurance contracts using either the investment method or the fair value method. We elected to use the fair value method to account for our life insurance contracts. Under the fair value method, we recognize our initial investment at the purchase price. At each subsequent reporting period, we re-measure the investment at fair value in its entirety and recognize the change in fair value as revenue in the current period net of premiums paid. We use the term “life insurance contracts” to have the same meaning as “life insurance policies.”

We also recognize realized gain (revenue) from a life insurance contract upon one of the two following events: (1) our receipt of notice or verified mortality of the insured; or (2) our sale of the contract, filing of change-of-ownership forms and receipt of payment. In the case of mortality, the gain (or loss) we recognize is the difference between the contract benefits and the carrying values of the contract once we receive notice or verify the mortality of the insured. In the case of a contract sale, the gain (or loss) we recognize is the difference between the sale price and the carrying value of the contract on the date of our receipt of sale proceeds.

In a case where our acquisition of a contract is not complete as of a reporting date, but we have nonetheless advanced direct costs and deposits for the acquisition, those costs and deposits are recorded as “other assets” on our balance sheet until the acquisition is complete and we secured title to the contract. On September 30, 2016 and December 31, 2015, a total of $34,000 and $31,000, respectively, of our “other assets” comprised direct costs and deposits that we advanced for contract acquisitions. 

Other Assets – GWG acquired the exclusive option to license “DNA Methylation Based Predictor of Mortality” technology from the University of California, Los Angeles (UCLA). The technology was discovered by Dr. Steven Horvath and is featured in the September 2016 edition of Aging. In 2013, Dr. Horvath reported that human cells have a mechanism that records biological aging progression based on DNA methylation that is independent from chronological aging progression. In 2016, Dr. Horvath discovered a specific set of DNA methylation-based bio-markers that are highly predictive of all-cause mortality. The discovery was made through a statistical analysis of bio-markers found in DNA samples from over 13,000 individuals whose health had been studied for decades. The implications of Dr. Horvath’s discovery are simple and profound: A biostatistician can review a specific set of identified bio-markers and develop a highly predictive analytical model of an individual’s lifespan. The cost of entering into this exclusive option agreement is listed as “other assets”.

Deferred Financing and Issuance Costs – Loans advanced to us under our senior credit facilities, as described in Notes 5 and 6, are reported net of financing costs, which are amortized using the straight-line method over the term of the facility.  The Series I Secured Notes and L Bonds, as respectively described in Notes 7 and 8, are reported net of issuance costs, sales commissions and other direct expenses, which are amortized using the interest method over the term of those borrowings. The Series A Preferred Stock, as described in Note 9, is reported net of issuance costs, sales commissions (including the fair value of warrants issued) and other direct expenses, all of which were fully amortized using the interest method as of December 31, 2015. Selling and issuance costs of Redeemable Preferred Stock and MCA Preferred Stock, described in Notes 10 and 11, are netted against additional paid-in-capital.

Earnings (loss) per Share – Basic earnings (loss) per share attributable to non-redeemable interests are calculated using the weighted-average number of shares outstanding during the reported period. Diluted earnings (loss) per share are calculated based on the potential dilutive impact of our outstanding Series A Preferred Stock, Redeemable Preferred Stock, warrants and stock options.

Recently Adopted Pronouncements – On April 7, 2015, the FASB issued Accounting Standards Update No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), as part of its simplification initiative. ASU 2015-03 changes the presentation of debt issuance costs by presenting those costs in the balance sheet as a direct deduction from the related debt liability. Amortization of the costs is reported as interest expense. We adopted ASU 2015-03 effective January 1, 2016, as required for public reporting entities.

Reclassification–Certain 2015 amounts have been reclassified to conform to ASU 2015-03, and that adoption reduced our assets, together with a corresponding reduction to our liabilities, by approximately $2,288,000 as of December 31, 2015. There was no impact on our statements of operations in 2015, and these reclassifications had no effect on our reported consolidated net income or loss for prior periods.

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Restrictions on Cash

9 Months Ended

Sep. 30, 2016

Restrictions on Cash [Abstract]

Restrictions on cash

(2)       Restrictions on Cash

Under the terms of our senior credit facilities (discussed in Notes 5 and 6), we are required to maintain collection and escrow accounts that are used to fund the acquisition of contracts, pay annual contract premiums, pay interest and other charges under the facility, and collect contract benefits. The agent for the lender authorizes the disbursements from these accounts. At September 30, 2016 and December 31, 2015, there was a balance of $15,688,000, and $2,342,000, respectively, in these restricted cash accounts.

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Investment in Life Insurance Contracts

9 Months Ended

Sep. 30, 2016

Investment in Life Insurance Contracts [Abstract]

Investment in Life Insurance Contracts

(3)      Investment in Life Insurance Contracts

Life insurance contracts are valued based on unobservable inputs that are significant to their overall fair value. Changes in the fair value of these contracts are recorded as gain or loss on life insurance contracts, net of cash premiums paid on those contracts, in our consolidated statements of operations. Fair value is determined on a discounted cash flow basis that incorporates life expectancy assumptions derived from reports obtained from widely accepted life expectancy providers, assumptions relating to cost-of-insurance (premium) rates and other assumptions. The discount rate we apply incorporates current information about discount rate applied by other reporting companies owning portfolios of life insurance contracts, the discount rates observed in the life insurance secondary market, market interest rates, our credit exposure to the insurance companies that issued the life insurance contracts and management’s estimate of the risk premium a purchaser would require to receive the future cash flows derived from our portfolio as a whole. As a result of management’s analysis, discount rates of 11.07% and 11.09% were applied to our portfolio as of September 30, 2016 and December 31, 2015, respectively.

We recognized life insurance benefits of $5,300,000 and $357,000 during the three months ended September 30, 2016 and 2015, respectively, related to contracts with a carrying value of $1,078,000 and $80,000, respectively, and as a result recorded realized gains of $4,221,000 and $277,000. We recognized life insurance benefits of $34,367,000 and $29,732,000 during the nine months ended September 30, 2016 and 2015, respectively, related to contracts with a carrying value of $7,381,000 and $3,823,000, respectively, and as a result recorded realized gains of $26,986,000 and $25,909,000.

Reconciliation of gain on life insurance contracts:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Change in fair value	$	21,073,000		$	14,517,000		$	53,846,000		$	26,651,000
Premiums and other fees		(11,784,000	)		(6,605,000	)		(29,225,000	)		(19,114,000	)
Contract maturities		4,221,000			277,000			26,986,000			25,909,000
Gain on life insurance contracts, net	$	13,510,000		$	8,189,000		$	51,607,000		$	33,446,000

We currently estimate that premium payments and servicing fees required to maintain our current portfolio of life insurance contracts in force for the next five years, assuming no mortalities, are as follows:

Years Ending December 31,	Premiums		Servicing		Premiums and Servicing Fees
Three months ending December 31, 2016	$	10,449,000	$	188,000	$	10,637,000
2017		43,155,000		750,000		43,905,000
2018		46,847,000		750,000		47,597,000
2019		50,813,000		750,000		51,563,000
2020		56,633,000		750,000		57,383,000
2021		63,222,000		750,000		63,972,000
	$	271,119,000	$	3,938,000	$	275,057,000

Management anticipates funding the premium payments estimated above with proceeds from our senior credit facilities, proceeds from additional debt and equity financing, and proceeds from maturities of life insurance contracts. The proceeds of these capital sources may also be used for the purchase, financing, and maintenance of additional life insurance contracts.

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Fair Value Definition and Hierarchy

9 Months Ended

Sep. 30, 2016

Fair Value Definition and Hierarchy [Abstract]

Fair Value Definition and Hierarchy

(4)       Fair Value Definition and Hierarchy

ASC 820, Fair Value Measurement (“ASC 820”), establishes a hierarchical disclosure framework that 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 and actively 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 maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring the use of observable inputs whenever available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect assumptions about how market participants price an asset or liability developed based on the best available information. 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 our portfolio of life insurance contracts is determined on a quarterly basis by our 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 (i) current information about discount rate applied by other reporting companies owning portfolios of life insurance contracts, (ii) the discount rates observed in the life insurance secondary market, (iii) market interest rates, (iv) our credit exposure to the insurance company that issued the life insurance contract and (v) management’s estimate of the risk premium a purchaser would require to receive the future cash flows derived from our portfolio as a whole.

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

The following table reconciles the beginning and ending fair value of our Level 3 investments in our portfolio of life insurance contracts for the periods ended September 30, as follows:

	Three months ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
Beginning balance	$	431,820,000		$	301,499,000		$	356,650,000		$	282,883,000
Purchases		25,770,000			13,626,000			74,470,000			23,851,000
Maturities (carrying value)		(1,078,000	)		(80,000	)		(7,381,000	)		(3,823,000	)
Net change in fair value		21,073,000			14,517,000			53,846,000			26,651,000
Ending balance (September 30)	$	477,585,000		$	329,562,000		$	477,585,000		$	329,562,000

We periodically update the independent life expectancy estimates on the insured lives in our portfolio, other than insured lives covered under small face amount contracts (i.e., $1 million in face value benefits or less), on a continuous rotating three-year cycle.  Accordingly, we update life expectancies for approximately one-twelfth of our portfolio each quarter.

The following table summarizes the inputs utilized in estimating the fair value of our portfolio of life insurance contracts:

	As of  September 30, 2016			As of December 31, 2015
Weighted-average age of insured, years		81.8			82.6
Weighted-average life expectancy, months		81.8			79.3
Average face amount per contract	$	2,035,000		$	2,386,000
Discount rate		11.07	%		11.09	%

These assumptions are, by their nature, inherently uncertain and the effect of changes in estimates may be significant. For example, if the life expectancy estimates were increased or decreased by four and eight months on each outstanding contract, and the discount rates were increased or decreased by 1% and 2%, while all other variables were held constant, the fair value of our investment in life insurance contracts would increase or (decrease) as summarized below:

Change in Fair Value of the Investment in Life Insurance Contracts

	Change in life expectancy estimates
	minus 8 months		minus 4 months		plus  4 months			plus  8 months
September 30, 2016	$	64,713,000	$	32,215,000	$	(31,450,000	)	$	(62,258,000	)
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%
September 30, 2016	$	50,097,000	$	23,990,000	$	(22,096,000	)	$	(42,492,000	)
December 31, 2015	$	35,024,000	$	16,786,000	$	(15,485,000	)	$	(29,803,000	)

Other Fair Value Considerations

The carrying valueof receivables, prepaid expenses,accounts payableandaccruedexpenses approximatefairvalue dueto theirshort-term maturities andlow credit risk.Using the income-based valuation approach, the estimated fairvalue ofourSeriesISecuredNotes and LBonds, having a combined aggregate face value of $402,416,000 as of September 30, 2016, is approximately $414,023,000based onaweighted-average marketinterest rateof 6.36%. The carrying value of the senior credit facilities reflects interestcharged atthe commercial paperrate or 12-month LIBOR, as applicable, plus an applicable margin.The margin represents ourcredit risk,andthestrengthoftheportfolio oflifeinsurancecontracts collateralizing thedebt. Theoverallratereflects market,and thecarryingvalue ofthefacilityapproximates fair value.

Our wholly owned subsidiary GWG MCA Capital, Inc. (“GWG MCA”) participates in the merchant cash advance by directly advancing sums to merchants and lending money, on a secured basis, to companies that advance sums to merchants. Each quarter, we review the carrying value of these advances and loans, and determine if an impairment reserve is necessary. At September 30, 2016, one of our secured loans to Nulook Capital LLC was potentially impaired. The secured loan to Nulook Capital LLC had an outstanding balance of $3,215,000 and a loan loss reserve of $400,000 at September 30, 2016. We deem fair value to be the estimated collectible value on each loan or advance made from GWG MCA. Where we estimate the collectible amount to be less than the outstanding balance, we record a reserve for the difference. 

The following table summarizes outstanding warrants as of September 30, 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

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Credit Facility - Autobahn Funding Company LLC

9 Months Ended

Sep. 30, 2016

Debt Disclosure [Abstract]

Credit Facility - Autobahn Funding Company LLC

(5)       Credit Facility – Autobahn Funding Company LLC

Through our subsidiaries GWG DLP Funding II, LLC (“DLP II”) and GWG DLP Funding III, LLC (“DLP III”), we are party to a $105 million revolving senior credit facility with Autobahn Funding Company LLC (“Autobahn”), with a maturity date of June 30, 2018. The facility is governed by a Credit and Security Agreement (the “Agreement”), and DZ Bank AG Deutsche Zentral-Genossenschaftsbank (“DZ Bank”) acts as the agent for Autobahn under the Agreement. On September 14, 2016, we paid off the revolving senior credit facility in full with funds received from a new senior secured term loan with LNV Corporation as described in Note 6.

Advances under the facility bear interest at a commercial paper rate of the lender at the time of the advance, or at the lender’s cost of borrowing plus 4.25%. We make interest payments on a monthly basis. The effective rate of interest was 5.42% at September 14, 2016 and 5.58% at December 31, 2015. The weighted-average effective interest rate, after excluding an unused line fee, was 5.46% and 5.42% for the three months ended September 30, 2016 and 2015, respectively, and 5.54% and 5.81% for the nine months ended September 30, 2016 and 2015, respectively.

The amount outstanding under this facility was $0 and $65,011,000 at September 30, 2016 and December 31, 2015, respectively. GWG Holdings is a performance guarantor of the various obligations of GWG Life, LLC (“GWG Life”), as servicer, under the Agreement. Obligations under the facility are secured by our pledge of ownership in our life insurance contracts to DZ Bank through an arrangement under which Wells Fargo serves as a securities intermediary.

The Agreement has certain financial (as described below) and non-financial covenants, and we were in compliance with these covenants at September 30, 2016 and December 31, 2015.

We have 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, (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 September 30, 2016, as calculated under the Agreement, was $33,877,000 and $149,361,000, respectively.

Total funds available for additional borrowings under the facility at December 31, 2015, was $39,989,000. At September 30, 2016, the amount outstanding was $0 and there were no policies pledged to the facility.

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Credit Facility - LNV Corporation

9 Months Ended

Sep. 30, 2016

Investments, Debt and Equity Securities [Abstract]

Credit Facility - LNV Corporation

(6)       Credit Facility – LNV Corporation

On September 14, 2016, we entered into a senior secured term loan with LNV Corporation (“LNV”) as lender through our subsidiary GWG DLP Funding IV, LLC (“DLP IV”) as borrower. The facility is governed by a Loan and Security Agreement (the “Loan Agreement”), with CLMG Corp. (“CLMG”) acting as administrative agent on behalf of the lender under the Loan Agreement. The Loan Agreement makes available a total of up to $172,300,000 in credit with a maturity date of September 14, 2026. Additional quarterly advances are available under the Loan Agreement. Interest will accrue on amounts borrowed under the agreement at an annual interest rate, determined as of each date of borrowing, equal to (A) the greater of 12-month LIBOR or the federal funds rate (as defined in the agreement) plus one-half of one percent per annum, plus (B) 5.75% per annum. Interest payments are made on a quarterly basis.

At September 30, 2016, the amount outstanding under this facility was $71,250,000 and total funds available for additional borrowing, net of required reserve, was $76,629,000.

Obligations under the facility are secured by a security interest in DLP IV’s assets, for the benefit of the lenders under the Loan Agreement, through an arrangement under which Wells Fargo serves as security intermediary.

The Loan Agreement requires DLP IV to maintain a reserve account in an amount sufficient to pay 12 months of servicing, administrative and third party expenses identified under the Loan Agreement, and 12 months of debt service as calculated under the Loan Agreement. As of November 10, 2016, the amount set aside in the reserve account is $27,500,000.

The Agreement has no financial covenants and certain non-financial reporting covenants, and we were in compliance with these covenants at September 30, 2016.

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Series I Secured Notes

9 Months Ended

Sep. 30, 2016

Debt Disclosure [Abstract]

Series I Secured Notes

(7)       Series I Secured Notes

Series I Secured Notes (“Notes”) are legal obligations of GWG Life and were privately offered and sold from August 2009 through June 2011. The Notes are secured by the assets of GWG Life and are subordinate to obligations under our senior credit facilities (see Notes 5 and 6). We are party to a Third Amended and Restated Note Issuance and Security Agreement dated November 1, 2011, as amended, under which GWG Life is obligor, GWG Holdings is guarantor, and Lord Securities Corporation serves as trustee of the GWG Life Trust (“Trust”). This agreement contains certain financial and non-financial covenants, and we were in compliance with these covenants at September 30, 2016 and December 31, 2015.

The Notes were sold with original maturity dates ranging from six months to seven years, and with fixed interest rates varying from 5.65% to 9.55% depending on the term of the Note. The Notes have renewal features under which we may elect to permit their renewal, subject to the right of bondholders to elect to receive payment at maturity. Effective September 1, 2016, we no longer anticipate renewing the Notes.

Interest on the Notes is payable monthly, quarterly, annually or at maturity depending on the election of the investor. At September 30, 2016 and December 31, 2015, the weighted-average interest rate of our Notes was 8.63% and 8.47%, respectively. The principal amount of Notes outstanding was $17,830,000 and $23,578,000 at September 30, 2016 and December 31, 2015, respectively. The difference between the amount outstanding on the Notes and the carrying amount on our balance sheet is due to netting of unamortized deferred issuance costs. Overall, interest expense includes amortization of deferred financing and issuance costs of $82,000 and $275,000 for the three and nine months ended September 30, 2016 and $49,000 and $260,000 for the three and nine months ended September 30, 2015. Future expected amortization of deferred financing costs is $277,000 in total over the next six years.

Future contractual maturities of Notes payable and future amortization of their deferred financing costs at September 30, 2016 are as follows: 

Years Ending December 31,	Contractual Maturities		Amortization of Deferred Financing Costs
Three months ending December 31 ,2016	$	1,177,000	$	5,000
2017		10,522,000		88,000
2018		2,401,000		49,000
2019		1,023,000		22,000
2020		1,766,000		55,000
Thereafter		941,000		58,000
	$	17,830,000	$	277,000

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L Bonds

9 Months Ended

Sep. 30, 2016

Debt Disclosure [Abstract]

L Bonds

(8)       L Bonds

Our L Bonds are legal obligations of GWG Holdings. Obligations under the L Bonds are secured by the assets of GWG Holdings and by GWG Life, as a guarantor, and are subordinate to the obligations under our senior credit facilities (see Notes 5 and 6). We began publicly offering and selling L Bonds in January 2012 under the name “Renewable Secured Debentures.” These debt securities were re-named “L Bonds” in January 2015. L Bonds are publicly offered and sold on a continuous basis under a registration statement permitting us to sell up to $1.0 billion in principal amount of L Bonds. We are party to an indenture governing the L Bonds dated October 19, 2011, as amended (“Indenture”), under which GWG Holdings is obligor, GWG Life is guarantor, and Bank of Utah serves as indenture trustee. The Indenture contains certain financial and non-financial covenants, and we were in compliance with these covenants at September 30, 2016 and December 31, 2015.

Effective September 1, 2016, we discontinued the sales of 6-month and 1-year L Bonds. In addition, effective September 1, 2016, the L Bond interest rates changed to 5.50%, 6.25%, 7.50% and 8.50% for the 2-, 3-, 5- and 7-year L Bonds, respectively. The bonds have renewal features under which we may elect to permit their renewal, subject to the right of bondholders to elect to receive payment at maturity. Interest is payable monthly or annually depending on the election of the investor.

At September 30, 2016 and December 31, 2015, the weighted-average interest rate of our L Bonds was 7.16% and 7.18%, respectively. The principal amount of L Bonds outstanding was $384,586,000 and $282,171,000 at September 30, 2016 and December 31, 2015, respectively. The difference between the amount of outstanding L Bonds and the carrying amount on our 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 $2,073,000 and $5,362,000 for the three and nine months ended September 30, 2016 and $1,892,000 and $4,232,000 for the three and nine months ended September 30, 2015. Future expected amortization of deferred financing costs as of September 30, 2016 is $11,622,000 in total over the next eight years.

Future contractual maturities of L Bonds, and future amortization of their deferred financing costs, at September 30, 2016 are as follows: 

Years Ending December 31,	Contractual Maturities		Amortization of Deferred Financing Costs
Three months ending December 31, 2016	$	23,548,000	$	115,000
2017		112,987,000		1,708,000
2018		101,130,000		3,106,000
2019		78,098,000		3,222,000
2020		19,291,000		784,000
Thereafter		49,532,000		2,687,000
	$	384,586,000	$	11,622,000

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Convertible Preferred Stock

9 Months Ended

Sep. 30, 2016

Convertible and Redeemable Preferred Stock/Common Stock [Abstract]

Convertible Preferred Stock

(9)       Convertible Preferred Stock

From July 2011 until September 2012, we privately offered shares of Series A Preferred Stock (“Series A”) of GWG Holdings at $7.50 per share. In the offering, we sold an aggregate of 3,278,000 shares for gross consideration of $24,582,000. Holders of Series A are entitled to cumulative dividends at the rate of 10% per annum, paid quarterly. Dividends on the Series A are included as interest expense in the statements of operations. Under certain circumstances described in the Certificate of Designation for the Series A, additional Series A shares may be issued in lieu of cash dividends at the rate of $7.00 per share.

Holders of Series A are entitled to a liquidation preference equal to the stated value of their preferred shares (i.e., $7.50 per share) plus accrued but unpaid dividends. Holders of Series A may presently convert each share of their Series A into 0.75 shares of our common stock at the rate of $10.00 per share.

As of September 30, 2016, we issued an aggregate of 447,000 shares of Series A in satisfaction of $3,129,000 in dividends on the Series A, and an aggregate of 696,000 shares of Series A were converted into 522,000 shares of our common stock. As of September 30, 2016, we had 2,650,000 Series A shares outstanding with respect to which we incurred aggregate issuance costs of $2,838,000, all of which is included as a component of additional paid-in capital.

Purchasers of Series A in our offering received warrants to purchase an aggregate of 431,954 shares of our common stock at an exercise price of $12.50 per share. The grant date fair value of these warrants was $428,000. As of September 30, 2016 and December 31, 2015, none of these warrants were exercised, and the weighted-average remaining life of these warrants was 0.68 and 1.43 years, respectively.

In September 2012, we completed a public offering of our common stock and, as a result, the Series A was reclassified from temporary equity to permanent equity. We may redeem Series A shares under the Certificate of Designation at a price equal to 110% of their liquidation preference ($7.50 per share) at any time. As of September 30, 2016, we have redeemed an aggregate of 277,000 shares of Series A.

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Redeemable Preferred Stock

9 Months Ended

Sep. 30, 2016

Convertible and Redeemable Preferred Stock/Common Stock [Abstract]

Redeemable Preferred Stock

(10)       Redeemable Preferred Stock

Beginning November 30, 2015, we began publicly offering up to 100,000 shares of Redeemable Preferred Stock (“RPS”) at $1,000 per share. Holders of RPS are entitled to cumulative dividends at the rate of 7% per annum, paid monthly. Dividends on the RPS are included as interest expense in the statements of operations. Under certain circumstances described in the Certificate of Designation for the RPS, additional shares of RPS may be issued in lieu of cash dividends.

The RPS ranks senior to our common stock and pari passu with our Series A, and entitles its holders to a liquidation preference equal to the stated value per share (i.e., $1,000) plus accrued but unpaid dividends. Holders of RPS may presently convert their RPS into our 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 of conversion, subject to a minimum conversion price of $15.00 and in an aggregate amount limited to 15% of the stated value of RPS originally purchased by such holder from us and still held by such holder.

Holders of RPS may request that we redeem their RPS at a price equal to their liquidation preference at a price equal to their stated value plus accrued but unpaid dividends, less an applicable redemption fee, if any. Nevertheless, the Certificate of Designation for RPS permits us to decline requests for redemption in certain circumstances. Subject to certain restrictions and conditions, we may also redeem shares of RPS without a redemption fee upon a holder’s death, total disability or bankruptcy. In addition, after one year from the date of original issuance, we may, at our option, call and redeem shares of RPS at a price equal to their liquidation preference.

As of September 30, 2016, we had sold 33,201 shares of RPS for aggregate gross consideration of $33,177,000, and incurred approximately $2,399,000 of selling costs related to the sale of those shares.

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GWG MCA Capital, Inc - 9% Preferred Stock

9 Months Ended

Sep. 30, 2016

Convertible and Redeemable Preferred Stock/Common Stock [Abstract]

GWG MCA Capital, Inc - 9% Preferred Stock

(11)       GWG MCA Capital, Inc - 9% Preferred Stock

Beginning March 31, 2016, GWG MCA began privately offering up to 2,000,000 shares of GWG MCA 9% Preferred Stock (“MCA Preferred”) at $10.00 per share. Holders of MCA Preferred are entitled to cumulative dividends at a rate of 9% per annum, paid monthly. Dividends on the MCA Preferred are included as interest expense in the statements of operations. As of September 30, 2016, a total of 7,155 shares of MCA Preferred had been sold for aggregate gross consideration of $72,000 and approximately $7,000 of selling costs related to the sale of these shares were incurred.

Holders of MCA Preferred were redeemed as of September 30, 2016 at the stated value of their shares plus accrued but unpaid dividends.

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Income Taxes

9 Months Ended

Sep. 30, 2016

Income Taxes [Abstract]

Income Taxes

(12)       Income Taxes

We had a current income tax liability of $0 as of both September 30, 2016 and December 31, 2015. The components of current and deferred income tax expense for the three and nine months ended September 30, 2016 and 2015, respectfully, consisted of the following:

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,		September 30,
	2016			2015			2016		2015
Income tax provision (benefit):
Current:
Federal	$	-		$	(141,000	)	$	-	$	-
State	$	-		$	(40,000	)	$	-	$	-
Total current tax expense (benefit)		-			(181,000	)		-		-
Deferred:
Federal	$	(1,082,000	)	$	(1,488,000	)	$	1,121,000	$	(504,000	)
State	$	(346,000	)	$	(429,000	)	$	358,000	$	(161,000	)
Total deferred tax expense (benefit)		(1,428,000	)		(1,917,000	)		1,479,000		(665,000	)
Total income tax expense (benefit)		(1,428,000	)		(2,098,000	)		1,479,000		(665,000	)

We provided a valuation allowance against the deferred tax asset related to a note receivable, which was 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.

Wealsoprovided avaluation allowance againstthe deferred taxassetrelated to ataxbasiscapital lossgenerated withrespect tooursettlement and subsequentdisposalofanearlier investment in Athena Structured FundsPLC. Aswe have no expectation ofgenerating capital gains with theapplicable carryforwardperiod,we donot believe thatit is“more likely thannot”that the deferredasset will berealized.

The primary differences between the September 30, 2016 effective tax rate and the statutory federal rate are the accrual of non-deductible preferred stock dividend expense of $2,153,000, 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 contracts and revenue recognition with respect to the mark-to-market of our life insurance portfolio.

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Common Stock

9 Months Ended

Sep. 30, 2016

Convertible and Redeemable Preferred Stock/Common Stock [Abstract]

Common Stock

(13)       Common Stock

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 payment of underwriting commissions, discounts and expense reimbursements. In connection with this offering, we listed our common stock on the Nasdaq Capital Market under the ticker symbol “GWGH.”

On June 24, 2015 we issued 60,000 restricted common shares at $9.70 per share, determined by the closing market price on the date of grant, to a vendor as payment for services to be rendered over three years. The cost of these shares is amortized over a 12-month period. On March 17, 2016, we issued an additional 6,500 restricted common shares at an average price of $7.16 per share, determined by the closing market price on the date of grant, to this same vendor for additional services provided to us. On April 25, 2016, we issued 25,000 restricted shares of common stock at $6.25 per share, determined by the closing market price on the date of grant, to a vendor as a form of payment for services the vendor is providing to us, which is expensed in the current period.

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Stock Incentive Plan

9 Months Ended

Sep. 30, 2016

Stock Incentive Plan [Abstract]

Stock Incentive Plan

(14)       Stock Incentive Plan

We adopted our GWG Holdings 2013 Stock Incentive Plan in March 2013. The Compensation Committee of our Board of Directors administers the plan. Incentives under the plan may be granted incentive stock options and non-statutory stock options; stock appreciation rights; stock awards; restricted stock; restricted stock units; and performance shares. Eligible participants include officers and employees of GWG Holdings and its subsidiaries, members of our Board of Directors, and consultants. 2,000,000 common shares are presently issuable under the plan.

Stock Options – Through September 30, 2016, we issued stock options for 1,237,000 shares of common stock to employees, officers, and directors under the plan. Options for 687,000 shares have vested, and the remaining options are scheduled to vest over three years. The options were issued with an exercise price between $6.35 and $10.18 for those beneficially owning more than 10% of our common stock, and between $6.00 and $10.25 for all others, which is equal to the estimated market price of the shares on the date of grant using Black-Scholes binomial option pricing model. The expected annualized volatility used in the Black-Scholes model valuation of options issued during the period was 25.5%. 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. A forfeiture rate of 15% is based on historical information and expected future trend. As of September 30, 2016, stock options for 415,000 shares were forfeited and stock options for 28,000 shares were exercised.

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 year		22,500			239,948			262,448
Vested during the year		187,473			(187,473	)		-
Forfeited during the year		(6,676	)		(72,824	)		(79,500	)
Balance as of September 30, 2016		687,000			549,563			1,236,563

Compensation expense related to un-vested options not yet recognized is $420,000. We expect to recognize this compensation expense over the next three years ($14,000 in 2016, $240,000 in 2017, $109,000 in 2018, and $57,000 in 2019).

Stock Appreciation Rights (SARs) - On September 19, 2016 we issued SARs for 145,388 shares of the common stock to employees. The strike price of the SARs was $8.76, which was equal to the market price of the common stock at the close of business on September 19, 2016. 56,358 of the SARs were vested as of September 30, 2016, on which date the market price of the common stock was $8.82. A forfeiture rate of 15% was used in calculating our liability for the SARs.

Outstanding Stock Appreciation Rights:

	Vested		Un-vested		Total
Balance as of December 31, 2015		-		-		-
Granted during the year		56,358		89,030		145,388
Vested during the year		56,358		89,030		145,388
Forfeited during the year		-		-		-
Balance as of September 30, 2016		56,358		89,030		145,388

A liability for Stock Appreciation Rights - Compensation Expense was recorded on September 30, 2016 in the amount of $3,381 and Compensation Expense was charged for the same amount.

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Net Income per Common Share

9 Months Ended

Sep. 30, 2016

Net Income Per Common Share [Abstract]

Net Income per Common Share

(15)       Net Income per Common Share

We have outstanding Series A, as described in Note 9. The Series A are dilutive to our net income per common share calculation for the nine-month period ended September 30, 2016. They are anti-dilutive for the three-month period ended September 30, 2016 and for both three and nine-month periods ended September 30, 2015. We also issued warrants to purchase common stock in conjunction with the sale of Series A (see Note 9). Both those warrants and our vested stock options are anti-dilutive for both three and nine-month periods ended September 30, 2016 and 2015 and have not been included in the fully diluted net loss per common share calculation. We issued RPS (see Note 10). The RPS is dilutive for the nine-month period ended September 30, 2016 and anti-dilutive for the three-month period ended September 30, 2016.

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Commitments

9 Months Ended

Sep. 30, 2016

Commitments and Contingencies [Abstract]

Commitments

(16)       Commitments

We are party to an office lease with U.S. Bank National Association as the landlord. On September 1, 2015, we entered into an amendment to our original lease that expanded the leased space to 17,687 square feet and extended the term through August 31, 2025. Under the amended lease, we are obligated to pay base rent plus common area maintenance and a share of building operating costs. Rent expenses under these lease arrangements were $102,000 and $71,000 for the three months ended September 30, 2016 and 2015, respectively, and $306,000 and $193,000 for the nine months ended September 30, 2016 and 2015, respectively.

Minimum lease payments under the amended lease are as follows:

Three months ending December 31, 2016	$	44,000
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
	$	1,918,000

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Contingencies

9 Months Ended

Sep. 30, 2016

Commitments and Contingencies [Abstract]

Contingencies

(17)       Contingencies

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

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Guarantee of L Bonds

9 Months Ended

Sep. 30, 2016

Guarantee of L Bonds [Abstract]

Guarantee of L Bonds

(18)       Guarantee of L Bonds

We are publicly offering and selling L Bond under a registration statement declared effective by the SEC, as described in Note 8. Our obligations under the L Bonds are secured by substantially all the assets of GWG Holdings, a pledge of all the common stock held individually by our largest stockholders, and by a guarantee and corresponding grant of a security interest in substantially all the assets of GWG Life. As a guarantor, GWG Life has fully and unconditionally guaranteed the payment of principal and interest on the L Bonds. Substantially all of GWG’s life insurance contracts are held by wholly owned subsidiaries of GWG Life: DLP III, DLP IV and the Trust. GWG Life’s equity ownership in these subsidiaries serves as collateral for the L Bond obligation. The life insurance contracts held by DLP III and DLP IV are not direct collateral for the L Bond obligations but do serve as direct collateral for the senior credit facilities.

The consolidating financial statements are presented in lieu of separate financial statements and other related disclosures of the subsidiary guarantor 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 provided herein. A majority of insurance contracts we own are subject to a collateral arrangement with LNV described in Note 6. Under this arrangement, collection and escrow accounts are used to fund premiums for the insurance contracts and to pay interest and other charges under the senior credit facility.

The following represents consolidating financial information as of September 30, 2016 and December 31, 2015, with respect to the financial position, and for the three and nine months ended September 30, 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 for 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 III, DLP IV and the Trust under the equity method. The non-guarantor subsidiaries column presents the financial information of all non-guarantor subsidiaries, including DLP III, DLP IV and the Trust.

Condensed Consolidating Balance Sheets 

September 30, 2016	Parent			Guarantor Subsidiary		Non-Guarantor Subsidiaries		Eliminations			Consolidated
A S S E T S
Cash and cash equivalents	$	13,312,751		$	4,372,845	$	1,088,232	$	-		$	18,773,828
Restricted cash		-			4,438,025		11,250,000		-			15,688,025
Investment in life insurance contracts, at fair value		-			-		477,585,100		-			477,585,100
Secured MCA advances		-			-		6,113,831		-			6,113,831
Life insurance contract benefits receivable		-			-		6,129,022		-			6,129,022
Other assets		4,706,121			1,224,386		54,726		(2,854,126	)		3,131,107
Investment in subsidiaries		422,185,881			429,441,035		-		(851,626,916	)		-
TOTAL ASSETS	$	440,204,753		$	439,476,291	$	502,220,911	$	(854,481,042	)	$	527,420,913
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
Senior credit facilities	$	-		$	-	$	63,699,385	$	-		$	63,699,385
Series I Secured Notes		-			17,553,307		-		-			17,553,307
L Bonds		379,858,737			-		-		-			379,858,737
Notes payable to related parties		-			-		2,700,000		(2,700,000	)		-
Accounts payable		699,507			99,705		1,643,237		-			2,442,449
Interest payable		9,798,735			3,588,954		400,077		(154,126	)		13,633,640
Other accrued expenses		259,722			351,896		33,725		-			645,343
Deferred taxes, net		3,242,586			-		-		-			3,242,586
TOTAL LIABILITIES		393,859,287			21,593,862		68,476,424		(2,854,126	)		481,075,447
STOCKHOLDERS’ EQUITY (DEFICIT)
Member capital		-			417,882,429		433,744,487		(851,626,916	)		-
Convertible preferred stock		19,772,931			-		-		-			19,772,931
Redeemable preferred stock		33,176,600			-		-		-			33,176,600
Common stock		5,980			-		-		-			5,980
Additional paid-in capital		15,226,449			-		-		-			15,226,449
Accumulated deficit		(21,836,494	)		-		-		-			(21,836,494	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		46,345,466			417,882,429		433,744,487		(851,626,916	)		46,345,466
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	440,204,753		$	439,476,291	$	502,220,911	$	(854,481,042	)	$	527,420,913

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
Senior credit facilities	$	-		$	(1,000,000	)	$	64,279,596	$	-		$	63,279,596
Series I Secured Notes		-			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, net		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 nine months ended September 30, 2016	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Origination and servicing income	$	-		$	13,417		$	-	$	(13,417	)	$	-
Gain on life insurance contracts, net		-			-			51,606,815		-			51,606,815
MCA income		-			-			654,441		-			654,441
Interest and other income		181,828			31,137			282,259		(154,126	)		341,098
TOTAL REVENUE		181,828			44,554			52,543,515		(167,543	)		52,602,354
EXPENSES
Origination and servicing fees		-			-			13,417		(13,417	)		-
Interest expense		25,477,320			1,856,909			4,829,831		(154,126	)		32,009,934
Employee compensation and benefits		4,894,006			3,151,107			405,055		-			8,450,168
Legal and professional fees		1,642,252			1,308,959			146,101		-			3,097,312
Other expenses		4,241,825			2,197,133			1,169,099		-			7,608,057
TOTAL EXPENSES		36,255,403			8,514,108			6,563,503		(167,543	)		51,165,471
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(36,073,575	)		(8,469,554	)		45,980,012		-			1,436,883
EQUITY IN INCOME OF SUBSIDIARY		37,510,458			46,497,731			-		(84,008,189	)		-
INCOME BEFORE INCOME TAXES		1,436,883			38,028,177			45,980,012		(84,008,189	)		1,436,883
INCOME TAX EXPENSE		1,478,617			-			-		-			1,478,617
NET INCOME (LOSS)	$	(41,734	)	$	38,028,177		$	45,980,012	$	(84,008,189	)	$	(41,734	)

For the nine months ended  September 30, 2015	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Origination and servicing income	$	-		$	2,022,774		$	-	$	(2,022,774	)	$	-
Gain on life settlements, net		-			-			33,446,556		-			33,446,556
Interest and other income		38,944			61,694			132,878		-			233,516
TOTAL REVENUE		38,944			2,084,468			33,579,434		(2,022,774	)		33,680,072
EXPENSES
Origination and servicing fees		-			-			2,022,774		(2,022,774	)		-
Interest expense		18,011,890			1,984,356			3,152,784		-			23,149,030
Employee compensation and benefits		4,671,183			1,509,703			-		-			6,180,886
Legal and professional fees		1,427,388			560,873			-		-			1,988,261
Other expenses		3,251,606			2,297,063			97,733		-			5,646,402
TOTAL EXPENSES		27,362,067			6,351,995			5,273,291		(2,022,774	)		36,964,579
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(27,323,123	)		(4,267,527	)		28,306,143		-			(3,284,507	)
EQUITY IN INCOME OF SUBSIDIARY		24,038,616			28,305,979			-		(52,344,595	)		-
NET INCOME (LOSS) BEFORE INCOME TAXES		(3,284,507	)		24,038,452			28,306,143		(52,344,595	)		(3,284,507	)
INCOME TAX BENEFIT		(664,905	)		-			-		-			(664,905	)
NET INCOME (LOSS)	$	(2,619,602	)	$	24,038,452		$	28,306,143	$	(52,344,595	)	$	(2,619,602	)

For the three months ended September 30, 2016	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Gain on life insurance contracts, net		-			-			13,509,755		-			13,509,755
MCA income		-			-			286,225		-			286,225
Interest and other income		75,808			30,126			83,313		(64,249	)		124,998
TOTAL REVENUE		75,808			30,126			13,879,293		(64,249	)		13,920,978
EXPENSES
Interest expense		9,747,128			554,938			1,746,151		(64,249	)		11,983,968
Employee compensation and benefits		1,718,683			1,038,058			155,722		-			2,912,463
Legal and professional fees		263,917			297,804			25,109		-			586,830
Other expenses		1,464,498			803,106			595,608		-			2,863,212
TOTAL EXPENSES		13,194,226			2,693,906			2,522,590		(64,249	)		18,346,473
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(13,118,418	)		(2,663,780	)		11,356,703		-			(4,425,495	)
EQUITY IN INCOME OF SUBSIDIARY		8,692,923			11,361,329			-		(20,054,252	)		-
INCOME (LOSS) BEFORE INCOME TAXES		(4,425,495	)		8,697,549			11,356,703		(20,054,252	)		(4,425,495	)
INCOME TAX BENEFIT		(1,418,130	)		-			-		-			(1,428,130	)
NET INCOME (LOSS)	$	(2,997,365	)	$	8,697,549		$	11,356,703	$	(20,054,252	)	$	(2,997,365	)

For the three months ended September 30, 2015	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Origination and servicing income	$	-		$	1,004,024		$	-	$	(1,004,024	)	$	-
Gain on life settlements, net		-			-			8,189,261		-			8,189,261
Interest and other income		13,922			54,813			25,106		-			93,841
TOTAL REVENUE		13,922			1,058,837			8,214,367		(1,004,024	)		8,283,102
EXPENSES
Origination and servicing fees		-			-			1,004,024		(1,004,024	)		-
Interest expense		6,980,132			525,391			1,144,626		-			8,650,149
Employee compensation and benefits		1,759,589			548,657			-		-			2,308,246
Legal and professional fees		598,530			223,547			-		-			822,077
Other expenses		1,195,417			995,026			40,898		-			2,231,341
TOTAL EXPENSES		10,533,668			2,292,621			2,189,548		(1,004,024	)		14,011,813
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(10,519,746	)		(1,233,784	)		6,024,819		-			(5,728,711	)
EQUITY IN INCOME OF SUBSIDIARY		4,791,035			6,024,762			-		(10,815,797	)		-
NET INCOME (LOSS) BEFORE INCOME TAXES		(5,728,711	)		4,790,978			6,024,819		(10,815,797	)		(5,728,711	)
INCOME TAX BENEFIT		(2,097,633	)		-			-		-			(2,097,633	)
NET INCOME (LOSS)	$	(3,631,078	)	$	4,790,978		$	6,024,819	$	(10,815,797	)	$	(3,631,078	)

Condensed Consolidating Statements of Cash Flows 

For the nine months ended  September 30, 2016	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	(41,734	)	$	38,028,177		$	45,980,012		$	(84,008,189	)	$	(41,734	)
Adjustments to reconcile net income to net cash flows from operating activities:
(Equity) of subsidiaries		(37,510,459	)		(46,497,730	)		-			84,008,189			-
Gain on life insurance contracts		-			-			(53,846,155	)		-			(53,846,155	)
Amortization of deferred financing and issuance costs		5,982,802			(1,364,614	)		1,459,717			-			6,077,905
Deferred income taxes		1,478,617			-			-			-			1,478,617
Preferred stock dividends payable		663,614			-			-			-			663,614
(Increase) in operating assets:
Life insurance contract benefits receivable		-			-			(6,129,022	)					(6,129,022	)
Other assets		(114,885,990	)		(92,168,163	)		-			206,436,523			(617,630	)
Increase (decrease) in operating liabilities:
Due to related party		(2,867,225	)		(15,505	)		2,700,000			-			(182,730	)
Accounts payable and accrued expenses		2,396,503			2,889,525			(7,310,262	)		-			(2,024,234	)
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(144,783,872	)		(99,128,310	)		(17,145,710	)		206,436,523			(54,621,369	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts		-			-			(74,470,362	)		-			(74,470,362	)
Carrying value of matured life insurance contracts		-			-			7,381,132			-			7,381,132
Investment in Secured MCA advances		-			-			(7,613,310	)		-			(7,613,310	)
Proceeds from Secured MCA advances		-			-			1,246,703			-			1,246,703
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(73,455,837	)		-			(73,455,837	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on Senior Credit Facilities		-			-			6,238,952			-			6,238,952
Payments for redemption of Series I Secured Notes		-			(6,264,018	)		-			-			(6,264,018	)
Proceeds from issuance of L Bonds		135,477,090			-			-			-			135,477,090
Payments for redemption and issuance of L Bonds		(37,036,922	)		-			-			-			(37,036,922	)
Proceeds from (increase in) restricted cash		-			(2,335,768	)		(11,010,358	)		-			(13,346,126	)
Issuance of common stock		244,185			-			-			-			244,185
Proceeds from issuance of preferred stock		31,215,986			-			71,555			-			31,287,541
Payments for issuance and redemption of preferred stock		(4,095,878	)		-			(78,895	)		-			(4,174,773	)
Issuance of member capital		-			110,118,219			96,318,304			(206,436,523	)		-
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		125,804,461			101,518,433			91,539,558			(206,436,523	)		112,425,929
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(18,979,411	)		2,390,123			938,011			-			(15,651,277	)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		32,292,162			1,982,722			150,221			-			34,425,105
END OF THE PERIOD	$	13,312,751		$	4,372,845		$	1,088,232		$	-		$	18,773,828

For the nine months ended  September 30, 2015	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(2,619,602	)	$	24,038,452		$	28,306,143		$	(52,344,595	)	$	(2,619,602	)
Adjustments to reconcile net income to net cash flows from operating activities:
(Equity) of subsidiaries		(24,038,617	)		(28,305,978	)		-			52,344,595			-
Gain on life settlements		-			-			(26,651,363	)		-			(26,651,363	)
Amortization of deferred financing and issuance costs		2,832,487			260,455			(1,201,170	)		-			1,891,772
Deferred income taxes		(664,905	)		-			-			-			(664,905	)
Convertible, redeemable preferred dividends payable		509,225			-			-			-			509,225
(Increase) decrease in operating assets:
Policy benefits receivable		-			-			1,392,986						1,392,986
Other assets		(40,145,769	)		(26,745,888	)		-			66,117,118			(774,539	)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		4,503,624			123,222			(790,131	)		-			3,836,715
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(30,425,246	)		(30,629,737	)		1,056,465			66,117,118			(23,079,711	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(23,850,860	)		-			(23,850,860	)
Carrying value of matured life insurance contracts		-			-			3,822,983			-			3,822,983
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(20,027,877	)		-			(20,027,877	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of senior credit facilities		-			-			(7,150,000	)		-			(7,150,000	)
Payments for redemption of Series I Secured Notes		-			(4,508,130	)		-			-			(4,508,130	)
Proceeds from issuance of L Bonds		87,620,483			-			-			-			87,620,483
Payments for redemption and issuance of L Bonds		(32,376,104	)		-			-			-			(32,376,104	)
Payments from restricted cash		-			(2,306,300	)		(669,207	)		-			(2,975,507	)
Issuance of common stock		582,000			-			-			-			582,000
Payments for redemption preferred stock		(295,185	)		-			-			-			(295,185	)
Issuance of member capital		-			39,176,335			26,940,783			(66,117,118	)		-
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		55,531,194			32,361,905			19,121,576			(66,117,118	)		40,897,557
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(4,092,363	)		1,732,168			150,164			-			(2,210,031	)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		30,446,473			216,231			-			-			30,662,704
END OF THE PERIOD	$	26,354,110		$	1,948,399		$	150,164		$	-		$	28,452,673

For the three months ended September 30, 2016	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	(2,997,365	)	$	8,697,549		$	11,356,703		$	(20,054,252	)	$	(2,997,365	)
Adjustments to reconcile net loss to net cash flows from operating activities:
(Equity) of subsidiaries		(8,692,924	)		(11,361,328	)		-			20,054,252			-
Gain on life insurance contracts		-			-			(21,073,226	)		-			(21,073,226	)
Amortization of deferred financing and issuance costs		2,072,879			81,849			611,015			-			2,765,743
Deferred income taxes		(1,428,130	)		-			-			-			(1,428,130	)
Preferred stock dividends payable		333,565			-			-			-			333,565
(Increase) in operating assets:
Life insurance contract benefits receivable		-			-			700,000			-			700,000
Other assets		(54,428,152	)		(54,272,589	)		-			109,120,577			419,836
Increase (decrease) in operating liabilities:
Due to related party		(64,249	)		(16,700	)		-			-			(80,949	)
Accounts payable and other accrued expenses		155,980			2,172,227			(5,545,197	)		-			(3,216,990	)
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(65,048,396	)		(54,698,992	)		(13,950,705	)		109,120,577			(24,577,516	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts		-			-			(25,770,326	)		-			(25,770,326	)
Carrying value of matured life insurance contracts		-			-			1,078,889			-			1,078,889
Investment in Secured MCA advances		-			-			(1,965,896	)					(1,965,896	)
Proceeds from Secured MCA advances		-			-			220,911			-			220,911
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(26,436,422	)		-			(26,436,422	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net repayment of Senior Credit Facilities		-			-			(10,761,048	)					(10,761,048	)
Payments for redemption of Series I Secured Notes		-			(541,275	)		-			-			(541,275	)
Proceeds from issuance of L Bonds		64,350,430			-			-			-			64,350,430
Payments for redemption and issuance of L Bonds		(14,373,447	)		-			-			-			(14,373,447	)
Proceeds from (increase in) restricted cash		-			486,283			(5,013,515	)		-			(4,527,232	)
Issuance of member capital		-			52,304,345			56,816,232			(109,120,577	)		-
Issuance of common stock		31,515			-			-			-			31,515
Proceeds from issuance of preferred stock		20,786,332			-			-			-			20,786,332
Payments for issuance and redemption of preferred stock		(2,485,304	)		-			(71,555	)		-			(2,556,859	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		68,309,526			52,249,353			40,970,114			(109,120,577	)		52,408,416
NET INCREASE IN CASH AND CASH EQUIVALENTS		3,261,130			(2,449,639	)		582,987			-			1,394,478
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		10,051,621			6,822,484			505,245			-			17,379,350
END OF THE PERIOD	$	13,312,751		$	4,372,845		$	1,088,232		$	-		$	18,773,828

For the three months ended September 30, 2015	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(3,631,078	)	$	4,790,978		$	6,024,819		$	(10,815,797	)	$	(3,631,078	)
Adjustments to reconcile net loss to net cash flows from operating activities:
(Equity) of subsidiaries		(4,791,035	)		(6,024,762	)		-			10,815,797			-
Gain on life settlements		-			-			(14,516,881	)		-			(14,516,881	)
Amortization of deferred financing and issuance costs		1,103,312			49,339			781,125			-			1,933,776
Deferred income taxes		(1,916,686	)		-			-			-			(1,916,686	)
Convertible, redeemable preferred stock dividends payable		173,993			-			-			-			173,993
(Increase) decrease in operating assets:
Policy benefits receivable		-			-			2,142,986			-			2,142,986
Other assets		(22,146,946	)		(15,631,849	)		-			37,360,805			(417,990	)
Increase (decrease) in operating liabilities:
Accounts payable and other accrued expenses		2,010,129			(105,418	)		629,558			-			2,534,269
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(29,198,311	)		(16,921,712	)		(4,938,393	)		37,360,805			(13,697,611	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(13,626,842	)		-			(13,626,842	)
Carrying value of matured life insurance contracts		-			-			80,000			-			80,000
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(13,546,842	)		-			(13,546,842	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for redemption of Series I Secured Notes		-			(890,586	)		-			-			(890,586	)
Proceeds from issuance of L Bonds		37,122,127			-			-			-			37,122,127
Payments for redemption and issuance of L Bonds		(19,363,047	)		-			-			-			(19,363,047	)
Proceeds (payments) from restricted cash		-			(2,203,800	)		2,855,430			-			651,630
Issuance of member capital		-			21,730,944			15,629,861			(37,360,805	)		-
Payments for redemption preferred stock		(21,187	)		-			-			-			(21,187	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		17,737,893			18,636,558			18,485,291			(37,360,805	)		17,498,937
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(11,460,418	)		1,714,846			56			-			(9,745,516	)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		37,814,528			233,553			150,108			-			38,198,189
END OF THE PERIOD	$	26,354,110		$	1,948,399		$	150,164		$	-		$	28,452,673

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Concentrations

9 Months Ended

Sep. 30, 2016

Concentrations [Abstract]

Concentrations

(19)       Concentrations

We purchase life insurance contracts written by life insurance companies having investment grade ratings by independent rating agencies. As a result, there may be concentrations of contracts with certain 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 us.

Life insurance company	September 30,			December 31,
	2016			2015
AXA Equitable		14.3	%		14.0	%
John Hancock		13.0	%		12.7	%
Lincoln National		11.5	%		*
Transamerica		10.1	%		*

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

The following summarizes the number of insurance contracts insuring the lives of persons living in specific states exceeding 10% of the total face value held by us:

State of Residence	September 30,			December 31,
	2016			2015
California		21.1	%		25.2	%
Florida		19.0	%		20.0	%

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Subsequent Events

9 Months Ended

Sep. 30, 2016

Subsequent Events [Abstract]

Subsequent events

(20)       Subsequent events

Subsequent to September 30, 2016, two policies covering two individual matured. The life insurance contract benefits of these policies were $3,240,000 and we recorded realized gains of $2,539,000 on these policies.

Subsequent to September 30, 2016, we have issued approximately $6,911,000 in additional principal amount of L Bonds, and 7,350 shares of RPS for gross consideration of approximately $7,350,000.

On October 28, 2016, DLP IV completed the closing of the second of two initial advances contemplated under a Loan and Security Agreement with LNV. At this closing, a total of $92,900,000 in loan proceeds were obtained by DLP IV, of which approximately $16,250,000 was used to fund a reserve account required under the Loan and Security Agreement.

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

9 Months Ended

Sep. 30, 2016

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

Use of estimates

Use of Estimates – The preparation of our consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenue during the reporting period. The Company regularly evaluates estimates and assumptions, which are based on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. The most significant estimates with regard to these consolidated financial statements relate to (1) the determination of the assumptions used in estimating the fair value of our investments in life insurance contracts, and (2) the value of our deferred tax assets and liabilities.

Cash and cash equivalents

Cash and Cash Equivalents – We consider cash in demand deposit accounts and temporary investments purchased with an original maturity of three months or less to be cash equivalents. We maintain our cash and cash equivalents with highly rated financial institutions. The balances in our bank accounts may exceed Federal Deposit Insurance Corporation limits. We periodically evaluate the risk of exceeding insured levels and may transfer funds as we deem appropriate.

Life insurance contracts

Life Insurance Contracts– ASC 325-30, Investments in Insurance Contracts (“ASC 325-30”), permits a reporting entity to account for its investments in life insurance contracts using either the investment method or the fair value method. We elected to use the fair value method to account for our life insurance contracts. Under the fair value method, we recognize our initial investment at the purchase price. At each subsequent reporting period, we re-measure the investment at fair value in its entirety and recognize the change in fair value as revenue in the current period net of premiums paid. We use the term “life insurance contracts” to have the same meaning as “life insurance policies.”

We also recognize realized gain (revenue) from a life insurance contract upon one of the two following events: (1) our receipt of notice or verified mortality of the insured; or (2) our sale of the contract, filing of change-of-ownership forms and receipt of payment. In the case of mortality, the gain (or loss) we recognize is the difference between the contract benefits and the carrying values of the contract once we receive notice or verify the mortality of the insured. In the case of a contract sale, the gain (or loss) we recognize is the difference between the sale price and the carrying value of the contract on the date of our receipt of sale proceeds.

In a case where our acquisition of a contract is not complete as of a reporting date, but we have nonetheless advanced direct costs and deposits for the acquisition, those costs and deposits are recorded as “other assets” on our balance sheet until the acquisition is complete and we secured title to the contract. On September 30, 2016 and December 31, 2015, a total of $34,000 and $31,000, respectively, of our “other assets” comprised direct costs and deposits that we advanced for contract acquisitions. 

Other assets

Other Assets – GWG acquired the exclusive option to license “DNA Methylation Based Predictor of Mortality” technology from the University of California, Los Angeles (UCLA). The technology was discovered by Dr. Steven Horvath and is featured in the September 2016 edition of Aging. In 2013, Dr. Horvath reported that human cells have a mechanism that records biological aging progression based on DNA methylation that is independent from chronological aging progression. In 2016, Dr. Horvath discovered a specific set of DNA methylation-based bio-markers that are highly predictive of all-cause mortality. The discovery was made through a statistical analysis of bio-markers found in DNA samples from over 13,000 individuals whose health had been studied for decades. The implications of Dr. Horvath’s discovery are simple and profound: A biostatistician can review a specific set of identified bio-markers and develop a highly predictive analytical model of an individual’s lifespan. The cost of entering into this exclusive option agreement is listed as “other assets”.

Deferred financing and issuance costs

Deferred Financing and Issuance Costs – Loans advanced to us under our senior credit facilities, as described in Notes 5 and 6, are reported net of financing costs, which are amortized using the straight-line method over the term of the facility.  The Series I Secured Notes and L Bonds, as respectively described in Notes 6 and 7, are reported net of issuance costs, sales commissions and other direct expenses, which are amortized using the interest method over the term of those borrowings. The Series A Preferred Stock, as described in Note 9, is reported net of issuance costs, sales commissions (including the fair value of warrants issued) and other direct expenses, all of which were fully amortized using the interest method as of December 31, 2015. Selling and issuance costs of Redeemable Preferred Stock and MCA Preferred Stock, described in Notes 10 and 11, are netted against additional paid-in-capital.

Earnings (loss) per share

Earnings (loss) per Share – Basic earnings (loss) per share attributable to non-redeemable interests are calculated using the weighted-average number of shares outstanding during the reported period. Diluted earnings (loss) per share are calculated based on the potential dilutive impact of our outstanding Series A Preferred Stock, Redeemable Preferred Stock, warrants and stock options.

Recently adopted pronouncements

Recently Adopted Pronouncements – On April 7, 2015, the FASB issued Accounting Standards Update No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), as part of its simplification initiative. ASU 2015-03 changes the presentation of debt issuance costs by presenting those costs in the balance sheet as a direct deduction from the related debt liability. Amortization of the costs is reported as interest expense. We adopted ASU 2015-03 effective January 1, 2016, as required for public reporting entities.

Reclassification

Reclassification–Certain 2015 amounts have been reclassified to conform to ASU 2015-03, and that adoption reduced our assets, together with a corresponding reduction to our liabilities, by approximately $2,288,000 as of December 31, 2015. There was no impact on our statements of operations in 2015, and these reclassifications had no effect on our reported consolidated net income or loss for prior periods.

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Investment in Life Insurance Contracts (Tables)

9 Months Ended

Sep. 30, 2016

Investment in Life Insurance Contracts [Abstract]

Reconciliation of gain on life insurance contracts

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Change in fair value	$	21,073,000		$	14,517,000		$	53,846,000		$	26,651,000
Premiums and other fees		(11,784,000	)		(6,605,000	)		(29,225,000	)		(19,114,000	)
Contract maturities		4,221,000			277,000			26,986,000			25,909,000
Gain on life insurance contracts, net	$	13,510,000		$	8,189,000		$	51,607,000		$	33,446,000

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

Years Ending December 31,	Premiums		Servicing		Premiums and Servicing Fees
Three months ending December 31, 2016	$	10,449,000	$	188,000	$	10,637,000
2017		43,155,000		750,000		43,905,000
2018		46,847,000		750,000		47,597,000
2019		50,813,000		750,000		51,563,000
2020		56,633,000		750,000		57,383,000
2021		63,222,000		750,000		63,972,000
	$	271,119,000	$	3,938,000	$	275,057,000

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Fair Value Definition and Hierarchy (Tables)

9 Months Ended

Sep. 30, 2016

Fair Value Definition and Hierarchy [Abstract]

Reconciliation of investments in life insurance contracts

	Three months ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
Beginning balance	$	431,820,000		$	301,499,000		$	356,650,000		$	282,883,000
Purchases		25,770,000			13,626,000			74,470,000			23,851,000
Maturities (carrying value)		(1,078,000	)		(80,000	)		(7,381,000	)		(3,823,000	)
Net change in fair value		21,073,000			14,517,000			53,846,000			26,651,000
Ending balance (September 30)	$	477,585,000		$	329,562,000		$	477,585,000		$	329,562,000

Summary of inputs utilized in estimating the fair value of life insurance contracts

	As of  September 30, 2016			As of December 31, 2015
Weighted-average age of insured, years		81.8			82.6
Weighted-average life expectancy, months		81.8			79.3
Average face amount per contract	$	2,035,000		$	2,386,000
Discount rate		11.07	%		11.09	%

Summary of change in fair value of the investment in life insurance contracts

	Change in life expectancy estimates
	minus 8 months		minus 4 months		plus  4 months			plus  8 months
September 30, 2016	$	64,713,000	$	32,215,000	$	(31,450,000	)	$	(62,258,000	)
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%
September 30, 2016	$	50,097,000	$	23,990,000	$	(22,096,000	)	$	(42,492,000	)
December 31, 2015	$	35,024,000	$	16,786,000	$	(15,485,000	)	$	(29,803,000	)

Summary of outstanding warrants

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 (Tables)

9 Months Ended

Sep. 30, 2016

Debt Disclosure [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
Three months ending December 31 ,2016	$	1,177,000	$	5,000
2017		10,522,000		88,000
2018		2,401,000		49,000
2019		1,023,000		22,000
2020		1,766,000		55,000
Thereafter		941,000		58,000
	$	17,830,000	$	277,000

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L Bonds (Tables)

9 Months Ended

Sep. 30, 2016

Debt Disclosure [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
Three months ending December 31 ,2016	$	23,548,000	$	115,000
2017		112,987,000		1,708,000
2018		101,130,000		3,106,000
2019		78,098,000		3,222,000
2020		19,291,000		784,000
Thereafter		49,532,000		2,687,000
	$	384,586,000	$	11,622,000

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Income Taxes (Tables)

9 Months Ended

Sep. 30, 2016

Income Taxes [Abstract]

Components of current and deferred income tax expense

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,		September 30,
	2016			2015			2016		2015
Income tax provision (benefit):
Current:
Federal	$	-		$	(141,000	)	$	-	$	-
State	$	-		$	(40,000	)	$	-	$	-
Total current tax expense (benefit)		-			(181,000	)		-		-
Deferred:
Federal	$	(1,082,000	)	$	(1,488,000	)	$	1,121,000	$	(504,000	)
State	$	(346,000	)	$	(429,000	)	$	358,000	$	(161,000	)
Total deferred tax expense (benefit)		(1,428,000	)		(1,917,000	)		1,479,000		(665,000	)
Total income tax expense (benefit)		(1,428,000	)		(2,098,000	)		1,479,000		(665,000	)

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Stock Incentive Plan (Tables)

9 Months Ended

Sep. 30, 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 year		22,500			239,948			262,448
Vested during the year		187,473			(187,473	)		-
Forfeited during the year		(6,676	)		(72,824	)		(79,500	)
Balance as of September 30, 2016		687,000			549,563			1,236,563

Schedule of outstanding stock appreciation rights

	Vested		Un-vested		Total
Balance as of December 31, 2015		-		-		-
Granted during the year		56,358		89,030		145,388
Vested during the year		56,358		89,030		145,388
Forfeited during the year		-		-		-
Balance as of September 30, 2016		56,358		89,030		145,388

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Commitments (Tables)

9 Months Ended

Sep. 30, 2016

Commitments and Contingencies [Abstract]

Schedule of minimum lease payments under the amendment lease

Three months ending December 31, 2016	$	44,000
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
	$	1,918,000

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Guarantee of L Bonds (Tables)

9 Months Ended

Sep. 30, 2016

Guarantee of L Bonds [Abstract]

Condensed consolidating balance sheets

September 30, 2016	Parent			Guarantor Subsidiary		Non-Guarantor Subsidiaries		Eliminations			Consolidated
A S S E T S
Cash and cash equivalents	$	13,312,751		$	4,372,845	$	1,088,232	$	-		$	18,773,828
Restricted cash		-			4,438,025		11,250,000		-			15,688,025
Investment in life insurance contracts, at fair value		-			-		477,585,100		-			477,585,100
Secured MCA advances		-			-		6,113,831		-			6,113,831
Life insurance contract benefits receivable		-			-		6,129,022		-			6,129,022
Other assets		4,706,121			1,224,386		54,726		(2,854,126	)		3,131,107
Investment in subsidiaries		422,185,881			429,441,035		-		(851,626,916	)		-
TOTAL ASSETS	$	440,204,753		$	439,476,291	$	502,220,911	$	(854,481,042	)	$	527,420,913
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
Senior credit facilities	$	-		$	-	$	63,699,385	$	-		$	63,699,385
Series I Secured Notes		-			17,553,307		-		-			17,553,307
L Bonds		379,858,737			-		-		-			379,858,737
Notes payable to related parties		-			-		2,700,000		(2,700,000	)		-
Accounts payable		699,507			99,705		1,643,237		-			2,442,449
Interest payable		9,798,735			3,588,954		400,077		(154,126	)		13,633,640
Other accrued expenses		259,722			351,896		33,725		-			645,343
Deferred taxes, net		3,242,586			-		-		-			3,242,586
TOTAL LIABILITIES		393,859,287			21,593,862		68,476,424		(2,854,126	)		481,075,447
STOCKHOLDERS’ EQUITY (DEFICIT)
Member capital		-			417,882,429		433,744,487		(851,626,916	)		-
Convertible preferred stock		19,772,931			-		-		-			19,772,931
Redeemable preferred stock		33,176,600			-		-		-			33,176,600
Common stock		5,980			-		-		-			5,980
Additional paid-in capital		15,226,449			-		-		-			15,226,449
Accumulated deficit		(21,836,494	)		-		-		-			(21,836,494	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		46,345,466			417,882,429		433,744,487		(851,626,916	)		46,345,466
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	440,204,753		$	439,476,291	$	502,220,911	$	(854,481,042	)	$	527,420,913

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
Senior credit facilities	$	-		$	(1,000,000	)	$	64,279,596	$	-		$	63,279,596
Series I Secured Notes		-			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, net		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 nine months ended September 30, 2016	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Origination and servicing income	$	-		$	13,417		$	-	$	(13,417	)	$	-
Gain on life insurance contracts, net		-			-			51,606,815		-			51,606,815
MCA income		-			-			654,441		-			654,441
Interest and other income		181,828			31,137			282,259		(154,126	)		341,098
TOTAL REVENUE		181,828			44,554			52,543,515		(167,543	)		52,602,354
EXPENSES
Origination and servicing fees		-			-			13,417		(13,417	)		-
Interest expense		25,477,320			1,856,909			4,829,831		(154,126	)		32,009,934
Employee compensation and benefits		4,894,006			3,151,107			405,055		-			8,450,168
Legal and professional fees		1,642,252			1,308,959			146,101		-			3,097,312
Other expenses		4,241,825			2,197,133			1,169,099		-			7,608,057
TOTAL EXPENSES		36,255,403			8,514,108			6,563,503		(167,543	)		51,165,471
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(36,073,575	)		(8,469,554	)		45,980,012		-			1,436,883
EQUITY IN INCOME OF SUBSIDIARY		37,510,458			46,497,731			-		(84,008,189	)		-
INCOME BEFORE INCOME TAXES		1,436,883			38,028,177			45,980,012		(84,008,189	)		1,436,883
INCOME TAX EXPENSE		1,478,617			-			-		-			1,478,617
NET INCOME (LOSS)	$	(41,734	)	$	38,028,177		$	45,980,012	$	(84,008,189	)	$	(41,734	)

For the nine months ended  September 30, 2015	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Origination and servicing income	$	-		$	2,022,774		$	-	$	(2,022,774	)	$	-
Gain on life settlements, net		-			-			33,446,556		-			33,446,556
Interest and other income		38,944			61,694			132,878		-			233,516
TOTAL REVENUE		38,944			2,084,468			33,579,434		(2,022,774	)		33,680,072
EXPENSES
Origination and servicing fees		-			-			2,022,774		(2,022,774	)		-
Interest expense		18,011,890			1,984,356			3,152,784		-			23,149,030
Employee compensation and benefits		4,671,183			1,509,703			-		-			6,180,886
Legal and professional fees		1,427,388			560,873			-		-			1,988,261
Other expenses		3,251,606			2,297,063			97,733		-			5,646,402
TOTAL EXPENSES		27,362,067			6,351,995			5,273,291		(2,022,774	)		36,964,579
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(27,323,123	)		(4,267,527	)		28,306,143		-			(3,284,507	)
EQUITY IN INCOME OF SUBSIDIARY		24,038,616			28,305,979			-		(52,344,595	)		-
NET INCOME (LOSS) BEFORE INCOME TAXES		(3,284,507	)		24,038,452			28,306,143		(52,344,595	)		(3,284,507	)
INCOME TAX BENEFIT		(664,905	)		-			-		-			(664,905	)
NET INCOME (LOSS)	$	(2,619,602	)	$	24,038,452		$	28,306,143	$	(52,344,595	)	$	(2,619,602	)

For the three months ended September 30, 2016	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Gain on life insurance contracts, net		-			-			13,509,755		-			13,509,755
MCA income		-			-			286,225		-			286,225
Interest and other income		75,808			30,126			83,313		(64,249	)		124,998
TOTAL REVENUE		75,808			30,126			13,879,293		(64,249	)		13,920,978
EXPENSES
Interest expense		9,747,128			554,938			1,746,151		(64,249	)		11,983,968
Employee compensation and benefits		1,718,683			1,038,058			155,722		-			2,912,463
Legal and professional fees		263,917			297,804			25,109		-			586,830
Other expenses		1,464,498			803,106			595,608		-			2,863,212
TOTAL EXPENSES		13,194,226			2,693,906			2,522,590		(64,249	)		18,346,473
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(13,118,418	)		(2,663,780	)		11,356,703		-			(4,425,495	)
EQUITY IN INCOME OF SUBSIDIARY		8,692,923			11,361,329			-		(20,054,252	)		-
INCOME (LOSS) BEFORE INCOME TAXES		(4,425,495	)		8,697,549			11,356,703		(20,054,252	)		(4,425,495	)
INCOME TAX BENEFIT		(1,418,130	)		-			-		-			(1,428,130	)
NET INCOME (LOSS)	$	(2,997,365	)	$	8,697,549		$	11,356,703	$	(20,054,252	)	$	(2,997,365	)

For the three months ended September 30, 2015	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Origination and servicing income	$	-		$	1,004,024		$	-	$	(1,004,024	)	$	-
Gain on life settlements, net		-			-			8,189,261		-			8,189,261
Interest and other income		13,922			54,813			25,106		-			93,841
TOTAL REVENUE		13,922			1,058,837			8,214,367		(1,004,024	)		8,283,102
EXPENSES
Origination and servicing fees		-			-			1,004,024		(1,004,024	)		-
Interest expense		6,980,132			525,391			1,144,626		-			8,650,149
Employee compensation and benefits		1,759,589			548,657			-		-			2,308,246
Legal and professional fees		598,530			223,547			-		-			822,077
Other expenses		1,195,417			995,026			40,898		-			2,231,341
TOTAL EXPENSES		10,533,668			2,292,621			2,189,548		(1,004,024	)		14,011,813
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(10,519,746	)		(1,233,784	)		6,024,819		-			(5,728,711	)
EQUITY IN INCOME OF SUBSIDIARY		4,791,035			6,024,762			-		(10,815,797	)		-
NET INCOME (LOSS) BEFORE INCOME TAXES		(5,728,711	)		4,790,978			6,024,819		(10,815,797	)		(5,728,711	)
INCOME TAX BENEFIT		(2,097,633	)		-			-		-			(2,097,633	)
NET INCOME (LOSS)	$	(3,631,078	)	$	4,790,978		$	6,024,819	$	(10,815,797	)	$	(3,631,078	)

Condensed consolidating statements of cash flows

For the nine months ended  September 30, 2016	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	(41,734	)	$	38,028,177		$	45,980,012		$	(84,008,189	)	$	(41,734	)
Adjustments to reconcile net income to net cash flows from operating activities:
(Equity) of subsidiaries		(37,510,459	)		(46,497,730	)		-			84,008,189			-
Gain on life insurance contracts		-			-			(53,846,155	)		-			(53,846,155	)
Amortization of deferred financing and issuance costs		5,982,802			(1,364,614	)		1,459,717			-			6,077,905
Deferred income taxes		1,478,617			-			-			-			1,478,617
Preferred stock dividends payable		663,614			-			-			-			663,614
(Increase) in operating assets:
Life insurance contract benefits receivable		-			-			(6,129,022	)					(6,129,022	)
Other assets		(114,885,990	)		(92,168,163	)		-			206,436,523			(617,630	)
Increase (decrease) in operating liabilities:
Due to related party		(2,867,225	)		(15,505	)		2,700,000			-			(182,730	)
Accounts payable and accrued expenses		2,396,503			2,889,525			(7,310,262	)		-			(2,024,234	)
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(144,783,872	)		(99,128,310	)		(17,145,710	)		206,436,523			(54,621,369	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts		-			-			(74,470,362	)		-			(74,470,362	)
Carrying value of matured life insurance contracts		-			-			7,381,132			-			7,381,132
Investment in Secured MCA advances		-			-			(7,613,310	)		-			(7,613,310	)
Proceeds from Secured MCA advances		-			-			1,246,703			-			1,246,703
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(73,455,837	)		-			(73,455,837	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on Senior Credit Facilities		-			-			6,238,952			-			6,238,952
Payments for redemption of Series I Secured Notes		-			(6,264,018	)		-			-			(6,264,018	)
Proceeds from issuance of L Bonds		135,477,090			-			-			-			135,477,090
Payments for redemption and issuance of L Bonds		(37,036,922	)		-			-			-			(37,036,922	)
Proceeds from (increase in) restricted cash		-			(2,335,768	)		(11,010,358	)		-			(13,346,126	)
Issuance of common stock		244,185			-			-			-			244,185
Proceeds from issuance of preferred stock		31,215,986			-			71,555			-			31,287,541
Payments for issuance and redemption of preferred stock		(4,095,878	)		-			(78,895	)		-			(4,174,773	)
Issuance of member capital		-			110,118,219			96,318,304			(206,436,523	)		-
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		125,804,461			101,518,433			91,539,558			(206,436,523	)		112,425,929
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(18,979,411	)		2,390,123			938,011			-			(15,651,277	)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		32,292,162			1,982,722			150,221			-			34,425,105
END OF THE PERIOD	$	13,312,751		$	4,372,845		$	1,088,232		$	-		$	18,773,828

For the nine months ended  September 30, 2015	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(2,619,602	)	$	24,038,452		$	28,306,143		$	(52,344,595	)	$	(2,619,602	)
Adjustments to reconcile net income to net cash flows from operating activities:
(Equity) of subsidiaries		(24,038,617	)		(28,305,978	)		-			52,344,595			-
Gain on life settlements		-			-			(26,651,363	)		-			(26,651,363	)
Amortization of deferred financing and issuance costs		2,832,487			260,455			(1,201,170	)		-			1,891,772
Deferred income taxes		(664,905	)		-			-			-			(664,905	)
Convertible, redeemable preferred dividends payable		509,225			-			-			-			509,225
(Increase) decrease in operating assets:
Policy benefits receivable		-			-			1,392,986						1,392,986
Other assets		(40,145,769	)		(26,745,888	)		-			66,117,118			(774,539	)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		4,503,624			123,222			(790,131	)		-			3,836,715
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(30,425,246	)		(30,629,737	)		1,056,465			66,117,118			(23,079,711	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(23,850,860	)		-			(23,850,860	)
Carrying value of matured life insurance contracts		-			-			3,822,983			-			3,822,983
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(20,027,877	)		-			(20,027,877	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of senior credit facilities		-			-			(7,150,000	)		-			(7,150,000	)
Payments for redemption of Series I Secured Notes		-			(4,508,130	)		-			-			(4,508,130	)
Proceeds from issuance of L Bonds		87,620,483			-			-			-			87,620,483
Payments for redemption and issuance of L Bonds		(32,376,104	)		-			-			-			(32,376,104	)
Payments from restricted cash		-			(2,306,300	)		(669,207	)		-			(2,975,507	)
Issuance of common stock		582,000			-			-			-			582,000
Payments for redemption preferred stock		(295,185	)		-			-			-			(295,185	)
Issuance of member capital		-			39,176,335			26,940,783			(66,117,118	)		-
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		55,531,194			32,361,905			19,121,576			(66,117,118	)		40,897,557
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(4,092,363	)		1,732,168			150,164			-			(2,210,031	)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		30,446,473			216,231			-			-			30,662,704
END OF THE PERIOD	$	26,354,110		$	1,948,399		$	150,164		$	-		$	28,452,673

For the three months ended September 30, 2016	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	(2,997,365	)	$	8,697,549		$	11,356,703		$	(20,054,252	)	$	(2,997,365	)
Adjustments to reconcile net loss to net cash flows from operating activities:
(Equity) of subsidiaries		(8,692,924	)		(11,361,328	)		-			20,054,252			-
Gain on life insurance contracts		-			-			(21,073,226	)		-			(21,073,226	)
Amortization of deferred financing and issuance costs		2,072,879			81,849			611,015			-			2,765,743
Deferred income taxes		(1,428,130	)		-			-			-			(1,428,130	)
Preferred stock dividends payable		333,565			-			-			-			333,565
(Increase) in operating assets:
Life insurance contract benefits receivable		-			-			700,000			-			700,000
Other assets		(54,428,152	)		(54,272,589	)		-			109,120,577			419,836
Increase (decrease) in operating liabilities:
Due to related party		(64,249	)		(16,700	)		-			-			(80,949	)
Accounts payable and other accrued expenses		155,980			2,172,227			(5,545,197	)		-			(3,216,990	)
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(65,048,396	)		(54,698,992	)		(13,950,705	)		109,120,577			(24,577,516	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts		-			-			(25,770,326	)		-			(25,770,326	)
Carrying value of matured life insurance contracts		-			-			1,078,889			-			1,078,889
Investment in Secured MCA advances		-			-			(1,965,896	)					(1,965,896	)
Proceeds from Secured MCA advances		-			-			220,911			-			220,911
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(26,436,422	)		-			(26,436,422	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net repayment of Senior Credit Facilities		-			-			(10,761,048	)					(10,761,048	)
Payments for redemption of Series I Secured Notes		-			(541,275	)		-			-			(541,275	)
Proceeds from issuance of L Bonds		64,350,430			-			-			-			64,350,430
Payments for redemption and issuance of L Bonds		(14,373,447	)		-			-			-			(14,373,447	)
Proceeds from (increase in) restricted cash		-			486,283			(5,013,515	)		-			(4,527,232	)
Issuance of member capital		-			52,304,345			56,816,232			(109,120,577	)		-
Issuance of common stock		31,515			-			-			-			31,515
Proceeds from issuance of preferred stock		20,786,332			-			-			-			20,786,332
Payments for issuance and redemption of preferred stock		(2,485,304	)		-			(71,555	)		-			(2,556,859	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		68,309,526			52,249,353			40,970,114			(109,120,577	)		52,408,416
NET INCREASE IN CASH AND CASH EQUIVALENTS		3,261,130			(2,449,639	)		582,987			-			1,394,478
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		10,051,621			6,822,484			505,245			-			17,379,350
END OF THE PERIOD	$	13,312,751		$	4,372,845		$	1,088,232		$	-		$	18,773,828

For the three months ended September 30, 2015	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(3,631,078	)	$	4,790,978		$	6,024,819		$	(10,815,797	)	$	(3,631,078	)
Adjustments to reconcile net loss to net cash flows from operating activities:
(Equity) of subsidiaries		(4,791,035	)		(6,024,762	)		-			10,815,797			-
Gain on life settlements		-			-			(14,516,881	)		-			(14,516,881	)
Amortization of deferred financing and issuance costs		1,103,312			49,339			781,125			-			1,933,776
Deferred income taxes		(1,916,686	)		-			-			-			(1,916,686	)
Convertible, redeemable preferred stock dividends payable		173,993			-			-			-			173,993
(Increase) decrease in operating assets:
Policy benefits receivable		-			-			2,142,986			-			2,142,986
Other assets		(22,146,946	)		(15,631,849	)		-			37,360,805			(417,990	)
Increase (decrease) in operating liabilities:
Accounts payable and other accrued expenses		2,010,129			(105,418	)		629,558			-			2,534,269
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(29,198,311	)		(16,921,712	)		(4,938,393	)		37,360,805			(13,697,611	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(13,626,842	)		-			(13,626,842	)
Carrying value of matured life insurance contracts		-			-			80,000			-			80,000
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(13,546,842	)		-			(13,546,842	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for redemption of Series I Secured Notes		-			(890,586	)		-			-			(890,586	)
Proceeds from issuance of L Bonds		37,122,127			-			-			-			37,122,127
Payments for redemption and issuance of L Bonds		(19,363,047	)		-			-			-			(19,363,047	)
Proceeds (payments) from restricted cash		-			(2,203,800	)		2,855,430			-			651,630
Issuance of member capital		-			21,730,944			15,629,861			(37,360,805	)		-
Payments for redemption preferred stock		(21,187	)		-			-			-			(21,187	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		17,737,893			18,636,558			18,485,291			(37,360,805	)		17,498,937
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(11,460,418	)		1,714,846			56			-			(9,745,516	)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		37,814,528			233,553			150,108			-			38,198,189
END OF THE PERIOD	$	26,354,110		$	1,948,399		$	150,164		$	-		$	28,452,673

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Concentrations (Tables)

9 Months Ended

Sep. 30, 2016

Concentrations [Abstract]

Summary of the face value of insurance contracts

Life insurance company	September 30,			December 31,
	2016			2015
AXA Equitable		14.3	%		14.0	%
John Hancock		13.0	%		12.7	%
Lincoln National		11.5	%		*
Transamerica		10.1	%		*

Summary of the number of insurance contracts

State of Residence	September 30,			December 31,
	2016			2015
California		21.1	%		25.2	%
Florida		19.0	%		20.0	%

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Nature of Business and Summary of Significant Accounting Policies (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Nature of business and summary of significant accounting policies (Textual)
Portfolio of life insurance contracts aggreate fair value	$ 477,600,000
Direct costs and deposits	$ 34,000	$ 31,000
Liabilities and stockholders' equity		$ 2,288,000

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Restrictions on Cash (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Restrictions on Cash (Textual)
Restricted cash	$ 15,688,000	$ 2,342,000

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Investment in Life Insurance Contracts (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Summary of reconciliation of gain on life settlements
Change in fair value	$ 21,073,000	$ 14,517,000	$ 53,846,000	$ 26,651,000
Premiums and other fees	(11,784,000)	(6,605,000)	(29,225,000)	(19,114,000)
Contract maturities	4,221,000	277,000	26,986,000	25,909,000
Gain on life insurance contracts, net	$ 13,510,000	$ 8,189,000	$ 51,607,000	$ 33,446,000

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Investment in Life Insurance Contracts (Details 1)	Sep. 30, 2016 USD ($)
Summary of estimated expected premium payments to maintain the above life insurance policies assuming no mortalities
Three months ending December 31, 2016	$ 10,637,000
2017	43,905,000
2018	47,597,000
2019	51,563,000
2020	57,383,000
2021	63,972,000
Estimated expected premium payments	275,057,000
Premiums [Member]
Summary of estimated expected premium payments to maintain the above life insurance policies assuming no mortalities
Three months ending December 31, 2016	10,449,000
2017	43,155,000
2018	46,847,000
2019	50,813,000
2020	56,633,000
2021	63,222,000
Estimated expected premium payments	271,119,000
Servicing [Member]
Summary of estimated expected premium payments to maintain the above life insurance policies assuming no mortalities
Three months ending December 31, 2016	188,000
2017	750,000
2018	750,000
2019	750,000
2020	750,000
2021	750,000
Estimated expected premium payments	$ 3,938,000

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Investment in Life Insurance Contracts (Details Textual) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Investment in Life Insurance Contracts (Textual)
Benefit recognized from insurance policy	$ 5,300,000	$ 357,000	$ 34,367,000	$ 29,732,000
Carrying value of life insurance policy	1,078,000	80,000	7,381,000	3,823,000
Realized gains from life insurance policy	$ 4,221,000	$ 277,000	$ 26,986,000	$ 25,909,000
Life insurance policies [Member]
Investment in Life Insurance Contracts (Textual)
Discount rate applied to portfolio			11.07%		11.09%

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Fair Value Definition and Hierarchy (Details) - Life insurance contracts [Member] - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Summary of reconciliation of investments in life insurance contracts
Beginning balance	$ 431,820,000	$ 301,499,000	$ 356,650,000	$ 282,883,000
Purchases	25,770,000	13,626,000	74,470,000	23,851,000
Maturities (cash in excess of carrying value)	(1,078,000)	(80,000)	(7,381,000)	(3,823,000)
Net change in fair value	21,073,000	14,517,000	53,846,000	26,651,000
Ending balance (September 30)	$ 477,585,000	$ 329,562,000	$ 477,585,000	$ 329,562,000

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Fair Value Definition and Hierarchy (Details 1) - Life insurance policies [Member] - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Summary of inputs utilized in estimating the fair value
Weighted-average age of insured, years	81 years 9 months 18 days	82 years 7 months 6 days
Weighted-average life expectancy, months	81 years 9 months 18 days	79 months 9 days
Average face amount per contract	$ 2,035,000	$ 2,386,000
Discount rate	11.07%	11.09%

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Fair Value Definition and Hierarchy (Details 2) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Minus 8 months [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life insurance contracts	$ 64,713,000	$ 48,339,000
Minus 4 Months [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life insurance contracts	32,215,000	24,076,000
Plus 4 Months [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life insurance contracts	(31,450,000)	(23,501,000)
Plus 8 months [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life insurance contracts	(62,258,000)	(46,482,000)
Minus 2% [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life insurance contracts	50,097,000	35,024,000
Minus 1% [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life insurance contracts	23,990,000	16,786,000
Plus 1% [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life insurance contracts	(22,096,000)	(15,485,000)
Plus 2% [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life insurance contracts	$ (42,492,000)	$ (29,803,000)

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Fair value definition and hierarchy (Details 3) - Level 3 [Member]	9 Months Ended
	Sep. 30, 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. 30, 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)	9 Months Ended
	Sep. 30, 2016 USD ($)
Fair Value Definition and Hierarchy (Textual)
Life expectancy report, description	We periodically update the independent life expectancy estimates on the insured lives in our portfolio, other than insured lives covered under small face amount contracts (i.e., under $1 million in face amount), on a continuous rotating three-year cycle. Accordingly, we update life expectancies for approximately one-twelfth of our portfolio each quarter.
Description for change in discount factor	If the life expectancy estimates were increased or decreased by four and eight months on each outstanding contract, and the discount rates were increased or decreased by 1% and 2%, while all other variables were held constant.
Increase decrease in life expectancy	Four and eight months
Increase decrease in discount rate	1% and 2
Estimated fair value of series I secured notes payable and L Bonds	$ 402,416,000
Debt instruments face value	$ 414,023,000
Weighted average market interest rate of secured notes payable	6.36%
Loan receivable through credit agreement	$ 3,215,000
Loan loss reserve	$ 400,000

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Credit Facility - Autobahn Funding Company LLC (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Sep. 14, 2016	Dec. 31, 2015
Credit Facility - Autobahn Funding Company LLC (Textual)
Maximum borrowing amount under line of credit facility	$ 105,000,000		$ 105,000,000
Expiry date of line of credit			Jun. 30, 2018
Effective rate of interest					5.42%	5.58%
Weighted average effective interest rate	5.46%	5.42%	5.54%	5.81%
Amount outstanding under line of credit facility	$ 0		$ 0			$ 65,011,000
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			33,877,000
Consolidated net income under credit and security agreement			$ 149,361,000
Credit facility, Description			Advances under the facility bear interest at a commercial paper rate of the lender at the time of the advance, or at the lender's cost of borrowing plus 4.25%.
Total funds available for additional borrowings under the borrowing base formula criteria	$ 0		$ 0			$ 39,989,000

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Credit Facility - LNV Corporation (Details) - USD ($)	Sep. 14, 2016	Nov. 10, 2016	Sep. 30, 2016
Line of Credit Facility [Line Items]
Secured term loan	$ 172,300,000
Maturity date	Sep. 14, 2026
Interest rate description	Interest will accrue on amounts borrowed under the agreement at an annual interest rate, determined as of each date of borrowing, equal to (A) the greater of 12-month LIBOR or the federal funds rate (as defined in the agreement) plus one-half of one percent per annum, plus (B) 5.75% per annum. Interest payments are made on a quarterly basis.
Additional amount borrowing under line of credit			$ 76,629,000
Outstanding amount of credit facility			$ 71,250,000
Subsequent Event [Member]
Line of Credit Facility [Line Items]
Reserve account		$ 27,500,000

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Series I Secured Notes (Details) - Series I Secured Notes Payable [Member]	Sep. 30, 2016 USD ($)
Summary of future contractual maturities of notes payable
Three months ending December 31, 2016	$ 1,177,000
2017	10,522,000
2018	2,401,000
2019	1,023,000
2020	1,766,000
Thereafter	941,000
Total	17,830,000
Summary of amortization of deferred financing costs of notes payable
Three months ending December 31, 2016	5,000
2017	88,000
2018	49,000
2019	22,000
2020	55,000
Thereafter	58,000
Total	$ 277,000

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Series I Secured Notes (Details Textual) - USD ($)	1 Months Ended	3 Months Ended		9 Months Ended
	Jun. 30, 2011	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Sep. 14, 2016	Dec. 31, 2015
Series I Secured Notes Payable (Textual)
Effective rate of interest						5.42%	5.58%
Weighted average interest rate of secured notes payable		6.36%		6.36%
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		8.63%		8.63%			8.47%
Principal amount outstanding under Series I Secured notes		$ 17,830,000		$ 17,830,000			$ 23,578,000
Amortization of deferred financing and issuance costs		$ 82,000	$ 49,000	275,000	$ 260,000
Future expected amortization of deferred financing costs				$ 277,000
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]	Sep. 30, 2016 USD ($)
Summary of future contractual maturities of L Bonds
Three months ending December 31, 2016	$ 23,548,000
2017	112,987,000
2018	101,130,000
2019	78,098,000
2020	19,291,000
Thereafter	49,532,000
Total	384,586,000
Summary of amortization of deferred financing costs of L Bonds
Three months ending December 31, 2016	115,000
2017	1,708,000
2018	3,106,000
2019	3,222,000
2020	784,000
Thereafter	2,687,000
Total	$ 11,622,000

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L Bonds (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015	Jan. 31, 2015
L Bonds (Textual)
Debentures offer for sale	$ 414,023,000		$ 414,023,000
Weighted average market interest rate of secured notes payable	6.36%		6.36%
For the 2 year [Member]
L Bonds (Textual)
Interest rate change			5.50%
For the 3 year [Member]
L Bonds (Textual)
Interest rate change			6.25%
For the 5 year [Member]
L Bonds (Textual)
Interest rate change			7.50%
For the 7 year [Member]
L Bonds (Textual)
Interest rate change			8.50%
Renewable Secured Debentures [Member]
L Bonds (Textual)
Debentures offer for sale						$ 1,000,000,000
Description of interest payment			Interest is payable monthly or annually depending on the election of an investor.
Weighted average market interest rate of secured notes payable	7.16%		7.16%		7.18%
Amount outstanding under L bonds	$ 384,586,000		$ 384,586,000		$ 282,171,000
Amortization of deferred issuance costs	$ 2,073,000	$ 1,892,000	5,362,000	$ 4,232,000
Future expected amortization of deferred financing costs			$ 11,622,000
Amortizatoin period of deferred financing cost			8 years

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Convertible Preferred Stock (Details) - USD ($)	9 Months Ended	12 Months Ended	15 Months Ended
	Sep. 30, 2016	Dec. 31, 2015	Sep. 30, 2012
Convertible Preferred Stock (Textual)
Series A preferred stock shares sold for cash	7,350
Series A preferred stock outstanding	33,201	33,201
Series A Convertible Preferred Stock [Member]
Convertible Preferred Stock (Textual)
Series A preferred stock shares sold for cash			3,278,000
Consideration received on sale of Series A preferred stock			$ 24,582,000
Cumulative dividends rate, Percentage			10.00%
Series A preferred stock, Dividend rate			$ 7.00
Conversion term for series A preferred stock	Holders of Series A are entitled to a liquidation preference equal to the stated value of their preferred shares (i.e., $7.50 per share) plus accrued but unpaid dividends. Holders of Series A may presently convert each share of their Series A into 0.75 shares of our common stock at the rate of $10.00 per share.
Series A preferred stock shares issued in conversion of dividends	447,000
Series A preferred stock value issued in conversion of dividends	$ 3,129,000
Aggregate shares of common stock, Warrants	431,954
Convertible preferred stock, shares issued upon conversion	696,000
Conversion of stock, shares converted into common stock	522,000
Exercise price	$ 12.50
Preferred stock, liquidation preference per share			$ 7.50
Series A preferred stock outstanding	2,650,000
Series A preferred stock issuance costs	$ 2,838,000
Fair value of warrants	$ 428,000
Weighted average remaining life of warrants outstanding	8 months 5 days	1 year 5 months 5 days
Preferred stock redemption terms	We may redeem Series A shares at a price equal to 110% of their liquidation preference ($7.50 per share) at any time.
Redeemed shares of Series A preferred stock	277,000

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Redeemable Preferred Stock (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2016 USD ($) $ / shares shares	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($) Tradingdays $ / shares shares	Sep. 30, 2015 USD ($)
Subsidiary, Sale of Stock [Line Items]
Minimum conversion price | $ / shares	$ 15.00		$ 15.00
Number of trading days | Tradingdays			20
Proceeds from redeemable preferred stock | $	$ 20,786,332	$ (21,187)	$ 31,287,541	$ (21,187)
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 | $ / shares	$ 1,000		$ 1,000
Redeemable preferred stock par value per share | $ / shares	$ 1,000		$ 1,000
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]
Redeemable preferred stock, shares issued | shares	33,201		33,201
Proceeds from redeemable preferred stock | $			$ 33,177,000
Redeemable Preferred Stock For Sale | $			$ 2,399,000

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GWG MCA Capital, Inc - 9% Preferred Stock (Details) - USD ($)	3 Months Ended			9 Months Ended
	Sep. 30, 2016	Mar. 31, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Subsidiary, Sale of Stock [Line Items]
Preferred stock shares sold for cash, shares				7,350
Proceeds from redeemable preferred stock	$ 20,786,332		$ (21,187)	$ 31,287,541	$ (21,187)
Mca Preferred Stock [Member]
Subsidiary, Sale of Stock [Line Items]
Redeemable preferred stock, shares issued	7,155			7,155
Proceeds from redeemable preferred stock				$ 72,000
Redeemable Preferred Stock For Sale				$ 7,000
Private Placement [Member]
Subsidiary, Sale of Stock [Line Items]
Preferred stock shares sold for cash, shares		2,000,000
Percentage of preferred stock issued		9.00%

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Income Taxes (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Current:
Federal		$ (141,000)
State		(40,000)
Total current tax expense (benefit)	0	(181,000)			$ 0
Deferred:
Federal	(1,082,000)	(1,488,000)	1,121,000	(504,000)
State	(346,000)	(429,000)	358,000	(161,000)
Total deferred tax expense (benefit)	(1,428,130)	(1,916,686)	1,478,617	(664,905)
Total income tax expense (benefit)	$ (1,428,130)	$ (2,097,633)	$ 1,478,617	$ (664,905)

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Income Taxes (Details Textual) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Income Taxes (Textual)
Income tax liability current	$ 0	$ (181,000)			$ 0
Accrual of non-deductible preferred stock dividend expense			$ 2,153,000

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Common Stock (Details) - GWG MCA Capital, Inc. (Member) - USD ($) $ / shares in Units, $ in Millions	1 Months Ended
	Apr. 25, 2016	Mar. 17, 2016	Jun. 24, 2015	Sep. 30, 2014
Common Stock (Textual)
Restricted Common stock issued	25,000	6,500	60,000	800,000
Common stock, par value	$ 6.25	$ 7.16	$ 9.70	$ 12.50
Net proceeds				$ 8.6

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Stock Incentive Plan (Details) - shares	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Stock Option [Member]
Outstanding stock options
Beginning Balance	1,053,615	1,000,101
Granted during the year	262,448	353,200
Vested during the year
Exercised during the year		(27,667)
Forfeited during the year	(79,500)	(272,019)
Ending Balance	1,236,563	1,053,615
Vested [Member]
Outstanding stock options
Beginning Balance	483,703	314,288
Granted during the year	22,500	79,500
Vested during the year	187,473	238,999
Exercised during the year		(27,667)
Forfeited during the year	(6,676)	(121,417)
Ending Balance	687,000	483,703
Un-vested [Member]
Outstanding stock options
Beginning Balance	569,912	685,813
Granted during the year	239,948	273,700
Vested during the year	(187,473)	(238,999)
Exercised during the year
Forfeited during the year	(72,824)	(150,602)
Ending Balance	549,563	569,912

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Stock Incentive Plan (Details 1) - Stock Appreciation Rights (SARs) [Member]	9 Months Ended
	Sep. 30, 2016 shares
Outstanding Stock Appreciation Rights:
Beginning Balance
Granted during the year	145,388
Vested during the year	145,388
Forfeited during the year
Ending Balance	145,388
Vested [Member]
Outstanding Stock Appreciation Rights:
Beginning Balance
Granted during the year	56,358
Vested during the year	56,358
Forfeited during the year
Ending Balance	56,358
Un-vested [Member]
Outstanding Stock Appreciation Rights:
Beginning Balance
Granted during the year	89,030
Vested during the year	89,030
Forfeited during the year
Ending Balance	89,030

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Stock Incentive Plan (Details Textual)		9 Months Ended
	Sep. 19, 2016 $ / pure shares	Sep. 30, 2016 USD ($) $ / shares $ / pure shares	Mar. 31, 2013 shares
Stock Incentive Plan (Textual)
Options vesting period		3 years
Compensation expense related to un-vested options not yet recognized | $		$ 420,000
Compensation expense related to un-vested options, period of recognition		3 years
Compensation Expense in 2016 | $		$ 14,000
Compensation Expense in 2017 | $		240,000
Compensation Expense in 2018 | $		109,000
Compensation Expense in 2019 | $		$ 57,000
Common Stock [Member]
Stock Incentive Plan (Textual)
Number of shares issued to employees, officers and directors		237,000
Number of options vested		687,000
Others [Member] | Maximum [Member]
Stock Incentive Plan (Textual)
Exercise Price | $ / shares		$ 10.25
Others [Member] | Minimum [Member]
Stock Incentive Plan (Textual)
Exercise Price | $ / shares		6.00
Owning more than 10% [Member] | Maximum [Member]
Stock Incentive Plan (Textual)
Exercise Price | $ / shares		10.18
Owning more than 10% [Member] | Minimum [Member]
Stock Incentive Plan (Textual)
Exercise Price | $ / shares		$ 6.35
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		25.50%
2013 Stock Incentive Plan [Member] | Common Stock [Member]
Stock Incentive Plan (Textual)
Forfeited during the year		415,000
Forfeited during the year, Percent		15.00%
Exercised during the year		28,000
Stock Appreciation Rights (SARs) [Member]
Stock Incentive Plan (Textual)
Number of shares issued to employees, officers and directors		145,388
Number of options vested		56,358
Forfeited during the year
Compensation Expense | $		$ 3,381
Common stock issued to employees	145,388
Strike price	8.76	8.82

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Commitments (Details)	Sep. 30, 2016 USD ($)
Summary of Minimum lease payments under the lease agreement
Three months ending December 31, 2016	$ 44,000
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	$ 1,918,000

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Commitments (Details Textual)	3 Months Ended		9 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 01, 2015 ft²
Commitments (Textual)
Office space in square feet | ft²					17,687
Lease term date			Aug. 31, 2025
Rent expenses | $	$ 102,000	$ 71,000	$ 306,000	$ 193,000
Description of lessor leasing arrangements			On September 1, 2015, we entered into an amendment to our original lease that expanded the leased space to 17,687 square feet and extended the term through August 31, 2025.

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Guarantee of L Bonds (Details) - USD ($)	Sep. 30, 2016	Jun. 30, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Dec. 31, 2014
A S S E T S
Cash and cash equivalents	$ 18,773,828	$ 17,379,350	$ 34,425,105	$ 28,452,673	$ 38,198,189	$ 30,662,704
Restricted cash	15,688,025		2,341,900
Investment in life insurance contracts, at fair value	477,585,100		356,649,715
Secured MCA advances	6,113,831
Life insurance contract benefits receivable	6,129,022
Other assets	3,131,107		2,461,045
Investment in subsidiaries
TOTAL ASSETS	527,420,913		395,877,765
LIABILITIES
Senior credit facilities	63,699,385		63,279,596
Series I Secured Notes	17,553,307		23,287,704
L Bonds	379,858,737		276,482,796
Notes payable to related parties
Accounts payable	2,442,449		1,517,440
Interest payable	13,633,640		12,340,061
Other accrued expenses	645,343		1,060,786
Deferred taxes, net	3,242,586		1,763,968
TOTAL LIABILITIES	481,075,447		379,732,351
STOCKHOLDERS' EQUITY (DEFICIT)
Member capital
Convertible preferred stock	19,772,931		20,784,841
Redeemable preferred stock	33,176,600
Common stock	5,980		5,942
Additional paid-in capital	15,226,449		17,149,391
Accumulated deficit	(21,836,494)		(21,794,760)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	46,345,466		16,145,414
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	527,420,913		395,877,765
Parent [Member]
A S S E T S
Cash and cash equivalents	13,312,751	10,051,621	32,292,162	26,354,110	37,814,528	30,446,473
Restricted cash
Investment in life insurance contracts, at fair value
Secured MCA advances
Life insurance contract benefits receivable
Other assets	4,706,121		1,742,074
Investment in subsidiaries	422,185,881		269,886,254
TOTAL ASSETS	440,204,753		303,920,490
LIABILITIES
Senior credit facilities
Series I Secured Notes
L Bonds	379,858,737		276,482,796
Notes payable to related parties
Accounts payable	699,507		280,988
Interest payable	9,798,735		8,529,959
Other accrued expenses	259,722		717,365
Deferred taxes, net	3,242,586		1,763,968
TOTAL LIABILITIES	393,859,287		287,775,076
STOCKHOLDERS' EQUITY (DEFICIT)
Member capital
Convertible preferred stock	19,772,931		20,784,841
Redeemable preferred stock	33,176,600
Common stock	5,980		5,942
Additional paid-in capital	15,226,449		17,149,391
Accumulated deficit	(21,836,494)		(21,794,760)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	46,345,466		16,145,414
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	440,204,753		303,920,490
Guarantor Subsidiary [Member]
A S S E T S
Cash and cash equivalents	4,372,845	6,822,484	1,982,722	1,948,399	233,553	216,231
Restricted cash	4,438,025		2,102,257
Investment in life insurance contracts, at fair value
Secured MCA advances
Life insurance contract benefits receivable
Other assets	1,224,386		688,071
Investment in subsidiaries	429,441,035		291,295,951
TOTAL ASSETS	439,476,291		296,069,001
LIABILITIES
Senior credit facilities			(1,000,000)
Series I Secured Notes	17,553,307		23,287,704
L Bonds
Notes payable to related parties
Accounts payable	99,705		157,217
Interest payable	3,588,954		3,544,626
Other accrued expenses	351,896		343,421
Deferred taxes, net
TOTAL LIABILITIES	21,593,862		26,332,968
STOCKHOLDERS' EQUITY (DEFICIT)
Member capital	417,882,429		269,736,033
Convertible preferred stock
Redeemable preferred stock
Common stock
Additional paid-in capital
Accumulated deficit
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	417,882,429		269,736,033
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	439,476,291		296,069,001
Non-Guarantor Subsidiaries [Member]
A S S E T S
Cash and cash equivalents	1,088,232	505,245	150,221	150,164	150,108
Restricted cash	11,250,000		239,643
Investment in life insurance contracts, at fair value	477,585,100		356,649,715
Secured MCA advances	6,113,831
Life insurance contract benefits receivable	6,129,022
Other assets	54,726		30,900
Investment in subsidiaries
TOTAL ASSETS	502,220,911		357,070,479
LIABILITIES
Senior credit facilities	63,699,385		64,279,596
Series I Secured Notes
L Bonds
Notes payable to related parties	2,700,000
Accounts payable	1,643,237		1,079,235
Interest payable	400,077		265,476
Other accrued expenses	33,725
Deferred taxes, net
TOTAL LIABILITIES	68,476,424		65,624,307
STOCKHOLDERS' EQUITY (DEFICIT)
Member capital	433,744,487		291,446,172
Convertible preferred stock
Redeemable preferred stock
Common stock
Additional paid-in capital
Accumulated deficit
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	433,744,487		291,446,172
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	502,220,911		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
Life insurance contract benefits receivable
Other assets	(2,854,126)
Investment in subsidiaries	(851,626,916)		(561,182,205)
TOTAL ASSETS	(854,481,042)		(561,182,205)
LIABILITIES
Senior credit facilities
Series I Secured Notes
L Bonds
Notes payable to related parties	(2,700,000)
Accounts payable
Interest payable	(154,126)
Other accrued expenses
Deferred taxes, net
TOTAL LIABILITIES	(2,854,126)
STOCKHOLDERS' EQUITY (DEFICIT)
Member capital	(851,626,916)		(561,182,205)
Convertible preferred stock
Redeemable preferred stock
Common stock
Additional paid-in capital
Accumulated deficit
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	(851,626,916)		(561,182,205)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$ (854,481,042)		$ (561,182,205)

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Guarantee of L Bonds (Details 1) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
REVENUE
Origination and servicing income
Gain on life insurance contracts, net	$ 13,509,755	8,189,261	51,606,815	33,446,556
MCA income	286,225		654,441
Interest and other income	124,998	93,841	341,098	233,516
TOTAL REVENUE	13,920,978	8,283,102	52,602,354	33,680,072
EXPENSES
Origination and servicing fees
Interest expense	11,983,968	8,650,149	32,009,934	23,149,030
Employee compensation and benefits	2,912,463	2,308,246	8,450,168	6,180,886
Legal and professional fees	586,830	822,077	3,097,312	1,988,261
Other expenses	2,863,212	2,231,341	7,608,057	5,646,402
TOTAL EXPENSES	18,346,473	14,011,813	51,165,471	36,964,579
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES	(4,425,495)	(5,728,711)	1,436,883	(3,284,507)
EQUITY IN INCOME OF SUBSIDIARY
NET INCOME (LOSS) BEFORE INCOME TAXES	(4,425,495)	(5,728,711)	1,436,883	(3,284,507)
INCOME TAX BENEFIT	(1,428,130)	(2,097,633)	1,478,617	(664,905)
NET INCOME (LOSS)	(2,997,365)	(3,631,078)	(41,734)	(2,619,602)	$ (7,393,274)
Parent [Member]
REVENUE
Origination and servicing income
Gain on life insurance contracts, net
MCA income
Interest and other income	75,808	13,922	181,828	38,944
TOTAL REVENUE	75,808	13,922	181,828	38,944
EXPENSES
Origination and servicing fees
Interest expense	9,747,128	6,980,132	25,477,320	18,011,890
Employee compensation and benefits	1,718,683	1,759,589	4,894,006	4,671,183
Legal and professional fees	263,917	598,530	1,642,252	1,427,388
Other expenses	1,464,498	1,195,417	4,241,825	3,251,606
TOTAL EXPENSES	13,194,226	10,533,668	36,255,403	27,362,067
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES	(13,118,418)	(10,519,746)	(36,073,575)	(27,323,123)
EQUITY IN INCOME OF SUBSIDIARY	8,692,924	4,791,035	37,510,459	24,038,616
NET INCOME (LOSS) BEFORE INCOME TAXES	(4,425,495)	(5,728,711)	1,436,883	(3,284,507)
INCOME TAX BENEFIT	(1,418,130)	(2,097,633)	1,478,617	(664,905)
NET INCOME (LOSS)	2,997,365	(3,631,078)	(41,734)	(2,619,602)
Guarantor Subsidiary [Member]
REVENUE
Origination and servicing income		1,004,024	13,417	2,022,774
Gain on life insurance contracts, net
MCA income
Interest and other income	30,126	54,813	31,137	61,694
TOTAL REVENUE	30,126	1,058,837	44,554	2,084,468
EXPENSES
Origination and servicing fees
Interest expense	554,938	525,391	1,856,909	1,984,356
Employee compensation and benefits	1,038,058	548,657	3,151,107	1,509,703
Legal and professional fees	297,804	223,547	1,308,959	560,873
Other expenses	803,106	995,026	2,197,133	2,297,063
TOTAL EXPENSES	2,693,906	2,292,621	8,514,108	6,351,995
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES	(2,663,780)	(1,233,784)	(8,469,554)	(4,267,527)
EQUITY IN INCOME OF SUBSIDIARY	11,361,328	6,024,762	46,497,730	28,305,979
NET INCOME (LOSS) BEFORE INCOME TAXES	8,697,549	4,790,978	38,028,177	24,038,452
INCOME TAX BENEFIT
NET INCOME (LOSS)	8,697,549	4,790,978	38,028,177	24,038,452
Non-Guarantor Subsidiaries [Member]
REVENUE
Origination and servicing income
Gain on life insurance contracts, net	13,509,755	8,189,261	51,606,815	33,446,556
MCA income	286,225		654,441
Interest and other income	83,313	25,106	282,259	132,878
TOTAL REVENUE	13,879,293	8,214,367	52,543,515	33,579,434
EXPENSES
Origination and servicing fees		1,004,024	13,417	2,022,774
Interest expense	1,746,151	1,144,626	4,829,831	3,152,784
Employee compensation and benefits	155,722		405,055
Legal and professional fees	25,109		146,101
Other expenses	595,608	40,898	1,169,099	97,733
TOTAL EXPENSES	2,522,590	2,189,548	6,563,503	5,273,291
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES	11,356,703	6,024,819	45,980,012	28,306,143
EQUITY IN INCOME OF SUBSIDIARY
NET INCOME (LOSS) BEFORE INCOME TAXES	11,356,703	6,024,819	45,980,012	28,306,143
INCOME TAX BENEFIT
NET INCOME (LOSS)	11,356,703	6,024,819	45,980,012	28,306,143
Eliminations [Member]
REVENUE
Origination and servicing income		(1,004,024)	(13,417)	(2,022,774)
Gain on life insurance contracts, net
MCA income
Interest and other income	(64,249)		(154,126)
TOTAL REVENUE	(64,249)	(1,004,024)	(167,543)	(2,022,774)
EXPENSES
Origination and servicing fees		(1,004,024)	13,417	(2,022,774)
Interest expense	(64,249)		154,126
Employee compensation and benefits
Legal and professional fees
Other expenses
TOTAL EXPENSES	(64,249)	(1,004,024)	167,543	(2,022,774)
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES
EQUITY IN INCOME OF SUBSIDIARY	(20,054,252)	(10,815,797)	(84,008,189)	52,344,595
NET INCOME (LOSS) BEFORE INCOME TAXES	(20,054,252)	(10,815,797)	(84,008,189)	(52,344,595)
INCOME TAX BENEFIT
NET INCOME (LOSS)	$ (20,054,252)	$ (10,815,797)	$ (84,008,189)	$ (52,344,595)

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Guarantee of L Bonds (Details 2) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ (2,997,365)	$ (3,631,078)	$ (41,734)	$ (2,619,602)	$ (7,393,274)
Adjustments to reconcile net income to net cash flows from operating activities:
(Equity) of subsidiaries
Gain on life insurance contracts	(21,073,226)	(14,516,881)	(53,846,155)	(26,651,363)
Amortization of deferred financing and issuance costs	2,765,743	1,933,776	6,077,905	1,891,772
Deferred income taxes	(1,428,130)	(1,916,686)	1,478,617	(664,905)
Preferred stock dividends payable	333,565	173,993	663,614	509,225
Convertible, redeemable preferred dividends payable		173,993		509,225
(Increase) in operating assets:
Life insurance contract benefits receivable	700,000	(2,142,986)	(6,129,022)	1,392,986
Other assets	419,836	(417,990)	(617,630)	(774,539)
Increase (decrease) in operating liabilities:
Due to related party	(80,949)		(182,730)
Accounts payable and accrued expenses	(3,216,990)	2,534,269	(2,024,234)	3,836,715
NET CASH FLOWS USED IN OPERATING ACTIVITIES	(24,577,516)	(13,697,611)	(54,621,369)	(23,079,711)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts	(25,770,326)	(13,626,842)	(74,470,362)	(23,850,860)
Carrying value of matured life insurance contracts	1,078,889	80,000	7,381,132	3,822,983
Investment in Secured MCA advances	(1,965,896)		(7,613,310)
Proceeds from Secured MCA advances	220,911		1,246,703
NET CASH FLOWS UESD IN INVESTING ACTIVITIES	(26,436,422)	(13,546,842)	(73,455,837)	(20,027,877)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on Senior Credit Facilities	(10,761,048)		6,238,952	(7,150,000)
Payments for redemption of Series I Secured Notes	(541,275)	(890,586)	(6,264,018)	(4,508,130)
Proceeds from issuance of L Bonds	64,350,430	37,122,127	135,477,090	87,620,483
Payments for redemption and issuance of L Bonds	(14,373,447)	(19,363,047)	(37,036,922)	(32,376,104)
Proceeds from (increase in) restricted cash	(4,527,232)	651,630	(13,346,126)	(2,975,507)
Issuance of member capital
Proceeds from issuance of preferred stock	20,786,332	(21,187)	31,287,541	(21,187)
Issuance of common stock	31,515		244,185
Payments for issuance and redemption of preferred stock	20,786,332		31,287,541
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES	52,408,416	17,498,937	112,425,929	40,897,557
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	1,394,478	(9,745,516)	(15,651,277)	(2,210,031)
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD	17,379,350	38,198,189	34,425,105	30,662,704	30,662,704
END OF PERIOD	18,773,828	28,452,673	18,773,828	28,452,673	34,425,105
Parent [Member]
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	2,997,365	(3,631,078)	(41,734)	(2,619,602)
Adjustments to reconcile net income to net cash flows from operating activities:
(Equity) of subsidiaries	(8,692,924)	(4,791,035)	(37,510,459)	(24,038,616)
Gain on life insurance contracts
Amortization of deferred financing and issuance costs	2,072,879	1,103,312	5,982,802	2,832,487
Deferred income taxes	(1,428,130)	(1,916,686)	1,478,617	(664,905)
Preferred stock dividends payable	333,565		663,614
Convertible, redeemable preferred dividends payable		173,993		509,225
(Increase) in operating assets:
Life insurance contract benefits receivable
Other assets	(54,428,152)	(22,146,946)	(114,885,990)	(40,145,769)
Increase (decrease) in operating liabilities:
Due to related party	(64,249)		(2,867,225)
Accounts payable and accrued expenses	155,980	2,010,129	2,396,503	4,503,624
NET CASH FLOWS USED IN OPERATING ACTIVITIES	(65,048,396)	(29,198,311)	(144,783,872)	(30,425,246)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts
Carrying value of matured life insurance contracts
Investment in Secured MCA advances
Proceeds from Secured MCA advances
NET CASH FLOWS UESD IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on Senior Credit Facilities
Payments for redemption of Series I Secured Notes
Proceeds from issuance of L Bonds	64,350,430	37,122,127	135,477,090	87,620,483
Payments for redemption and issuance of L Bonds	(14,373,447)	(19,363,047)	(37,036,922)	(32,376,104)
Proceeds from (increase in) restricted cash
Issuance of member capital
Proceeds from issuance of preferred stock	20,786,332	(21,187)	31,215,986
Issuance of common stock	31,515		244,185	582,000
Payments for issuance and redemption of preferred stock	(2,485,304)		(4,095,878)	(295,185)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES	68,309,526	17,737,893	125,804,461	55,531,194
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	3,261,130	(11,460,418)	(18,979,411)	(4,092,363)
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD	10,051,621	37,814,528	32,292,162	30,446,473	30,446,473
END OF PERIOD	13,312,751	26,354,110	13,312,751	26,354,110	32,292,162
Guarantor Subsidiary [Member]
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	8,697,549	4,790,978	38,028,177	24,038,452
Adjustments to reconcile net income to net cash flows from operating activities:
(Equity) of subsidiaries	(11,361,328)	(6,024,762)	(46,497,730)	(28,305,979)
Gain on life insurance contracts
Amortization of deferred financing and issuance costs	81,849	49,339	(1,364,614)	260,455
Deferred income taxes
Preferred stock dividends payable
Convertible, redeemable preferred dividends payable
(Increase) in operating assets:
Life insurance contract benefits receivable
Other assets	(54,272,589)	(15,631,849)	(92,168,163)	(26,745,888)
Increase (decrease) in operating liabilities:
Due to related party	(16,700)		(15,505)
Accounts payable and accrued expenses	2,172,227	(105,418)	2,889,525	123,222
NET CASH FLOWS USED IN OPERATING ACTIVITIES	(54,698,992)	(16,921,712)	(99,128,310)	(30,629,737)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts
Carrying value of matured life insurance contracts
Investment in Secured MCA advances
Proceeds from Secured MCA advances
NET CASH FLOWS UESD IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on Senior Credit Facilities
Payments for redemption of Series I Secured Notes	(541,275)	(890,586)	(6,264,018)	(4,508,130)
Proceeds from issuance of L Bonds
Payments for redemption and issuance of L Bonds
Proceeds from (increase in) restricted cash	486,283	(2,203,800)	(2,335,768)	(2,203,800)
Issuance of member capital	52,304,345	21,730,944	110,118,219	39,176,335
Proceeds from issuance of preferred stock
Issuance of common stock
Payments for issuance and redemption of preferred stock
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES	52,249,353	18,636,558	101,518,433	32,361,905
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(2,449,639)	1,714,846	2,390,123	1,732,168
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD	6,822,484	233,553	1,982,722	216,231	216,231
END OF PERIOD	4,372,845	1,948,399	4,372,845	1,948,399	1,982,722
Non-Guarantor Subsidiaries [Member]
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	11,356,703	6,024,819	45,980,012	28,306,143
Adjustments to reconcile net income to net cash flows from operating activities:
(Equity) of subsidiaries
Gain on life insurance contracts	(21,073,226)	(14,516,881)	(53,846,155)
Amortization of deferred financing and issuance costs	611,015	781,125	1,459,717	(26,651,363)
Deferred income taxes				(1,201,170)
Preferred stock dividends payable
Convertible, redeemable preferred dividends payable
(Increase) in operating assets:
Life insurance contract benefits receivable	(700,000)	(2,142,986)	(6,129,022)	1,392,986
Other assets
Increase (decrease) in operating liabilities:
Due to related party			2,700,000
Accounts payable and accrued expenses	(5,545,197)	629,558	(7,310,262)	(790,131)
NET CASH FLOWS USED IN OPERATING ACTIVITIES	(13,950,705)	(4,938,393)	(17,145,710)	1,056,465
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts	(25,770,326)	(13,626,842)	(74,470,362)	(23,850,860)
Carrying value of matured life insurance contracts	1,078,889	80,000	7,381,132	3,822,983
Investment in Secured MCA advances	(1,965,896)		(7,613,310)
Proceeds from Secured MCA advances	220,911		1,246,703
NET CASH FLOWS UESD IN INVESTING ACTIVITIES	(26,436,422)	(13,546,842)	(73,455,837)	(20,027,877)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on Senior Credit Facilities	(10,761,048)		6,238,952	(7,150,000)
Payments for redemption of Series I Secured Notes
Proceeds from issuance of L Bonds
Payments for redemption and issuance of L Bonds
Proceeds from (increase in) restricted cash	(5,013,515)	2,855,430	(11,010,358)	(669,207)
Issuance of member capital	56,816,232	15,629,861	96,318,304	26,940,783
Proceeds from issuance of preferred stock			71,555
Issuance of common stock
Payments for issuance and redemption of preferred stock	(71,555)		(78,895)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES	40,970,114	18,485,291	91,539,558	19,121,576
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	582,987	56	938,011	150,164
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD	505,245	150,108	150,221
END OF PERIOD	1,088,232	150,164	1,088,232	150,164	150,221
Eliminations [Member]
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	(20,054,252)	(10,815,797)	(84,008,189)	(52,344,595)
Adjustments to reconcile net income to net cash flows from operating activities:
(Equity) of subsidiaries	20,054,252	10,815,797	84,008,189	(52,344,595)
Gain on life insurance contracts				(52,344,595)
Amortization of deferred financing and issuance costs
Deferred income taxes
Preferred stock dividends payable
Convertible, redeemable preferred dividends payable
(Increase) in operating assets:
Life insurance contract benefits receivable
Other assets	(109,120,577)	37,360,805	(206,436,523)	66,117,118
Increase (decrease) in operating liabilities:
Due to related party
Accounts payable and accrued expenses
NET CASH FLOWS USED IN OPERATING ACTIVITIES	109,120,577	37,360,805	206,436,523	66,117,118
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance contracts
Carrying value of matured life insurance contracts
Investment in Secured MCA advances
Proceeds from Secured MCA advances
NET CASH FLOWS UESD IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on Senior Credit Facilities
Payments for redemption of Series I Secured Notes
Proceeds from issuance of L Bonds
Payments for redemption and issuance of L Bonds
Proceeds from (increase in) restricted cash
Issuance of member capital	(109,120,577)	(37,360,805)	(206,436,523)
Proceeds from issuance of preferred stock
Issuance of common stock				(66,117,118)
Payments for issuance and redemption of preferred stock				(66,117,118)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES	(109,120,577)	(37,360,805)	(206,436,523)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD
END OF PERIOD

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Concentrations (Details)	Sep. 30, 2016	Dec. 31, 2015
Summary of the face value of insurance contracts with specific life insurance companies
Face value percentage of insurance contracts with specific life insurance companies	10.10%		[1]
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	14.30%	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	13.00%	12.70%
Lincoln National [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	11.50%		[1]

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

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Concentrations (Details 1)	Sep. 30, 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	21.10%	25.20%
Florida [Member]
Summary of the number of insurance contracts held in specific states exceeding 10% of the total face value held by the Company
Percentage of insurance contracts held in specific states	19.00%	20.00%

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Concentrations (Details Textual)	9 Months Ended
	Sep. 30, 2016
Concentrations (Textual)
Description of issuance contracts with specific life insurance companies and contracts held in specific states	Exceeding 10% of the total face value

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Subsequent Events (Details) - USD ($)		9 Months Ended
	Oct. 28, 2016	Sep. 30, 2016
Subsequent Events (Textual)
Life insurance contract policy benefit		$ 3,240,000
Realized gains on life insurance policy contract		2,539,000
Additional principal amount of debt		$ 6,911,000
Shares issued		7,350
Gross Consideration		$ 7,350,000
Subsequent Event [Member]
Subsequent Events (Textual)
Proceed From Loan Advances	$ 92,900,000
Money Tranfered To Reserve Account	$ 16,250,000