Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Mar. 13, 2015 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | GWG Holdings, Inc. | |
Entity Central Index Key | 1522690 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -19 | |
Document Type | 10-K | |
Document Period End Date | 31-Dec-14 | |
Document Fiscal Year Focus | 2014 | |
Document Fiscal Period Focus | FY | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 5,870,193 | |
Entity Public Float | $0 |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
A S S E T S | ||
Cash and cash equivalents | $30,662,704 | $33,449,793 |
Restricted cash | 4,296,053 | 5,832,970 |
Investment in life settlements, at fair value | 282,883,010 | 234,672,794 |
Deferred financing costs, net | 1,569,400 | 357,901 |
Policy benefits receivable | 1,750,000 | |
Other assets | 1,909,362 | 1,067,018 |
TOTAL ASSETS | 323,070,529 | 275,380,476 |
LIABILITIES | ||
Revolving credit facility | 72,161,048 | 79,000,000 |
Series I Secured Notes payable | 27,616,578 | 29,275,202 |
L Bonds | 182,782,884 | 131,646,062 |
Accounts payable | 1,203,575 | 839,869 |
Interest payable | 11,128,519 | 7,209,408 |
Other accrued expenses | 514,435 | 504,083 |
Deferred taxes, net | 5,273,555 | 7,675,174 |
TOTAL LIABILITIES | 300,680,594 | 256,149,798 |
COMMITMENTS AND CONTINGENCIES (NOTES 13 AND 14) | ||
CONVERTIBLE, REDEEMABLE PREFERRED STOCK (par value $0.001; shares authorized 40,000,000; shares outstanding 2,738,966 and 3,368,109; liquidation preference of $20,542,000 and $25,261,000 on December 31, 2014 and December 31, 2013 respectively) | 20,527,866 | 24,722,693 |
STOCKHOLDERS' EQUITY (DEFICIT) | ||
Common stock (par value $0.001: shares authorized 210,000,000; shares outstanding 5,870,193 and 4,562,000 on December 31, 2014 and 2013) | 5,870 | 4,562 |
Additional paid-in capital | 16,257,686 | 2,942,000 |
Accumulated deficit | -14,401,486 | -8,438,577 |
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | 22,389,936 | -5,492,015 |
TOTAL LIABILITIES & EQUITY (DEFICIT) | $323,070,529 | $275,380,476 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Balance Sheets [Abstract] | ||
Convertible redeemable preferred stock, par value | $0.00 | $0.00 |
Convertible redeemable preferred stock, shares authorized | 40,000,000 | 40,000,000 |
Convertible redeemable preferred stock, shares outstanding | 2,738,966 | 3,368,109 |
Convertible redeemable preferred stock, liquidation preference | $20,542,000 | $25,261,000 |
Common stock, par value | $0.00 | $0.00 |
Common stock, shares authorized | 210,000,000 | 210,000,000 |
Common stock, shares outstanding | 5,870,193 | 4,562,000 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
REVENUE | ||
Gain on life settlements, net | $30,416,127 | $29,513,642 |
Gain on termination of agreement with Athena Securities Ltd. | 3,252,400 | |
Interest and other income | 60,448 | 298,732 |
TOTAL REVENUE | 30,476,575 | 33,064,774 |
EXPENSES | ||
Interest expense | 26,716,798 | 20,762,644 |
Employee compensation and benefits | 4,969,636 | 5,043,848 |
Legal and professional fees | 2,339,235 | 1,754,209 |
Other expenses | 4,815,434 | 3,525,261 |
TOTAL EXPENSES | 38,841,103 | 31,085,962 |
(LOSS) INCOME BEFORE INCOME TAXES | -8,364,528 | 1,978,812 |
Income tax (benefit) expense | -2,401,619 | 2,173,767 |
NET LOSS | -5,962,909 | -194,955 |
Loss attributable to preferred shareholders | -138,374 | -806,624 |
LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | ($6,101,283) | ($1,001,579) |
NET LOSS PER COMMON SHARE | ||
Basic | ($1.24) | ($0.21) |
Diluted | ($1.24) | ($0.21) |
WEIGHTED AVERAGE SHARES OUTSTANDING | ||
Basic | 4,909,657 | 4,758,699 |
Diluted | 4,909,657 | 4,758,699 |
Consolidated_Statement_of_Stoc
Consolidated Statement of Stockholders' Equity (USD $) | Total | Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | |
Balance at Dec. 31, 2012 | ($1,261,789) | $4,995 | $6,976,838 | ($8,243,622) | ||
Balance, Shares at Dec. 31, 2012 | 4,994,500 | |||||
Net income | -194,955 | -194,955 | ||||
Repurchase of common stock | -3,252,400 | -433 | -3,251,967 | |||
Repurchase of common stock, Shares | -432,500 | |||||
Issuance of stock options | 23,753 | 23,753 | ||||
Accretion of preferred stock to liquidation value | -806,624 | -806,624 | ||||
Balance at Dec. 31, 2013 | -5,492,015 | 4,562 | 2,942,000 | -8,438,577 | ||
Balance, Shares at Dec. 31, 2013 | 4,562,000 | |||||
Net income | -5,962,909 | -5,962,909 | ||||
Issuance of common stock | 8,643,790 | 800 | 8,642,990 | |||
Issuance of common stock, Shares | 800,000 | |||||
Series A Preferred Stock conversion | 4,957,099 | 508 | 4,956,591 | |||
Series A Preferred Stock conversion, Shares | 508,193 | |||||
Reclassification of preferred stock from temporary equity to permanent equity due to initial public offering | [1] | 20,326,605 | 20,326,605 | |||
Reclassification of preferred stock from temporary equity to permanent equity due to initial public offering, Shares | [1] | 2,710,214 | ||||
Issuance of preferred stock | 201,261 | 201,261 | ||||
Issuance of preferred stock, Shares | 28,752 | |||||
Issuance of stock options | 122,412 | 122,412 | ||||
Extension and issuance of warrants | 47,120 | 47,120 | ||||
Accretion of preferred stock to liquidation value | -453,427 | -453,427 | ||||
Balance at Dec. 31, 2014 | $22,389,936 | $20,527,866 | $5,870 | $16,257,686 | ($14,401,486) | |
Balance, Shares at Dec. 31, 2014 | 2,738,966 | 5,870,193 | ||||
[1] | Subject to the terms of the Certificate of Designation for Series A Convertible Preferred Stock, the listing of our common stock on The Nasdaq Capital Market on September 25, 2014 resulted in the termination of a redemption right in favor of the holders of such preferred stock. Preferred stock that is not redeemable by a shareholder is treated as stockholders' equity as shown in the table above. |
Consolidated_Statement_of_Cash
Consolidated Statement of Cash Flows (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | ($5,962,909) | ($194,955) |
Adjustments to reconcile net loss to net cash flows used in operating activities: | ||
Gain on life settlements, gross | -39,928,003 | -39,337,542 |
Amortization of deferred financing and issuance costs | 3,804,795 | 2,470,390 |
Deferred income taxes | -2,401,619 | 2,173,767 |
Convertible, redeemable preferred stock issued in lieu of cash dividends | 774,085 | 623,899 |
Convertible, redeemable preferred stock dividends payable | -116,207 | 255 |
Gain upon termination of agreement with Athena Securities Ltd. | -3,252,400 | |
(Increase) decrease in operating assets: | ||
Due from related parties | -291 | 8,613 |
Insurance benefits receivable | -1,750,000 | 2,850,000 |
Other assets | -2,347,050 | -566,418 |
Increase in operating liabilities: | ||
Accounts payable | 363,706 | 369,809 |
Interest payable | 4,638,876 | 3,418,432 |
Other accrued expenses | 457,376 | 50,642 |
NET CASH FLOWS USED IN OPERATING ACTIVITIES | -42,467,241 | -31,385,508 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Investment in life settlements | -12,292,401 | -34,997,500 |
Proceeds from settlement of life settlements | 4,185,813 | 4,563,896 |
NET CASH FLOWS USED IN INVESTING ACTIVITIES | -8,106,588 | -30,433,604 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Net proceeds from (repayment of) revolving credit facility | -6,838,952 | 8,000,000 |
Payments for redemption of Series I Secured Notes payable | -2,268,379 | -8,671,624 |
Proceeds from issuance of L Bonds | 65,713,297 | 85,260,976 |
Payment of deferred issuance costs for L Bonds | -4,104,876 | -4,320,542 |
Payments for redemption of L Bonds | -14,429,017 | -8,143,363 |
Issuance of common stock | 8,642,990 | |
Proceeds from (uses of) restricted cash | 1,536,916 | -3,739,878 |
Redemption of convertible, redeemable preferred stock | -465,239 | -613,708 |
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 47,786,740 | 67,771,861 |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | -2,787,089 | 5,952,749 |
CASH AND CASH EQUIVALENTS | ||
BEGINNING OF PERIOD | 33,449,793 | 27,497,044 |
END OF PERIOD | 30,662,704 | 33,449,793 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||
Interest and preferred dividends paid | 16,931,000 | 13,627,000 |
NON-CASH INVESTING AND FINANCING ACTIVITIES | ||
Non-cash conversion of Series I Secured Notes | 912,000 | |
Warrants issued to purchase common stock | 47,000 | |
Options issued to purchase common stock | 122,000 | 24,000 |
Accrued interest payable on Series I Secured Notes added to principal | 151,000 | 185,000 |
Accrued interest payable on L Bonds added to principal | 452,000 | 141,000 |
Conversion of Series A Preferred Stock into common stock | 4,957,000 | |
Reclassification of Series A Preferred Stock to permanent equity due to initial public offering | 20,327,000 | |
Issuance of preferred stock in lieu of cash dividends | $774,000 | $624,000 |
Nature_of_Business_and_Summary
Nature of Business and Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2014 | |
Nature of Business and Summary of Significant Accounting Policies [Abstract] | |
Nature of business and summary of significant accounting policies | ( 1 ) Nature of business and summary of significant accounting policies |
Nature of business - GWG Holdings, Inc. (GWG Holdings) and subsidiaries, located in Minneapolis, Minnesota, facilitates the purchase of life insurance policies for its own investment portfolio through its wholly owned subsidiary, GWG Life, LLC (GWG Life), and its subsidiaries, GWG Trust (Trust), GWG DLP Funding II, LLC (DLP II) and its wholly-owned subsidiary, GWG DLP Master Trust II (the Trust II). All of these entities are legally organized in Delaware. Unless the context otherwise requires or we specifically so indicate, all references in this report to "we", "us", "our", "our Company", "GWG", or the "Company" refer to these entities collectively. | |
Use of estimates - The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The most significant estimates with regard to these consolidated financial statements relates to (1) the determination of the assumptions used in estimating the fair value of the investment in life insurance policies, and (2) the value of deferred tax assets and liabilities. | |
Cash and cash equivalents - The Company considers cash in demand deposit accounts and temporary investments purchased with an original maturity of three months or less to be cash equivalents. The Company maintains its cash and cash equivalents with highly rated financial institutions. From time to time, the Company’s balances in its bank accounts exceed Federal Deposit Insurance Corporation limits. The Company periodically evaluates the risk of exceeding insured levels and may transfer funds as it deems appropriate. The Company has not experienced any losses with regards to balances in excess of insured limits or as a result of other concentrations of credit risk. | |
Life settlements - ASC 325-30, Investments in Insurance Contracts, allows a reporting entity the election to account for its investments in life settlements using either the investment method or the fair value method. The election shall be made on an instrument-by-instrument basis and is irrevocable. Under the investment method, an investor shall recognize the initial investment at the purchase price plus all initial direct costs. Continuing costs (policy premiums and direct external costs, if any) to keep the policy in force shall be capitalized. Under the fair value method, an investor shall recognize the initial investment at the purchase price. In subsequent periods, the investor shall re- measure the investment at fair value in its entirety at each reporting period and shall recognize the change in fair value in current period income net of premiums paid. The Company uses the fair value method to account for all life settlements. | |
The Company recognizes realized gains (revenue) from life settlement contracts upon one of the two following events: | |
1) Receipt of mortality notice or verified obituary of insured; or | |
2) Sale of policy and filing of change of ownership forms and receipt of payment | |
The Company recognizes the difference between the face value of the insurance benefits and carrying values of the policy when an insured event has occurred and the Company determines that settlement and ultimate collection of the face value of the insurance benefits is realizable and reasonably assured. Revenue from a transaction must meet both criteria in order to be recognized. In an event of a sale of a policy the Company recognizes gain or loss as the difference between the sale price and the carrying value of the policy on the date of the receipt of payment on such sale. | |
Deposits and initial direct costs advanced on unsettled policy acquisitions are recorded as other assets until policy ownership has been transferred to the Company. Such deposits and direct cost advances were $27,000 and $201,000 at December 31, 2014 and 2013, respectively. | |
Deferred financing and issuance costs – Costs incurred to obtain financing under the revolving credit facility, as described in note 5, have been capitalized and are amortized using the straight-line method over the term of the revolving credit facility. Amortization of deferred financing costs was $358,000 and $455,000 for the years ended December 31, 2014 and 2013, respectively. As of December 31, 2014 those costs have been fully amortized. The Series I Secured Notes payable, as described in note 6, are reported net of issuance costs, sales commissions and other direct expenses, which are amortized using the interest method over the term of each respective borrowing. The L Bonds, as described in note 7, are reported net of issuance costs, sales commissions and other direct expenses, which are amortized using the interest method over the term of each respective borrowing. The Series A Preferred Stock, as described in note 8, is reported net of issuance costs, sales commissions, including the fair value of warrants issued, and other direct expenses, which are amortized using the interest method as interest expense over the three-year redemption period. | |
Earnings (loss) per share - Basic per share earnings (loss) attributable to non-redeemable interests is calculated using the weighted-average number of shares outstanding during the period. Diluted earnings per share is calculated based on the potential dilutive impact, if any, of the Company’s convertible preferred stock, and outstanding warrants, and stock options. Due to the net loss reported for the years ended December 31, 2014 and 2013, all preferred stock, stock options and warrants are anti-dilutive. | |
Subsequent events - Subsequent events are events or transactions that occur after the balance sheet date but before consolidated financial statements are issued. The Company recognizes in the consolidated financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing the consolidated financial statements. The Company’s consolidated financial statements do not recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date and before the consolidated financial statements are available to be issued. The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the consolidated financial statements are filed for potential recognition or disclosure. | |
Recently adopted pronouncements - Pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or are not expected to be significant to the Company. |
Restrictions_on_Cash
Restrictions on Cash | 12 Months Ended |
Dec. 31, 2014 | |
Restrictions on Cash [Abstract] | |
Restrictions on cash | ( 2 ) Restrictions on cash |
The Company is required by its lenders to maintain collection and escrow accounts. These accounts are used to fund the acquisition, pay annual premiums of insurance policies, pay interest and other charges under the revolving credit facility, and collect policy benefits. DZ Bank AG, as agent for Autobahn Funding Company, LLC, the lender for the revolving credit facility as described in note 5, authorizes the disbursements from these accounts. At December 31, 2014 and December 31, 2013 there were balances of $4,296,000, and $5,833,000, respectively, maintained in these restricted cash accounts. | |
Investment_in_Life_Insurance_P
Investment in Life Insurance Policies | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||
Investment in Life Insurance Policies [Abstract] | |||||||||||||||||||||||||
Investment in life insurance policies | ( 3 ) Investment in life insurance policies | ||||||||||||||||||||||||
The life insurance policies (Level 3 fair value measurements) are valued based on unobservable inputs that are significant to the overall fair value measurement. Changes in the fair value of these instruments are recorded in gain or loss on life insurance policies in the consolidated statements of operations (net of the cash premiums paid on the policies). The fair value is determined on a discounted cash flow basis that incorporates life expectancy assumptions. Life expectancy reports have been obtained from widely accepted life expectancy providers. The discount rate incorporates current information about market interest rates, the credit exposure to the insurance company that issued the life insurance policy, and our estimate of the risk premium an investor in the policy would require. As a result of management’s analysis, discount rates of 11.43% and 11.69% were applied to the portfolio as of December 31, 2014 and 2013, respectively. | |||||||||||||||||||||||||
A summary of the Company’s life insurance policies accounted for under the fair value method and their estimated maturity dates, based on remaining life expectancy, is as follows: | |||||||||||||||||||||||||
As of December 31, 2014 | As of December 31, 2013 | ||||||||||||||||||||||||
Years Ending December 31, | Number of Contracts | Estimated Fair Value | Face Value | Number of Contracts | Estimated Fair Value | Face Value | |||||||||||||||||||
2015 | 3 | $ | 5,063,000 | $ | 6,000,000 | 4 | $ | 5,065,000 | $ | 6,750,000 | |||||||||||||||
2016 | 7 | 8,144,000 | 11,550,000 | 8 | 8,174,000 | 13,750,000 | |||||||||||||||||||
2017 | 17 | 21,916,000 | 35,542,000 | 25 | 33,345,000 | 63,916,000 | |||||||||||||||||||
2018 | 30 | 41,994,000 | 76,206,000 | 33 | 37,243,000 | 80,318,000 | |||||||||||||||||||
2019 | 45 | 47,303,000 | 106,973,000 | 34 | 32,844,000 | 89,295,000 | |||||||||||||||||||
2020 | 41 | 43,429,000 | 102,614,000 | 34 | 27,741,000 | 75,644,000 | |||||||||||||||||||
2021 | 36 | 29,789,000 | 90,921,000 | 33 | 29,041,000 | 111,770,000 | |||||||||||||||||||
Thereafter | 112 | 85,245,000 | 349,293,000 | 92 | 61,220,000 | 299,205,000 | |||||||||||||||||||
Totals | 291 | $ | 282,883,000 | $ | 779,099,000 | 263 | $ | 234,673,000 | $ | 740,648,000 | |||||||||||||||
The Company recognized insurance benefits of $18,050,000 and $16,600,000 during 2014 and 2013, respectively, related to policies with a carrying value of $4,186,000 and $4,564,000, respectively. The Company recorded realized gains of $13,864,000 and $12,036,000 on such policies. Subsequent to December 31, 2014, four policies covering three individuals have matured. The combined insurance benefits of these policies were $21,125,000. The Company recorded realized gains of $18,194,000 on four policies. | |||||||||||||||||||||||||
Reconciliation of gain on life settlements: | |||||||||||||||||||||||||
Years Ended December 31, | |||||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||||
Change in fair value | $ | 39,928,000 | $ | 39,338,000 | |||||||||||||||||||||
Premiums and other annual fees | (23,376,000 | ) | (21,860,000 | ) | |||||||||||||||||||||
Policy maturities | 13,864,000 | 12,036,000 | |||||||||||||||||||||||
Gain on life settlements, net | $ | 30,416,000 | $ | 29,514,000 | |||||||||||||||||||||
The estimated expected premium payments to maintain the above life insurance policies in force for the next five years, assuming no mortalities, are as follows: | |||||||||||||||||||||||||
Years Ending December 31, | |||||||||||||||||||||||||
2015 | $ | 26,349,000 | |||||||||||||||||||||||
2016 | 28,857,000 | ||||||||||||||||||||||||
2017 | 32,365,000 | ||||||||||||||||||||||||
2018 | 35,341,000 | ||||||||||||||||||||||||
2019 | 39,423,000 | ||||||||||||||||||||||||
$ | 162,335,000 | ||||||||||||||||||||||||
Management anticipates funding the estimated premium payments as noted above with proceeds from the DZ Bank revolving credit facility and through additional debt and equity financing as well as from cash proceeds from maturities of life insurance policies. The proceeds of these capital sources are also intended to be used for the purchase, financing, and maintenance of additional life insurance policies. |
Fair_Value_Definition_and_Hier
Fair Value Definition and Hierarchy | 12 Months Ended | ||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||
Fair Value Definition and Hierarchy [Abstract] | |||||||||||||||||||
Fair value definition and hierarchy | ( 4 ) Fair value definition and hierarchy | ||||||||||||||||||
ASC 820 establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring assets and liabilities at fair value. Market price observability is affected by a number of factors, including the type of investment, the characteristics specific to the investment and the state of the marketplace including the existence and transparency of transactions between market participants. Assets and liabilities with readily available active quoted prices or for which fair value can be measured from actively quoted prices in an orderly market generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. ASC 820 establishes a three-level valuation hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. | |||||||||||||||||||
The hierarchy is broken down into three levels based on the observability of inputs as follows: | |||||||||||||||||||
● | Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Since valuations are based quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. | ||||||||||||||||||
● | Level 2 - Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. | ||||||||||||||||||
● | Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. | ||||||||||||||||||
The availability of observable inputs can vary by types of assets and liabilities and is affected by a wide variety of factors, including, for example, whether an instrument is established in the marketplace, the liquidity of markets and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by management in determining fair value is greatest for assets and liabilities categorized in Level 3. | |||||||||||||||||||
Level 3 Valuation Process | |||||||||||||||||||
The estimated fair value of the Company’s portfolio of life settlements is determined on a quarterly basis by the Company’s portfolio management committee, taking into consideration changes in discount rate assumptions, estimated premium payments and life expectancy estimate assumptions, as well as any changes in economic and other relevant conditions. These inputs are then used to estimate the discounted cash flows using the Model Actuarial Pricing System (MAPS), probabilistic portfolio price model, which estimates the cash flows using various probabilities and scenarios. The valuation process includes a review by senior management as of each valuation date. Management has also engaged a third party expert to independently test the accuracy of the valuations using the inputs provided by management on a quarterly basis. | |||||||||||||||||||
Life insurance policies, as well as the portfolio taken as a whole, represent financial instruments recorded at fair value on a recurring basis. The following table reconciles the beginning and ending fair value of the Company’s Level 3 investments in its portfolio of life insurance policies for the years ending December 31, as follows: | |||||||||||||||||||
Years Ended December 31, | |||||||||||||||||||
2014 | 2013 | ||||||||||||||||||
Beginning balance | $ | 234,673,000 | $ | 164,317,000 | |||||||||||||||
Purchases | 12,468,000 | 35,582,000 | |||||||||||||||||
Maturities (cash in excess of carrying value) | (4,186,000 | ) | (4,564,000 | ) | |||||||||||||||
Net change in fair value | 39,928,000 | 39,338,000 | |||||||||||||||||
Ending balance | $ | 282,883,000 | $ | 234,673,000 | |||||||||||||||
The fair value of a portfolio of life insurance policies is based on information available to the Company at the reporting date. Fair value is based upon a discounted cash flow model that incorporates life expectancy estimate assumptions. Life expectancy estimates are obtained from independent, third-party widely accepted life expectancy estimate providers at policy acquisition. The life expectancy values of each insured, as determined at policy acquisition, are rolled down monthly for the passage of time by the MAPS actuarial software the Company uses for ongoing valuation of its portfolio of life insurance policies. The discount rate incorporates current information about discount rate applied by other reporting companies owning portfolios of life insurance policies, discount rates observed in the life insurance secondary market, market interest rates, the credit exposure to the insurance company that issued the life insurance policy and management’s estimate of the risk premium a purchaser would require to receive the future cash flows derived from our portfolio of life insurance policies. | |||||||||||||||||||
On September 15, 2014, 21st Services announced changes to its mortality tables primarily for insureds age 90 and older, as well as updated adjustment factors designed to better underwrite seniors with multiple impairments. These changes represent small portions of 21st Services’ historical underwritings. We expect medical-actuarial underwriting firms to continue improving and refining their underwriting methodology. | |||||||||||||||||||
The fair value of life insurance policies is estimated using present value calculations of estimated cash flows based on the data specific to each individual life insurance policy. Estimated future policy premium payments are calculated based on the terms of the policy and the premium payment history. The following summarizes the unobservable inputs utilized in estimating the fair value of the portfolio of life insurance policies: | |||||||||||||||||||
As of | As of | ||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||
2014 | 2013 | ||||||||||||||||||
Weighted average age of insured | 82.8 | 82.1 | |||||||||||||||||
Weighted average life expectancy, months* | 78.4 | 87 | |||||||||||||||||
Average face amount per policy | $ | 2,677,000 | $ | 2,816,000 | |||||||||||||||
Discount rate | 11.43 | % | 11.69 | % | |||||||||||||||
* Standard life expectancy as adjusted for insured’s specific circumstances. | |||||||||||||||||||
These assumptions are, by their nature, inherently uncertain and the effect of changes in estimates may be significant. The techniques used in estimating the present value of estimated cash flows are derived from valuation techniques generally used in the industry that include inputs for the asset that are not based on observable market data. The extent to which the fair value could reasonably vary in the near term has been quantified by evaluating the effect of changes in significant underlying assumptions used to estimate the fair value. If the life expectancy estimates were increased or decreased by four and eight months on each outstanding policy and the discount factors were increased or decreased by 1% and 2%, while all other variables are held constant, the fair value of the investment in life insurance policies would increase or (decrease) by the amounts summarized below: | |||||||||||||||||||
Changes in fair value of life insurance policies | |||||||||||||||||||
Change in life expectancy estimates | plus | minus | plus | minus | |||||||||||||||
8 months | 8 months | 4 months | 4 months | ||||||||||||||||
31-Dec-14 | $ | (38,864,000 | ) | $ | 40,634,000 | $ | (19,664,000 | ) | $ | 20,130,000 | |||||||||
31-Dec-13 | $ | (34,382,000 | ) | $ | 36,152,000 | $ | (17,417,000 | ) | $ | 17,865,000 | |||||||||
Change in discount rate | plus 2% | minus 2% | plus 1% | minus 1% | |||||||||||||||
31-Dec-14 | $ | (24,085,000 | ) | $ | 28,179,000 | $ | (12,502,000 | ) | $ | 13,522,000 | |||||||||
31-Dec-13 | $ | (22,944,000 | ) | $ | 27,063,000 | $ | (11,933,000 | ) | $ | 12,959,000 | |||||||||
Other Fair Value Considerations | |||||||||||||||||||
Carrying value of receivables, prepaid expenses, accounts payable and accrued expenses approximate fair value due to their short-term maturities and low credit risk. The estimated fair value of the Company’s Series I Secured Notes payable and L Bonds is approximately $216,837,000 based on a weighted-average market interest rate of 7.17% based on an income approach, the combined face value of these notes is $214,424,000 as of December 31, 2014. The carrying value of the revolving credit facility reflects interest charged at the commercial paper rate plus an applicable margin. The margin represents our credit risk, and the strength of the portfolio of life insurance policies collateralizing the debt. The overall rate reflects market, and the carrying value of the revolver approximates fair value. All of the financial instruments are Level 3 fair value measurements. | |||||||||||||||||||
The Company has issued warrants to purchase common stock in connection with the issuance of its convertible preferred stock. Warrants were determined by the Company as permanent equity. The fair value measurements associated with the warrants, measured at issuance represent Level 3 instruments. | |||||||||||||||||||
As of December 31, 2014: | |||||||||||||||||||
Month issued | Warrants | Fair value | Risk | Volatility | Term | ||||||||||||||
Issued | per share | free rate | |||||||||||||||||
Dec-11 | 68,937 | $ | 0.22 | 0.42 | % | 25.25 | % | 5 years | |||||||||||
Mar-12 | 38,130 | $ | 0.52 | 0.38 | % | 36.2 | % | 5 years | |||||||||||
Jun-12 | 161,840 | $ | 1.16 | 0.41 | % | 47.36 | % | 5 years | |||||||||||
Jul-12 | 144,547 | $ | 1.16 | 0.41 | % | 47.36 | % | 5 years | |||||||||||
Sep-12 | 2,500 | $ | 0.72 | 0.31 | % | 40.49 | % | 5 years | |||||||||||
Sep-14 | 16,000 | $ | 1.26 | 1.85 | % | 17.03 | % | 5 years | |||||||||||
431,954 | |||||||||||||||||||
Volatility is based upon the weekly percentage change in the stock price of selected comparable insurance companies. In June 2012, we evaluated the comparable companies used, and made certain changes to those used. The percentage change is calculated on the average price of those selected stocks at the weekly close of business for the year preceding the balance sheet date. We compare annual volatility based on this weekly information. | |||||||||||||||||||
In conjunction with the Company’s recent initial public offering, the Company issued a warrant for the purchase of up 16,000 shares of the Company’s common stock to the underwriters of the initial public offering. | |||||||||||||||||||
Credit_Facilities
Credit Facilities | 12 Months Ended | |
Dec. 31, 2014 | ||
Credit facilities and Series I Secured Notes Payable and Renewable Secured Debentures (subsequently renamed L Bonds) [Abstract] | ||
Credit facilities | ( 5 ) Credit facilities | |
Revolving credit facility – Autobahn Funding Company LLC | ||
On July 15, 2008, DLP II and United Lending entered into a revolving credit facility pursuant to a Credit and Security Agreement (Agreement) with Autobahn Funding Company LLC (Autobahn), providing the Company with a maximum borrowing amount of $100,000,000. Autobahn is a commercial paper conduit that issues commercial paper to investors in order to provide funding to DLP II. DZ Bank AG Deutsche Zentral-Genossenschaftsbank (DZ Bank) acts as the agent for Autobahn. The original Agreement was to expire on July 15, 2013. On January 29, 2013, GWG Holdings, together with GWG Life and DLP II, entered into an Amended and Restated Credit and Security Agreement with Autobahn, extending the facility expiration date to December 31, 2014. On May 29, 2014, GWG Holdings, together with GWG Life and DLP II, entered into an Amendment No. 1 to Amended and Restated Credit and Security Agreement with Autobahn and DZ Bank (as committed lender and Agent). The amendment was entered into for the purpose of extending the maturity date for borrowings under the agreement to December 31, 2016. The amount outstanding under this facility as of December 31, 2014 and 2013 were $72,161,000 and $79,000,000, respectively. | ||
The Agreement requires DLP II to pay, on a monthly basis, interest at the commercial paper rate plus an applicable margin, as defined in the Agreement. The effective rate was 6.24% at December 31, 2014 and 6.19% at December 31, 2013. The weighted average effective interest rate (excluding the unused line fee) was 6.24% and 6.14% for the years ended December 31, 2014 and 2013, respectively. The Agreement also requires payment of an unused line fee on the unfunded amount under the revolving credit facility. The note is secured by substantially all of DLP II assets which consist primarily of life insurance policies. | ||
The Agreement has certain financial and nonfinancial covenants. The Company was in compliance with these covenants at December 31, 2014 and December 31, 2013. The Agreement generally prohibits the Company from: | ||
● | changing its corporate name, offices, and jurisdiction of incorporation; | |
● | changing any deposit accounts or payment instructions to insurers; | |
● | changing any operating policies and practices such that it would be reasonably likely to adversely affect the collectability of any asset in any material respect; | |
● | merging or consolidating with, or selling all or substantially all of its assets to, any third party; | |
● | selling any collateral or creating or permitting to exist any adverse claim upon any collateral; | |
● | engaging in any other business or activity than that contemplated by the Agreement; | |
● | incurring or guaranteeing any debt for borrowed money; | |
● | amending the Company’s certificate of incorporation or bylaws, making any loans or advances to, investments in, or paying any dividends to, any person unless both before and after any such loan, advance, investment or dividend there exists no actual event of default, potential event of default or termination event; | |
● | removing an independent director on the board of directors except for cause or with the consent of the lender; or | |
● | making payment on or issuing any Series I Secured Notes or L Bonds, or amending any agreements respecting such notes or bonds, if an event of default, potential event of default, or termination event exists or would arise from any such action. | |
In addition, the Company has agreed to maintain (i) a positive consolidated net income on a Non-GAAP basis (as defined and calculated under the Agreement) for each complete fiscal year; (ii) a tangible net worth on a Non-GAAP basis (as defined and calculated under the Agreement) of not less than $15 million; and (iii) maintain a borrowing base surplus or cash cushion sufficient to pay 12 months of premiums and facility fees. | ||
Consolidated net income and tangible net worth as of and for the four quarters ended December 31, 2014, as calculated under the Agreement, was $29,369,000 and $87,381,000 respectively. | ||
Advances under the Agreement are subject to a borrowing base formula, which limits the availability of advances based on attributes of policies pledged to the facility. Over-concentration of policies by insurance carrier, over-concentration of policies by insurance carriers with ratings below a AA- rating, and the premiums and facility fees reserve are the three primary factors which might limit availability of funds on the facility. Total funds available for additional borrowings under the borrowing base formula criteria at December 31, 2014 and December 31, 2013, were $20,585,000 and $3,937,000 respectively. | ||
On July 15, 2008, GWG Holdings delivered a performance guaranty in favor of Autobahn pursuant to which it guaranteed the obligations of GWG Life, in its capacity as the seller and master servicer, under the Credit and Security Agreement and related documents. In January 2013 and May 2014 in connection with the Amended and Restated Credit and Security Agreement and Amendment No. 1 to Amended and Restated Credit and Security Agreement, GWG Holdings delivered a reaffirmation of its performance guaranty. The obligations of GWG Holdings under the performance guaranty and subsequent reaffirmation do not extend to the principal and interest owed by DLP II as the borrower under the credit facility. | ||
Series_I_Secured_Notes_Payable
Series I Secured Notes Payable | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Credit facilities and Series I Secured Notes Payable and Renewable Secured Debentures (subsequently renamed L Bonds) [Abstract] | |||||||||
Series I Secured Notes payable | |||||||||
( 6 ) Series I Secured Notes payable | |||||||||
Series I Secured Notes payable have been issued in conjunction with the GWG Series I Secured Notes private placement memorandum dated August 25, 2009 (last revised November 15, 2010). Series I Secured Notes are secured by assets of GWG Life and are subordinate to our revolving credit facility (see note 5). On June 14, 2011, the Company closed the offering to additional investors; however, existing investors may elect to continue advancing amounts outstanding upon maturity subject to the Company’s option. Series I Secured Notes have maturity dates ranging from six months to seven years with fixed interest rates varying from 5.65% to 9.55% depending on the term of the note. Interest is payable monthly, quarterly, annually or at maturity depending on the terms of the note. At December 31, 2014 and December 31, 2013, the weighted-average interest rate of Series I Secured Notes was 8.37% and 8.35%, respectively. The notes are secured by assets of GWG Life. The principal amount outstanding under these Series I Secured Notes was $28,047,000 and $29,744,000 at December 31, 2014 and December 31, 2013, respectively. The difference between the amount outstanding on the Series I Secured Notes and the carrying amount on the consolidated balance sheet is due to netting of unamortized deferred issuance costs. Overall, interest expense includes amortization of deferred financing and issuance costs of $552,000 and $606,000 in 2014 and 2013, respectively. Future expected amortization of deferred financing costs is $430,000 in total over the next six years. | |||||||||
Future contractual maturities of Series I Secured Notes payable and future amortization of their deferred financing costs at December 31, 2014 are as follows: | |||||||||
Years Ending December 31, | Contractual Maturities | Amortization of Deferred Financing Costs | |||||||
2015 | $ | 13,887,000 | $ | 92,000 | |||||
2016 | 8,242,000 | 161,000 | |||||||
2017 | 4,713,000 | 134,000 | |||||||
2018 | 754,000 | 30,000 | |||||||
2019 | 347,000 | 8,000 | |||||||
Thereafter | 104,000 | 5,000 | |||||||
$ | 28,047,000 | $ | 430,000 |
Renewable_Secured_Debentures_S
Renewable Secured Debentures (Subsequently Renamed L Bonds) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Credit facilities and Series I Secured Notes Payable and Renewable Secured Debentures (subsequently renamed L Bonds) [Abstract] | |||||||||
Renewable Secured Debentures (subsequently renamed L Bonds) | ( 7 ) Renewable Secured Debentures (subsequently renamed L Bonds) | ||||||||
The Company registered with the SEC, effective January of 2012, the offer and sale of $250,000,000 of Renewable Secured Debentures (subsequently renamed “L Bonds”). The debentures are secured by assets of GWG Holdings and GWG Life and are subordinate to our revolving credit facility (see note 5). L Bonds have maturity dates ranging from six months to seven years with fixed interest rates varying from 4.25% to 9.50% depending on the term of the note. Interest is payable monthly, annually or at maturity depending on the terms of the debenture. At December 31, 2014 and December 31, 2013, the weighted-average interest rate of L Bonds was 7.45% and 7.53%, respectively. The amount outstanding under these L Bonds was $186,377,000 and $134,891,000 at December 31, 2014 and December 31, 2013, respectively. The difference between the amount outstanding on the L Bonds and the carrying amount on the consolidated balance sheets is due to netting of unamortized deferred issuance costs and cash receipts for new issuances in process. Amortization of deferred issuance costs was $3,537,000 and $1,843,000 in 2014 and 2013, respectively. Future expected amortization of deferred financing costs as of December 31, 2014 is $5,882,000 in total over the next seven years. Subsequent to December 31, 2014, the Company has issued approximately an additional $19,051,000 in principal amount of L Bonds. | |||||||||
The use of proceeds from the issuances of L Bonds is limited to the following: (1) payment of commissions on sales of L Bonds, (2) payment of offering expenses, (3) purchase of life insurance policies, (4) payment of premiums on life insurance policies, (5) payment of principal and interest on L Bonds, (6) payment of portfolio operations expenses, and (7) general working capital. | |||||||||
Future contractual maturities of L Bonds and future amortization of their deferred financing costs at December 31, 2014 are as follows: | |||||||||
Years Ending December 31, | Contractual Maturities | Amortization of Deferred Financing Costs | |||||||
2015 | $ | 63,375,000 | $ | 871,000 | |||||
2016 | 50,270,000 | 1,578,000 | |||||||
2017 | 29,546,000 | 1,253,000 | |||||||
2018 | 13,551,000 | 668,000 | |||||||
2019 | 14,262,000 | 670,000 | |||||||
Thereafter | 15,373,000 | 842,000 | |||||||
$ | 186,377,000 | $ | 5,882,000 | ||||||
The Company entered into an Indenture effective October 19, 2011 with Holdings as obligor, GWG Life as guarantor, and Bank of Utah as trustee for the benefit of the debenture holders. The Indenture has certain financial and nonfinancial covenants. The Company was in compliance with these covenants at December 31, 2014 and 2013. | |||||||||
Convertible_Preferred_Stock
Convertible Preferred Stock | 12 Months Ended | |
Dec. 31, 2014 | ||
Equity [Abstract] | ||
Convertible preferred stock | ( 8 ) Convertible preferred stock | |
The Company offered 3,333,333 shares of convertible redeemable preferred stock (Series A Preferred Stock) for sale to accredited investors in a private placement on July 31, 2011. The offering of Series A Preferred Stock concluded on September 2, 2012 and resulted in 3,278,000 shares being issued for gross consideration of $24,582,000. As of December 31, 2014, 277,000 shares have been issued as a result of conversion of $1,936,681 in dividends into shares of Series A Preferred Stock and 678,000 shares have been converted to 508,000 shares of the Company’s common stock. The Series A Preferred Stock was sold at an offering price of $7.50 per share. Series A Preferred Stock has a preferred yield of 10% per annum, and each share has the right to convert into 0.75 shares of the Company’s common stock. Series A preferred shareholders also received three-year warrants to purchase, at an exercise price per share of $12.50, one share of common stock for every 40 shares of Series A Preferred Stock purchased. The warrants are exercisable immediately. Upon their original issuance, these warrants had a three-year exercise period. Effective August 1, 2014, the Board of Directors authorized the extension of the warrant exercise period for an additional two years. In the Certificate of Designations for the Series A Preferred Stock dated July 31, 2011, the Company agreed to permit preferred shareholders to sell their shares back to the Company for the stated value of $7.50 per share, plus accrued dividends, according to the following schedule: | ||
● | Up to 33% of the holder’s unredeemed shares one year after issuance: | |
● | Up to 66% of the holder’s unredeemed shares two years after issuance; and | |
● | Up to 100% of the holder’s unredeemed shares three years after issuance. | |
The Company’s obligation to redeem its Series A preferred stock terminated upon the Company completing a registration of its common stock with the SEC which occurred on September 24, 2014 (See Note 11). As such, the convertible redeemable preferred stock was reclassified from temporary equity to permanent equity. The Company may redeem the Series A preferred shares at a price equal to 110% of their liquidation preference ($7.50 per share) at any time. As of December 31, 2014, the Company had redeemed an aggregate of 145,000 shares of Series A preferred stock. The Series A Preferred Stock shares (i) were convertible, at the election of the Company, into common stock of the Company in the event of either a registered offering of the Company’s common stock with the SEC aggregating gross proceeds of at least $5.0 million and at a price equal to or greater than $11.00 per share; (ii) remain convertible at the option of each holder; and (iii) are required to be converted upon the consent of shareholders holding at least a majority of the then-outstanding Series A preferred stock. In connection with the Company’s initial public offering, the Company elected to cause the conversion of 677,566 shares of preferred stock into 508,193 shares of common stock. As of December 31, 2014, the Company had 2,739,000 shares of Series A Preferred Stock outstanding with gross consideration of $20,528,000 (including cash proceeds, conversion of Series I Secured Notes and accrued interest on Series I notes, and conversion of preferred dividends payable). The Company incurred Series A Preferred Stock issuance costs of $2,838,000, all of which was included as a component of additional paid in capital as of December 31, 2014. | ||
The Company determined that the grant date fair value of the outstanding warrants attached to the Series A Preferred Stock was $428,000 for warrants outstanding as of December 31, 2014. The Company may redeem outstanding warrants prior to their expiration, at a price of $0.01 per share upon 30 days written notice to the investors at any time after (i) the Company has completed a registration of its common stock with the SEC and (ii) the volume of weighted-average sale price per share of common stock equals or exceeds $14.00 per share for ten consecutive trading days ending on the third business day prior to proper notice of such redemption. | ||
In conjunction with the Company’s initial public offering a warrant for purchase of up to 16,000 shares of the Company’s common stock was issued to the underwriters of the initial public offering. These warrants are not exercisable prior to March 17, 2015 and expire on September 18, 2019. Total warrants outstanding as of December 31, 2014, were 431,954 with a weighted-average remaining life of 2.43 years. Total warrants outstanding at December 31, 2013, were 415,955 with a weighted-average remaining life of 1.34 years. As of December 31, 2014, none of these warrants have been exercised. | ||
Dividends on the Series A Preferred Stock may be paid in either cash or additional shares of Series A Preferred Stock at the election of the holder and approval of the Company. The dividends are reported as an expense and included in the caption interest expense in the consolidated statements of operations. The Company declared and accrued dividends of $2,428,000 and $2,528,000 in 2014 and 2013, respectively, pursuant to a board resolution declaring the dividend. 111,000 and 89,000 shares of Series A Preferred Stock were issued in lieu of cash dividends in 2014 and 2013, respectively. The shares issued in lieu of cash dividends were issued at $7.00 per share. As of December 31, 2014, GWG Holdings has $513,000 of accrued preferred dividends which were paid or converted to shares of Series A Preferred Stock on January 15, 2015. | ||
Income_Taxes
Income Taxes | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
Income Taxes [Abstract] | |||||||||||||||||
Income taxes | ( 9 ) Income taxes | ||||||||||||||||
The Company did not have any current income taxes for the years ended December 31, 2014 or 2013. The components of deferred income tax benefit for 2014 and income tax expense for 2013, consisted of the following: | |||||||||||||||||
Income tax provision (benefit): | 2014 | 2013 | |||||||||||||||
Deferred: | |||||||||||||||||
Federal | $ | (1,820,000 | ) | $ | 1,826,000 | ||||||||||||
State | (582,000 | ) | 348,000 | ||||||||||||||
Total income tax expense (benefit) | $ | (2,402,000 | ) | $ | 2,174,000 | ||||||||||||
The following table provides a reconciliation of our income tax expense (benefit) at the statutory federal tax rate to our actual income tax expense (benefit): | |||||||||||||||||
2014 | 2013 | ||||||||||||||||
Statutory federal income tax | $ | (2,844,000 | ) | (34.0 | )% | $ | 673,000 | 34 | % | ||||||||
State income taxes, net of federal benefit | (374,000 | ) | (4.5 | )% | 298,000 | 15.1 | % | ||||||||||
Series A Preferred Stock dividends | 826,000 | 9.9 | % | 860,000 | 43.4 | % | |||||||||||
Other permanent differences | (10,000 | ) | (0.1 | )% | 343,000 | 17.3 | % | ||||||||||
Total income tax expense (benefit) | $ | (2,402,000 | ) | (28.7 | )% | $ | 2,174,000 | 109.8 | % | ||||||||
The primary differences between the Company’s December 31, 2014 effective tax rate and the statutory federal rate are the accrual of nondeductible preferred stock dividend expense of $2,428,000, state taxes, and other non-deductible expenses. The most significant temporary differences between GAAP net income and taxable net income are the treatment of interest costs with respect to the acquisition of the life insurance policies and revenue recognition with respect to the mark-to-market of life insurance portfolio. | |||||||||||||||||
The tax effects of temporary differences that give rise to deferred income taxes were as follows: | |||||||||||||||||
2014 | 2013 | ||||||||||||||||
Deferred tax assets : | |||||||||||||||||
Note receivable from related party | $ | 2,023,000 | $ | 2,023,000 | |||||||||||||
Net operating loss carryforwards | 4,517,000 | 2,596,000 | |||||||||||||||
Other assets | 272,000 | 164,000 | |||||||||||||||
Subtotal | 6,812,000 | 4,783,000 | |||||||||||||||
Valuation allowance | (2,164,000 | ) | (2,164,000 | ) | |||||||||||||
Net deferred tax asset | 4,648,000 | 2,619,000 | |||||||||||||||
Deferred tax liabilities: | |||||||||||||||||
Investment in life settlements | (9,922,000 | ) | (10,294,000 | ) | |||||||||||||
Net deferred tax assets | $ | (5,274,000 | ) | $ | (7,675,000 | ) | |||||||||||
At December 31, 2014 and 2013, the Company had federal net operating loss (NOL) carryforwards of $11,163,000 and $4,182,000, respectively, and aggregate state NOL carryforwards of approximately $7,334,000 and $2,748,000, respectively. The NOL carryforwards will begin to expire in 2031. Future utilization of NOL carryforwards is subject to limitations under Section 382 of the Internal Revenue Code. This section generally relates to a more than 50 percent change in ownership over a three-year period. We currently do not believe that any issuance of common stock has resulted in an ownership change under Section 382. | |||||||||||||||||
The Company provides for a valuation allowance when it is not considered more likely than not that our deferred tax assets will be realized. At both December 31, 2014 and 2013 based upon all available evidence, the Company has provided a valuation allowance of $2,164,000, against deferred tax assets related to the likelihood of recovering the tax benefit of a capital loss on a note receivable from a related entity. Management believes all other deferred tax assets are recoverable. | |||||||||||||||||
ASC 740, Income Taxes, requires the reporting of certain tax positions which do not meet a threshold of "more-likely-than-not" to be recorded as uncertain tax benefits. It management's responsibility to determine whether it is "more-likely-than-not" that a tax position will be sustained upon examination, including resolution of any related appeals or litigation, based upon the technical merits of the position. Management has reviewed all income tax positions taken or expected to be taken for all open years and determined that the income tax positions are appropriately stated and supported. The Company does not anticipate that the total unrecognized tax benefits will significantly change prior to December 31, 2015. | |||||||||||||||||
Under the Company’s accounting policies, interest and penalties on unrecognized tax benefits, as well as interest received from favorable tax settlements are recognized as components of income tax expense. At December 31, 2014 and 2013, the Company has recorded no accrued interest or penalties related to uncertain tax positions. | |||||||||||||||||
The Company’s income tax returns for tax years ended December 31, 2012, 2013, and 2014, when filed, remain open to examination by the Internal Revenue Service and various state taxing jurisdictions. |
Common_Stock
Common Stock | 12 Months Ended |
Dec. 31, 2014 | |
Equity [Abstract] | |
Common Stock | ( 10 ) Common Stock |
On September 24, 2014, GWG consummated an initial public offering of its common stock which resulted in the sale of 800,000 shares of common stock at $12.50 per share. The sale resulted in net proceeds of approximately $8.6 million after the deduction of underwriting commissions, discounts and expense reimbursements. In connection with this offering, the Company listed its common stock on The NASDAQ Capital Market under the ticker symbol “GWGH” effective September 25, 2014. The Company used the net proceeds from the offering to promote and advertise the opportunities for consumers owning life insurance and investors to profit from participating in the secondary market for life insurance policies, purchase additional life insurance policies in the secondary market, pay premiums on the Company’s life insurance policy assets, fund its portfolio operations, and for working capital purposes. | |
On July 11, 2011, GWG entered into a Purchase and Sale Agreement with Athena Securities Group, Ltd. and Athena Structured Funds PLC. Under this agreement, GWG issued to Athena Securities Group, Ltd. (Athena) 494,500 shares of common stock, which was equal to 9.9% of GWG’s outstanding shares, in exchange for shares equal to 9.9% of the outstanding shares in Athena Structured Funds, PLC and cash of $5,000. This 2011 agreement had contemplated cooperative efforts by the parties aimed at developing a security and related offering in Europe or Ireland, the proceeds of which would be used to finance the acquisition of life-insurance related assets in the United States. In 2013, GWG sought to terminate the 2011 agreement due to a changing regulatory environment in Europe that negatively affected the likelihood of consummating the contemplated offering of securities, and the Company’s dissatisfaction with Athena’s performance under the 2011 agreement. As a result, in June 2013 GWG entered into a second Purchase and Sale Agreement with Athena Securities Ltd. and Athena. This agreement effected the termination of the 2011 agreement. The June 2013 agreement contained mutual general releases of claims and substantially unwound certain capital stock transactions that had been effected under the 2011 agreement. In particular, Athena returned to GWG for redemption 432,500 shares of the Company’s common stock, and retained 62,000 common shares in recognition of their earlier efforts under the 2011 agreement. For GWG’s part, the Company sold back to Athena all of its ownership in Athena Structured Funds, PLC that it had originally acquired under the 2011 agreement. Presently, GWG has no ongoing business relationship with Athena. | |
Stock split— On June 24, 2014, the Company’s Board of Directors and majority stockholders approved a joint resolution to effect an amendment to the Company’s Certificate of Incorporation to effect a reverse split of the issued and outstanding common stock on a 2-for-1 basis. The effective date of the amendment and reverse stock split was June 24, 2014. In lieu of fractional shares, stockholders received cash payments in an amount equal to the fraction to which the stockholder would otherwise be entitled multiplied by the price of the common stock, as determined by the Board of Directors of the Company, but adjusted so as to give effect to the reverse stock split. The par value of the common stock remained at $0.001 per share. | |
Stock_Incentive_Plan
Stock Incentive Plan | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Stock Incentive Plan [Abstract] | |||||||||||||
Stock Incentive Plan | ( 11 ) Stock Incentive Plan | ||||||||||||
The Company adopted the GWG Holdings, Inc. 2013 Stock Incentive Plan on March 27, 2013. The plan was subsequently revised on March 4, 2015. The plan is administered by Compensation Committee of the Board of Directors of the Company. The Company’s Chief Executive Officer may, on a discretionary basis and without committee review or approval, grant incentives to new employees of the Company who are not Officers of the Company. Incentives under the plan may be granted in one or a combination of the following forms: (a) incentive stock options and non-statutory stock options; (b) stock appreciation rights; (c) stock awards; (d) restricted stock; (e) restricted stock units; and (f) performance shares. Eligible participants include officers and employees of the company, members of the Board of Directors, and consultants or other independent contractors. 2,000,000 shares are issuable under the plan. No person shall receive grants of stock options and SARs under the plan that exceed, in the aggregate 400,000 shares of common stock in any one year. The term of each stock option shall be determined by the committee but shall not exceed ten years. Vested stock options may be exercised in whole or part by the holder giving notice to the Company. The holder of the option may provide payment for the exercise price or surrender shares equal to the exercise price. | |||||||||||||
The Company issued stock options for 745,601 shares of common stock to employees, officers, and directors of the Company through December 31, 2014. Options for 314,288 shares have vested, and the remaining options will vest over three years. The options were issued with an exercise price between $8.20 and $9.01 for those owning more than 10% of the Company’s stock and between $7.46 and $10.25 for others, which is equal to the estimated market price of the shares on the date of grant valued using Black-Scholes binomial option pricing model. The expected volatility used in the Black-Scholes model valuation of options issued during the year was 17.03% annualized. The annual volatility rate is based on the standard deviation of the average continuously compounded rate of return of five selected comparable companies over the previous 52 weeks. Forfeiture rate of 15% is based on historical Company information and expected future trend. As of December 31, 2014, stock options for 63,166 shares were forfeited and stock options for 334 shares were exercised. | |||||||||||||
In September 2014, we entered into a stock option agreement (the Agreement) with a new management employee (the Employee) granting the Employee the right to purchase up to 318,000 of the Company’s common stock at an exercise price of $12.50. The grant of such rights to purchase the Company’s common stock was treated as an inducement grant and was issued outside the GWG Holdings Inc. 2013 Stock Incentive Plan. The Agreement specifies that, among other things, options to purchase 159,000 shares of the Company’s common stock will vest with the Employee ratably on the first, second and third anniversary of the date of the Agreement. The remaining 159,000 options will vest quarterly using a formula based upon the closing price of the Company’s common stock on the last business day of such quarter. The maximum number of these remaining options that will vest with the Employee is 53,000 in each successive one-year period beginning on the date of the Agreement. | |||||||||||||
Outstanding stock options: | |||||||||||||
Vested | Un-vested | Total | |||||||||||
Balance as of December 31, 2013 | 195,000 | 210,250 | 405,250 | ||||||||||
Granted during the year | 64,450 | 565,901 | 630,351 | ||||||||||
Vested during the year | 72,089 | (72,089 | ) | - | |||||||||
Exercised during the year | (334 | ) | - | (334 | ) | ||||||||
Forfeited during the year | (16,917 | ) | (18,249 | ) | (35,166 | ) | |||||||
Expired during the year | - | - | - | ||||||||||
Balance as of December 31, 2014 | 314,288 | 685,813 | 1,000,101 | ||||||||||
Compensation expense related to un-vested options not yet recognized is $591,000. We expect to recognize this compensation expense over the next three years ($221,000 in 2015, $212,000 in 2016, and $158,000 in 2017). The Company issues new common stock for options exercised. | |||||||||||||
Net_loss_per_common_share
Net loss per common share | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Net loss per common share [Abstract] | |||||||||
Net loss per common share | ( 12 ) Net loss per common share | ||||||||
The Company began issuing Series A Preferred Stock September, 1, 2011, as described in note 8. The Series A Preferred Stock is anti-dilutive to the net loss per common share calculation at December 31, 2014 and 2013. The Company has also issued warrants to purchase common stock in conjunction with the sale of convertible preferred stock, discussed in note 8. The warrants and vested stock options are anti-dilutive at December 31, 2014 and 2013 and have not been included in the fully diluted net loss per common share calculation. | |||||||||
As of December 31, | 2014 | 2013 | |||||||
NET LOSS | (5,962,909 | ) | (194,955 | ) | |||||
(Loss) attributable to preferred shareholders | (138,374 | ) | (806,624 | ) | |||||
LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | (6,101,283 | ) | $ | (1,001,579 | ) | |||
Basic and diluted weighted average shares outstanding | 4,909,657 | 4,758,699 | |||||||
NET LOSS PER COMMON SHARE (BASIC AND DILUTED) | |||||||||
Net loss | $ | (1.21 | ) | $ | (0.04 | ) | |||
(Loss) attributable to preferred shareholders | $ | (0.03 | ) | $ | (0.17 | ) | |||
Net loss attributable to common shareholders | $ | (1.24 | ) | $ | (0.21 | ) | |||
Commitments
Commitments | 12 Months Ended |
Dec. 31, 2014 | |
Commitments and Contingencies [Abstract] | |
Commitments | ( 13 ) Commitments |
The Company entered into an office lease with U.S. Bank National Association as the landlord. The lease was effective April 22, 2012 with a term through August 31, 2015. The lease is for 11,695 square feet of office space located at 220 South Sixth Street, Minneapolis, Minnesota. The Company is obligated to pay base rent plus common area maintenance and a share of the building operating costs. Rent expenses under this agreement were $211,000 and $200,000 during 2014 and 2013, respectively. The minimum lease payments for 2015 under the lease agreement are $70,000. | |
Contingencies
Contingencies | 12 Months Ended |
Dec. 31, 2014 | |
Commitments and Contingencies [Abstract] | |
Contingencies | ( 14 ) Contingencies |
Litigation - In the normal course of business, the Company is involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings would not have a material adverse effect on the Company’s financial position, results of operations or cash flows. | |
Opportunity Finance, LLC, owned by Jon Sabes and Steven Sabes, is subject to litigation clawback claims by the bankruptcy trustee for third-party matters for payments that may have been deemed preference payments. In addition, Jon Sabes and Steven Sabes are subject to litigation clawback claims by the bankruptcy trustee for third-party matters for payments received from Opportunity Finance that may have been deemed preference payments. If the parties are unsuccessful in defending against these claims, it is possible that their equity ownership in the Company may be sold or transferred to other parties to satisfy such claims. In addition, the Company loaned $1,000,000 to Opportunity Finance, LLC, and was repaid in full plus interest of $177,000. This investment amount may also be subject to clawback claims by the bankruptcy trustee. At present, no such claims have been brought. | |
Guarantees_of_L_Bonds
Guarantees of L Bonds | 12 Months Ended | ||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||
Guarantees of L Bonds [Abstract] | |||||||||||||||||||||
Guarantees of L Bonds | ( 15 ) Guarantees of L Bonds | ||||||||||||||||||||
GWG Holdings has registered with the SEC the offer and sale $250,000,000 of L Bonds as described in note 7. The secured debentures are secured by the assets of Holdings as described in note 7 and a pledge of all the common stock by the largest shareholders. Obligations under the debentures are guaranteed by GWG Life. This guarantee involves the grant of a security interest in all the assets of GWG Life. The payment of principal and interest on the secured debentures is fully and unconditional guaranteed by GWG Life. Substantially all of the Company’s life insurance policies are held by DLP II and the Trust. The policies held by DLP II are not collateral for the debenture obligations as such policies serve as collateral for the credit facility. | |||||||||||||||||||||
The consolidating financial statements are presented in lieu of separate financial statements and other related disclosures of the subsidiary guarantors and issuer because management does not believe that separate financial statements and related disclosures would be material to investors. There are currently no significant restrictions on the ability of Holdings or GWG Life, the guarantor subsidiary, to obtain funds from its subsidiaries by dividend or loan, except as follows. DLP II is a borrower under a credit agreement with Autobahn, with DZ Bank AG as agent, as described in note 5. The significant majority of insurance policies owned by the Company are subject to a collateral arrangement with DZ Bank AG described in notes 2 and 5. Under this arrangement, collection and escrow accounts are used to fund premiums of the insurance policies and to pay interest and other charges under the revolving credit facility. DZ Bank AG and Autobahn must authorize all disbursements from these accounts, including any distributions to GWG Life. Distributions are limited to an amount that would result in the borrowers (DLP II, GWG Life and Holdings) realizing an annualized rate of return on the equity funded amount for such assets of not more than 18%, as determined by DZ Bank AG. After such amount is reached, the credit agreement requires that excess funds be used for repayments of borrowings before any additional distributions may be made. | |||||||||||||||||||||
The following represents consolidating financial information as of December 31, 2014 and December 31, 2013, with respect to the financial position, and for the three and nine months ended December 31, 2014 and 2013 with respect to results of operations and cash flows of GWG Holdings and its subsidiaries. The parent column presents the financial information of GWG Holdings, the primary obligor of the secured debentures. The guarantor subsidiary column presents the financial information of GWG Life, the guarantor subsidiary of the secured debentures, presenting its investment in DLP II and Trust under the equity method. The non-guarantor subsidiaries column presents the financial information of all non-guarantor subsidiaries including DLP II and Trust. | |||||||||||||||||||||
Consolidating Balance Sheets | |||||||||||||||||||||
Guarantor | Non-Guarantor | ||||||||||||||||||||
31-Dec-14 | Parent | Subsidiary | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
A S S E T S | |||||||||||||||||||||
Cash and cash equivalents | $ | 30,446,473 | $ | 216,231 | $ | - | $ | - | $ | 30,662,704 | |||||||||||
Restricted cash | - | 82,500 | 4,213,553 | - | 4,296,053 | ||||||||||||||||
Investment in life settlements, at fair value | - | - | 282,883,010 | - | 282,883,010 | ||||||||||||||||
Deferred financing costs, net | 569,400 | 1,000,000 | - | - | 1,569,400 | ||||||||||||||||
Other assets | 1,104,328 | 777,534 | 1,777,500 | - | 3,659,362 | ||||||||||||||||
Investment in subsidiaries | 185,636,417 | 215,124,779 | - | (400,761,196 | ) | - | |||||||||||||||
TOTAL ASSETS | $ | 217,756,618 | $ | 217,201,044 | $ | 288,874,063 | $ | (400,761,196 | ) | $ | 323,070,529 | ||||||||||
L I A B I L I T I E S & S T O C K H O L D E R S' E Q U I T Y (D E F I C I T) | |||||||||||||||||||||
LIABILITIES | |||||||||||||||||||||
Revolving credit facility | $ | - | $ | - | $ | 72,161,048 | $ | - | $ | 72,161,048 | |||||||||||
Series I Secured Notes payable | - | 27,616,578 | - | - | 27,616,578 | ||||||||||||||||
L Bonds | 182,782,884 | - | - | - | 182,782,884 | ||||||||||||||||
Accounts payable | 410,895 | 242,680 | 550,000 | - | 1,203,575 | ||||||||||||||||
Interest payable | 6,598,250 | 3,513,615 | 1,016,654 | - | 11,128,519 | ||||||||||||||||
Other accrued expenses | 301,098 | 191,753 | 21,583 | - | 514,434 | ||||||||||||||||
Deferred taxes | 5,273,555 | - | - | - | 5,273,555 | ||||||||||||||||
TOTAL LIABILITIES | 195,366,682 | 31,564,626 | 73,749,285 | - | 300,680,593 | ||||||||||||||||
STOCKHOLDERS’ EQUITY (DEFICIT) | |||||||||||||||||||||
Member capital | - | 185,636,418 | 215,124,778 | (400,761,196 | ) | - | |||||||||||||||
Convertible preferred stock | 20,527,866 | - | - | - | 20,527,866 | ||||||||||||||||
Common stock | 5,870 | - | - | - | 5,870 | ||||||||||||||||
Additional paid-in capital | 16,257,686 | - | - | - | 16,257,686 | ||||||||||||||||
Accumulated deficit | (14,401,486 | ) | - | - | - | (14,401,486 | ) | ||||||||||||||
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | 22,389,936 | 185,636,418 | 215,124,778 | (400,761,196 | ) | 22,389,936 | |||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | 217,756,618 | $ | 217,201,044 | $ | 288,874,063 | $ | (400,761,196 | ) | $ | 323,070,529 | ||||||||||
Guarantor | Non-Guarantor | ||||||||||||||||||||
31-Dec-13 | Parent | Subsidiary | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
A S S E T S | |||||||||||||||||||||
Cash and cash equivalents | $ | 32,711,636 | $ | 738,157 | $ | - | $ | - | $ | 33,449,793 | |||||||||||
Restricted cash | - | 1,420,000 | 4,412,970 | - | 5,832,970 | ||||||||||||||||
Investment in life settlements, at fair value | - | - | 234,672,794 | - | 234,672,794 | ||||||||||||||||
Deferred financing costs, net | - | - | 357,901 | - | 357,901 | ||||||||||||||||
Other assets | 381,883 | 484,510 | 200,625 | - | 1,067,018 | ||||||||||||||||
Investment in subsidiaries | 129,839,241 | 159,798,490 | - | (289,637,731 | ) | - | |||||||||||||||
TOTAL ASSETS | $ | 162,932,760 | $ | 162,441,157 | $ | 239,644,290 | $ | (289,637,731 | ) | $ | 275,380,476 | ||||||||||
L I A B I L I T I E S & S T O C K H O L D E R S' E Q U I T Y (D E F I C I T) | |||||||||||||||||||||
LIABILITIES | |||||||||||||||||||||
Revolving credit facility | $ | - | $ | - | $ | 79,000,000 | $ | - | $ | 79,000,000 | |||||||||||
Series I Secured Notes payable | - | 29,275,202 | - | - | 29,275,202 | ||||||||||||||||
L Bonds | 131,646,062 | - | - | - | 131,646,062 | ||||||||||||||||
Accounts payable | 233,214 | 106,655 | 500,000 | - | 839,869 | ||||||||||||||||
Interest payable | 3,806,820 | 3,065,465 | 337,123 | - | 7,209,408 | ||||||||||||||||
Other accrued expenses | 340,812 | 154,594 | 8,677 | - | 504,083 | ||||||||||||||||
Deferred taxes | 7,675,174 | - | - | - | 7,675,174 | ||||||||||||||||
TOTAL LIABILITIES | 143,702,082 | 32,601,916 | 79,845,800 | - | 256,149,798 | ||||||||||||||||
CONVERTIBLE, REDEEMABLE PREFERRED STOCK | 24,722,693 | - | - | - | 24,722,693 | ||||||||||||||||
STOCKHOLDERS’ EQUITY (DEFICIT) | |||||||||||||||||||||
Member capital | - | 129,839,241 | 159,798,490 | (289,637,731 | ) | - | |||||||||||||||
Common stock | 4,562 | - | - | - | 4,562 | ||||||||||||||||
Additional paid-in capital | 2,942,000 | - | - | - | 2,942,000 | ||||||||||||||||
Accumulated deficit | (8,438,577 | ) | - | - | - | (8,438,577 | ) | ||||||||||||||
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | (5,492,015 | ) | 129,839,241 | 159,798,490 | (289,637,731 | ) | (5,492,015 | ) | |||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | 162,932,760 | $ | 162,441,157 | $ | 239,644,290 | $ | (289,637,731 | ) | $ | 275,380,476 | ||||||||||
Consolidated Statements of Operations | |||||||||||||||||||||
For the year ended December 31, 2014 | Parent | Guarantor Subsidiary | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
REVENUE | |||||||||||||||||||||
Contract servicing fees | $ | - | $ | 1,615,674 | $ | - | $ | (1,615,674 | ) | $ | - | ||||||||||
Gain on life settlements, net | - | - | 30,416,127 | - | 30,416,127 | ||||||||||||||||
Interest and other income | 24,037 | 231,034 | 33,469 | (228,092 | ) | 60,448 | |||||||||||||||
TOTAL REVENUE | 24,307 | 1,846,708 | 30,449,596 | (1,843,766 | ) | 30,476,575 | |||||||||||||||
EXPENSES | |||||||||||||||||||||
Origination and servicing fees | - | - | 1,615,674 | (1,615,674 | ) | - | |||||||||||||||
Interest expense | 18,248,599 | 3,110,165 | 5,358,034 | - | 26,716,798 | ||||||||||||||||
Employee compensation and benefits | 3,018,570 | 1,951,066 | - | - | 4,969,636 | ||||||||||||||||
Legal and professional fees | 2,021,763 | 307,386 | 10,086 | - | 2,339,235 | ||||||||||||||||
Other expenses | 2,832,867 | 1,929,557 | 281,102 | (228,092 | ) | 4,815,434 | |||||||||||||||
TOTAL EXPENSES | 26,121,799 | 7,298,174 | 7,264,896 | (1,843,766 | ) | 38,841,103 | |||||||||||||||
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES | (26,097,762 | ) | (5,451,466 | ) | 23,184,700 | - | (8,364,528 | ) | |||||||||||||
EQUITY IN INCOME OF SUBSIDIARIES | 17,733,234 | 23,184,700 | - | (40,917,934 | ) | - | |||||||||||||||
NET INCOME BEFORE INCOME TAXES | 8,364,528 | 17,733,234 | 23,184,700 | (40,917,934 | ) | (8,364,528 | ) | ||||||||||||||
INCOME TAX BENEFIT | (2,401,619 | ) | - | - | - | (2,401,619 | ) | ||||||||||||||
NET INCOME (LOSS) | (5,962,909 | ) | 17,733,234 | 23,184,700 | (40,917,934 | ) | (5,962,909 | ) | |||||||||||||
(Loss) attributable to preferred shareholders | (138,374 | ) | - | - | - | (138,374 | ) | ||||||||||||||
LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | (6,101,283 | ) | $ | - | $ | - | $ | - | $ | (6,101,283 | ) | |||||||||
For the year ended December 31, 2013 | Parent | Guarantor Subsidiary | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
REVENUE | |||||||||||||||||||||
Contract servicing fees | $ | - | $ | 3,710,737 | $ | - | $ | (3,710,737 | ) | $ | - | ||||||||||
Gain on life settlements, net | - | - | 29,513,642 | - | 29,513,642 | ||||||||||||||||
Interest and other income | 3,334,331 | 2,612,420 | 79,767 | (2,475,386 | ) | 3,551,132 | |||||||||||||||
TOTAL REVENUE | 3,334,331 | 6,323,157 | 29,593,409 | (6,186,123 | ) | 33,064,774 | |||||||||||||||
EXPENSES | |||||||||||||||||||||
Origination and servicing fees | - | - | 3,710,737 | (3,710,737 | ) | - | |||||||||||||||
Interest expense | 11,800,718 | 3,684,811 | 5,277,115 | - | 20,762,644 | ||||||||||||||||
Employee compensation and benefits | 3,424,383 | 1,619,465 | - | - | 5,043,848 | ||||||||||||||||
Legal and professional fees | 1,206,520 | 514,728 | 32,961 | - | 1,754,209 | ||||||||||||||||
Other expenses | 2,004,636 | 1,463,084 | 2,532,927 | (2,475,386 | ) | 3,525,261 | |||||||||||||||
TOTAL EXPENSES | 18,436,257 | 7,282,088 | 11,553,740 | (6,186,123 | ) | 31,085,962 | |||||||||||||||
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES | (15,101,926 | ) | (958,931 | ) | 18,039,669 | - | 1,978,812 | ||||||||||||||
EQUITY IN INCOME OF SUBSIDIARIES | 17,080,738 | 18,088,189 | - | (35,168,927 | ) | - | |||||||||||||||
NET INCOME BEFORE INCOME TAXES | 1,978,812 | 17,129,258 | 18,039,669 | (35,168,927 | ) | 1,978,812 | |||||||||||||||
INCOME TAX EXPENSE | 2,173,767 | - | - | - | 2,173,767 | ||||||||||||||||
NET INCOME (LOSS) | (194,955 | ) | 17,129,258 | 18,039,669 | (35,168,927 | ) | (194,955 | ) | |||||||||||||
Accretion of preferred stock to liquidation value | (806,624 | ) | - | - | - | (806,624 | ) | ||||||||||||||
LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | (1,001,579 | ) | $ | - | $ | - | $ | - | $ | (1,001,579 | ) | |||||||||
Consolidated Statements of Cash Flows | |||||||||||||||||||||
For the year ended December 31, 2014 | Parent | Guarantor Subsidiary | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||||||||||||
Net income (loss) | $ | (5,962,909 | ) | $ | 17,733,234 | $ | 23,184,700 | $ | (40,917,934 | ) | $ | (5,962,909 | ) | ||||||||
Adjustments to reconcile net income (loss) to cash flows from operating activities: | |||||||||||||||||||||
Equity of subsidiaries | (17,733,234 | ) | (23,184,700 | ) | - | 40,917,934 | - | ||||||||||||||
Gain on life settlements | - | - | (39,928,003 | ) | - | (39,928,003 | ) | ||||||||||||||
Amortization of deferred financing and issuance costs | 2,967,617 | 479,278 | 357,900 | - | 3,804,795 | ||||||||||||||||
Deferred income taxes | (2,401,619 | ) | - | - | - | (2,401,619 | ) | ||||||||||||||
Preferred stock issued for dividends | 774,085 | - | - | - | 774,085 | ||||||||||||||||
Convertible, redeemable preferred stock dividends payable | (116,207 | ) | - | - | - | (116,207 | ) | ||||||||||||||
(Increase) decrease in operating assets: | |||||||||||||||||||||
Due from related parties | - | (291 | ) | - | - | (291 | ) | ||||||||||||||
Insurance benefits receivable | - | - | (1,750,000 | ) | - | (1,750,000 | ) | ||||||||||||||
Other assets | (39,118,259 | ) | (33,434,321 | ) | - | 70,205,530 | (2,347,050 | ) | |||||||||||||
Increase (decrease) in operating liabilities: | |||||||||||||||||||||
Accounts payable | 177,681 | 136,025 | 50,000 | - | 363,706 | ||||||||||||||||
Interest payable | 3,359,926 | 599,419 | 679,531 | - | 4,638,876 | ||||||||||||||||
Other accrued expenses | 430,601 | 16,367 | 10,408 | - | 457,376 | ||||||||||||||||
NET CASH FLOWS USED IN OPERATING ACTIVITIES | (57,622,318 | ) | (37,654,989 | ) | (17,395,464 | ) | 70,205,530 | (42,467,241 | ) | ||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||||||||||||
Investment in life settlements | - | - | (12,292,401 | ) | - | (12,292,401 | ) | ||||||||||||||
Proceeds from settlement of life settlements | - | - | 4,185,813 | - | 4,185,813 | ||||||||||||||||
NET CASH FLOWS USED IN INVESTING ACTIVITIES | - | - | (8,106,588 | ) | - | (8,106,588 | ) | ||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||||||||||||
Net proceeds from revolving credit facility | - | - | (6,838,952 | ) | - | (6,838,952 | ) | ||||||||||||||
Payments for redemption of Series I Secured Notes payable | - | (2,268,379 | ) | - | - | (2,268,379 | ) | ||||||||||||||
Proceeds from issuance of debentures | 65,713,297 | - | - | - | 65,713,297 | ||||||||||||||||
Payments for issuance of debentures | (4,104,876 | ) | - | - | - | (4,104,876 | ) | ||||||||||||||
Payments for redemption of debentures | (14,429,017 | ) | - | - | - | (14,429,017 | ) | ||||||||||||||
Proceeds (payments) from restricted cash | - | 1,337,500 | 199,416 | - | 1,536,916 | ||||||||||||||||
Issuance of common stock | 8,642,990 | - | - | - | 8,642,990 | ||||||||||||||||
Issuance of member capital | - | 38,063,942 | 32,141,588 | (70,205,530 | ) | - | |||||||||||||||
Payments for redemption of preferred stock | (456,239 | ) | - | - | - | (465,239 | ) | ||||||||||||||
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 55,357,155 | 37,133,063 | 25,502,052 | (70,205,530 | ) | 47,786,740 | |||||||||||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (2,265,163 | ) | (521,926 | ) | - | - | (2,787,089 | ) | |||||||||||||
CASH AND CASH EQUIVALENTS | |||||||||||||||||||||
BEGINNING OF THE YEAR | 32,711,636 | 738,157 | - | - | 33,449,793 | ||||||||||||||||
END OF THE YEAR | $ | 30,446,473 | $ | 216,231 | $ | - | $ | - | $ | 30,662,704 | |||||||||||
For the year ended December 31, 2013 | Parent | Guarantor Subsidiary | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||||||||||||
Net income (loss) | $ | (194,955 | ) | $ | 17,129,258 | $ | 18,039,669 | $ | (35,168,927 | ) | $ | (194,955 | ) | ||||||||
Adjustments to reconcile net income (loss) to cash flows from operating activities: | |||||||||||||||||||||
Equity of subsidiaries | (17,080,738 | ) | (18,088,189 | ) | - | 35,168,927 | - | ||||||||||||||
Gain on life settlements | - | - | (39,337,542 | ) | - | (39,337,542 | ) | ||||||||||||||
Amortization of deferred financing and issuance costs | 1,908,248 | 823,004 | (260,861 | ) | - | 2,470,391 | |||||||||||||||
Deferred income taxes | 2,173,767 | - | - | - | 2,173,767 | ||||||||||||||||
Preferred stock issued for dividends | 623,899 | - | - | - | 623,899 | ||||||||||||||||
Convertible, redeemable preferred stock dividends payable | 255 | - | - | - | 255 | ||||||||||||||||
Repurchase of common stock | (3,252,400 | ) | (3,252,400 | ) | |||||||||||||||||
(Increase) decrease in operating assets: | |||||||||||||||||||||
Due from related parties | - | 8,613 | - | - | 8,613 | ||||||||||||||||
Insurance benefits receivable | - | - | 2,850,000 | - | 2,850,000 | ||||||||||||||||
Other assets | (51,522,808 | ) | (45,077,218 | ) | - | 96,033,606 | (566,420 | ) | |||||||||||||
Increase (decrease) in operating liabilities: | |||||||||||||||||||||
Accounts payable | 160,130 | 1,680 | 208,000 | - | 369,810 | ||||||||||||||||
Interest payable | 2,399,975 | 809,540 | 208,918 | - | 3,418,433 | ||||||||||||||||
Other accrued expenses | 277,321 | (224,990 | ) | (1,690 | ) | - | 50,641 | ||||||||||||||
NET CASH FLOWS USED IN OPERATING ACTIVITIES | (64,507,306 | ) | (44,618,302 | ) | (18,293,506 | ) | 96,033,606 | (31,385,508 | ) | ||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||||||||||||
Investment in life settlements | - | - | (34,997,500 | ) | - | (34,997,500 | ) | ||||||||||||||
Proceeds from settlement of life settlements | - | - | 4,563,896 | - | 4,563,896 | ||||||||||||||||
NET CASH FLOWS USED IN INVESTING ACTIVITIES | - | - | (30,433,604 | ) | - | (30,433,604 | ) | ||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||||||||||||
Net proceeds from revolving credit facility | - | - | 8,000,000 | - | 8,000,000 | ||||||||||||||||
Payments for redemption of Series I Secured Notes payable | - | (8,671,624 | ) | - | - | (8,671,624 | ) | ||||||||||||||
Proceeds from issuance of debentures | 85,260,976 | - | - | - | 85,260,976 | ||||||||||||||||
Payments for issuance of debentures | (4,320,542 | ) | - | - | - | (4,320,542 | ) | ||||||||||||||
Payments for redemption of debentures | (8,143,363 | ) | - | - | - | (8,143,363 | ) | ||||||||||||||
Proceeds (payments) from restricted cash | - | 328,700 | (4,068,578 | ) | - | (3,739,878 | ) | ||||||||||||||
Issuance of member capital | - | 51,237,918 | 44,795,688 | (96,033,606 | ) | - | |||||||||||||||
Payments for redemption of preferred stock | (613,708 | ) | - | - | - | (613,708 | ) | ||||||||||||||
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 72,183,363 | 42,894,994 | 48,727,110 | (96,033,606 | ) | 67,771,861 | |||||||||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 7,676,057 | (1,723,308 | ) | - | - | 5,952,749 | |||||||||||||||
CASH AND CASH EQUIVALENTS | |||||||||||||||||||||
BEGINNING OF THE YEAR | 25,035,579 | 2,461,465 | - | - | 27,497,044 | ||||||||||||||||
END OF THE YEAR | $ | 32,711,636 | $ | 738,157 | $ | - | $ | - | $ | 33,449,793 | |||||||||||
Concentrations
Concentrations | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Concentration [Abstract] | |||||||||
Concentration | ( 16 ) Concentration | ||||||||
GWG purchases life insurance policies written by life insurance companies having investment grade ratings by independent rating agencies. As a result there may be certain concentrations of contracts with life insurance companies. The following summarizes the face value of insurance contracts with specific life insurance companies exceeding 10% of the total face value held by the Company. | |||||||||
As of December 31, | |||||||||
Life insurance company | 2014 | 2013 | |||||||
AXA Equitable | 14.55 | % | 16.58 | % | |||||
John Hancock | 11.48 | % | 11.34 | % | |||||
The following summarizes the number of insurance contracts held in specific states exceeding 10% of the total face value held by the Company: | |||||||||
As of December 31, | |||||||||
State of residence | 2014 | 2013 | |||||||
California | 28.87 | % | 28.14 | % | |||||
Florida | 18.56 | % | 15.59 | % | |||||
New York | * | 10.65 | % | ||||||
* percentage does not exceed 10% of the total face value. | |||||||||
Subsequent_events
Subsequent events | 12 Months Ended |
Dec. 31, 2014 | |
Subsequent events [Abstract] | |
Subsequent events | ( 17 ) Subsequent events |
Subsequent to December 31, 2014, four policies covering three individuals have matured. The combined insurance benefits of these three policies were $21,125,000. The Company recorded realized gains of $18,194,000 on four policies. | |
Effective January 9, 2015, GWG launched a $1 billion follow-on to our publicly registered L Bond offering. GWG is offering L Bonds on a continuous basis and there is no minimum amount of L Bonds that must be sold before GWG can use proceeds from the sale of L Bonds. GWG plans to use the net proceeds from the offering of the L Bonds primarily to purchase and finance additional life insurance assets, and to service and retire other outstanding debt obligations. Emerson Equity LLC is serving as the managing broker-dealer for the offering, which is being sold through a network of participating dealers and licensed financial advisors and representatives in minimum increments of $25,000. | |
Subsequent to December 31, 2014, the Company has issued approximately an additional $19,051,000 in principal amount of L Bonds. | |
Nature_of_Business_and_Summary1
Nature of Business and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2014 | |
Nature of Business and Summary of Significant Accounting Policies [Abstract] | |
Nature of business | Nature of business - GWG Holdings, Inc. (GWG Holdings) and subsidiaries, located in Minneapolis, Minnesota, facilitates the purchase of life insurance policies for its own investment portfolio through its wholly owned subsidiary, GWG Life, LLC (GWG Life), and its subsidiaries, GWG Trust (Trust), GWG DLP Funding II, LLC (DLP II) and its wholly-owned subsidiary, GWG DLP Master Trust II (the Trust II). All of these entities are legally organized in Delaware. Unless the context otherwise requires or we specifically so indicate, all references in this report to "we", "us", "our", "our Company", "GWG", or the "Company" refer to these entities collectively. |
Use of estimates | Use of estimates - The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The most significant estimates with regard to these consolidated financial statements relates to (1) the determination of the assumptions used in estimating the fair value of the investment in life insurance policies, and (2) the value of deferred tax assets and liabilities. |
Cash and cash equivalents | Cash and cash equivalents - The Company considers cash in demand deposit accounts and temporary investments purchased with an original maturity of three months or less to be cash equivalents. The Company maintains its cash and cash equivalents with highly rated financial institutions. From time to time, the Company’s balances in its bank accounts exceed Federal Deposit Insurance Corporation limits. The Company periodically evaluates the risk of exceeding insured levels and may transfer funds as it deems appropriate. The Company has not experienced any losses with regards to balances in excess of insured limits or as a result of other concentrations of credit risk. |
Life settlements | Life settlements - ASC 325-30, Investments in Insurance Contracts, allows a reporting entity the election to account for its investments in life settlements using either the investment method or the fair value method. The election shall be made on an instrument-by-instrument basis and is irrevocable. Under the investment method, an investor shall recognize the initial investment at the purchase price plus all initial direct costs. Continuing costs (policy premiums and direct external costs, if any) to keep the policy in force shall be capitalized. Under the fair value method, an investor shall recognize the initial investment at the purchase price. In subsequent periods, the investor shall re- measure the investment at fair value in its entirety at each reporting period and shall recognize the change in fair value in current period income net of premiums paid. The Company uses the fair value method to account for all life settlements. |
The Company recognizes realized gains (revenue) from life settlement contracts upon one of the two following events: | |
1) Receipt of mortality notice or verified obituary of insured; or | |
2) Sale of policy and filing of change of ownership forms and receipt of payment | |
The Company recognizes the difference between the face value of the insurance benefits and carrying values of the policy when an insured event has occurred and the Company determines that settlement and ultimate collection of the face value of the insurance benefits is realizable and reasonably assured. Revenue from a transaction must meet both criteria in order to be recognized. In an event of a sale of a policy the Company recognizes gain or loss as the difference between the sale price and the carrying value of the policy on the date of the receipt of payment on such sale. | |
Deposits and initial direct costs advanced on unsettled policy acquisitions are recorded as other assets until policy ownership has been transferred to the Company. Such deposits and direct cost advances were $27,000 and $201,000 at December 31, 2014 and 2013, respectively. | |
Deferred financing and issuance costs | Deferred financing and issuance costs – Costs incurred to obtain financing under the revolving credit facility, as described in note 5, have been capitalized and are amortized using the straight-line method over the term of the revolving credit facility. Amortization of deferred financing costs was $358,000 and $455,000 for the years ended December 31, 2014 and 2013, respectively. As of December 31, 2014 those costs have been fully amortized. The Series I Secured Notes payable, as described in note 6, are reported net of issuance costs, sales commissions and other direct expenses, which are amortized using the interest method over the term of each respective borrowing. The L Bonds, as described in note 7, are reported net of issuance costs, sales commissions and other direct expenses, which are amortized using the interest method over the term of each respective borrowing. The Series A Preferred Stock, as described in note 8, is reported net of issuance costs, sales commissions, including the fair value of warrants issued, and other direct expenses, which are amortized using the interest method as interest expense over the three-year redemption period. |
Earnings (loss) per share | Earnings (loss) per share - Basic per share earnings (loss) attributable to non-redeemable interests is calculated using the weighted-average number of shares outstanding during the period. Diluted earnings per share is calculated based on the potential dilutive impact, if any, of the Company’s convertible preferred stock, and outstanding warrants, and stock options. Due to the net loss reported for the years ended December 31, 2014 and 2013, all preferred stock, stock options and warrants are anti-dilutive. |
Subsequent events | Subsequent events - Subsequent events are events or transactions that occur after the balance sheet date but before consolidated financial statements are issued. The Company recognizes in the consolidated financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing the consolidated financial statements. The Company’s consolidated financial statements do not recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date and before the consolidated financial statements are available to be issued. The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the consolidated financial statements are filed for potential recognition or disclosure. |
Recently adopted pronouncements | Recently adopted pronouncements - Pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or are not expected to be significant to the Company. |
Investment_in_Life_Insurance_P1
Investment in Life Insurance Policies (Tables) | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||
Investment in Life Insurance Policies [Abstract] | |||||||||||||||||||||||||
Summary of life insurance policies, under the fair value method and estimated maturity dates, based on remaining life expectancy | As of December 31, 2014 | As of December 31, 2013 | |||||||||||||||||||||||
Years Ending December 31, | Number of Contracts | Estimated Fair Value | Face Value | Number of Contracts | Estimated Fair Value | Face Value | |||||||||||||||||||
2015 | 3 | $ | 5,063,000 | $ | 6,000,000 | 4 | $ | 5,065,000 | $ | 6,750,000 | |||||||||||||||
2016 | 7 | 8,144,000 | 11,550,000 | 8 | 8,174,000 | 13,750,000 | |||||||||||||||||||
2017 | 17 | 21,916,000 | 35,542,000 | 25 | 33,345,000 | 63,916,000 | |||||||||||||||||||
2018 | 30 | 41,994,000 | 76,206,000 | 33 | 37,243,000 | 80,318,000 | |||||||||||||||||||
2019 | 45 | 47,303,000 | 106,973,000 | 34 | 32,844,000 | 89,295,000 | |||||||||||||||||||
2020 | 41 | 43,429,000 | 102,614,000 | 34 | 27,741,000 | 75,644,000 | |||||||||||||||||||
2021 | 36 | 29,789,000 | 90,921,000 | 33 | 29,041,000 | 111,770,000 | |||||||||||||||||||
Thereafter | 112 | 85,245,000 | 349,293,000 | 92 | 61,220,000 | 299,205,000 | |||||||||||||||||||
Totals | 291 | $ | 282,883,000 | $ | 779,099,000 | 263 | $ | 234,673,000 | $ | 740,648,000 | |||||||||||||||
Reconciliation of gain on life settlements | Years Ended December 31, | ||||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||||
Change in fair value | $ | 39,928,000 | $ | 39,338,000 | |||||||||||||||||||||
Premiums and other annual fees | (23,376,000 | ) | (21,860,000 | ) | |||||||||||||||||||||
Policy maturities | 13,864,000 | 12,036,000 | |||||||||||||||||||||||
Gain on life settlements, net | $ | 30,416,000 | $ | 29,514,000 | |||||||||||||||||||||
Estimated expected premium payments to maintain the above life insurance policies assuming no mortalities | Years Ending December 31, | ||||||||||||||||||||||||
2015 | $ | 26,349,000 | |||||||||||||||||||||||
2016 | 28,857,000 | ||||||||||||||||||||||||
2017 | 32,365,000 | ||||||||||||||||||||||||
2018 | 35,341,000 | ||||||||||||||||||||||||
2019 | 39,423,000 | ||||||||||||||||||||||||
$ | 162,335,000 |
Fair_Value_Definition_and_Hier1
Fair Value Definition and Hierarchy (Tables) | 12 Months Ended | ||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||
Fair Value Definition and Hierarchy [Abstract] | |||||||||||||||||||
Reconciliation of investments in life insurance policies | |||||||||||||||||||
Years Ended December 31, | |||||||||||||||||||
2014 | 2013 | ||||||||||||||||||
Beginning balance | $ | 234,673,000 | $ | 164,317,000 | |||||||||||||||
Purchases | 12,468,000 | 35,582,000 | |||||||||||||||||
Maturities (cash in excess of carrying value) | (4,186,000 | ) | (4,564,000 | ) | |||||||||||||||
Net change in fair value | 39,928,000 | 39,338,000 | |||||||||||||||||
Ending balance | $ | 282,883,000 | $ | 234,673,000 | |||||||||||||||
Summary of inputs utilized in estimating the fair value | |||||||||||||||||||
As of | As of | ||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||
2014 | 2013 | ||||||||||||||||||
Weighted average age of insured | 82.8 | 82.1 | |||||||||||||||||
Weighted average life expectancy, months* | 78.4 | 87 | |||||||||||||||||
Average face amount per policy | $ | 2,677,000 | $ | 2,816,000 | |||||||||||||||
Discount rate | 11.43 | % | 11.69 | % | |||||||||||||||
* Standard life expectancy as adjusted for insured’s specific circumstances. | |||||||||||||||||||
Fair value sensitivity analysis on the investment in life insurance policies | |||||||||||||||||||
Changes in fair value of life insurance policies | |||||||||||||||||||
Change in life expectancy estimates | plus | minus | plus | minus | |||||||||||||||
8 months | 8 months | 4 months | 4 months | ||||||||||||||||
31-Dec-14 | $ | (38,864,000 | ) | $ | 40,634,000 | $ | (19,664,000 | ) | $ | 20,130,000 | |||||||||
31-Dec-13 | $ | (34,382,000 | ) | $ | 36,152,000 | $ | (17,417,000 | ) | $ | 17,865,000 | |||||||||
Change in discount rate | plus 2% | minus 2% | plus 1% | minus 1% | |||||||||||||||
31-Dec-14 | $ | (24,085,000 | ) | $ | 28,179,000 | $ | (12,502,000 | ) | $ | 13,522,000 | |||||||||
31-Dec-13 | $ | (22,944,000 | ) | $ | 27,063,000 | $ | (11,933,000 | ) | $ | 12,959,000 | |||||||||
Warrants Level 3 instruments and measured at fair value upon issuance | Month issued | Warrants | Fair value | Risk | Volatility | Term | |||||||||||||
Issued | per share | free rate | |||||||||||||||||
Dec-11 | 68,937 | $ | 0.22 | 0.42 | % | 25.25 | % | 5 years | |||||||||||
Mar-12 | 38,130 | $ | 0.52 | 0.38 | % | 36.2 | % | 5 years | |||||||||||
Jun-12 | 161,840 | $ | 1.16 | 0.41 | % | 47.36 | % | 5 years | |||||||||||
Jul-12 | 144,547 | $ | 1.16 | 0.41 | % | 47.36 | % | 5 years | |||||||||||
Sep-12 | 2,500 | $ | 0.72 | 0.31 | % | 40.49 | % | 5 years | |||||||||||
Sep-14 | 16,000 | $ | 1.26 | 1.85 | % | 17.03 | % | 5 years | |||||||||||
431,954 |
Series_I_Secured_Notes_Payable1
Series I Secured Notes Payable (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Credit facilities and Series I Secured Notes Payable and Renewable Secured Debentures (subsequently renamed L Bonds) [Abstract] | |||||||||
Future contractual maturities of series I secured notes payable | |||||||||
Years Ending December 31, | Contractual Maturities | Amortization of Deferred Financing Costs | |||||||
2015 | $ | 13,887,000 | $ | 92,000 | |||||
2016 | 8,242,000 | 161,000 | |||||||
2017 | 4,713,000 | 134,000 | |||||||
2018 | 754,000 | 30,000 | |||||||
2019 | 347,000 | 8,000 | |||||||
Thereafter | 104,000 | 5,000 | |||||||
$ | 28,047,000 | $ | 430,000 |
Renewable_Secured_Debentures_S1
Renewable Secured Debentures (Subsequently Renamed L Bonds) (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Credit facilities and Series I Secured Notes Payable and Renewable Secured Debentures (subsequently renamed L Bonds) [Abstract] | |||||||||
Schedule of future contractual maturities of L Bonds | |||||||||
Years Ending December 31, | Contractual Maturities | Amortization of Deferred Financing Costs | |||||||
2015 | $ | 63,375,000 | $ | 871,000 | |||||
2016 | 50,270,000 | 1,578,000 | |||||||
2017 | 29,546,000 | 1,253,000 | |||||||
2018 | 13,551,000 | 668,000 | |||||||
2019 | 14,262,000 | 670,000 | |||||||
Thereafter | 15,373,000 | 842,000 | |||||||
$ | 186,377,000 | $ | 5,882,000 |
Income_Taxes_Tables
Income Taxes (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
Income Taxes [Abstract] | |||||||||||||||||
Components of deferred income tax expense | Income tax provision (benefit): | 2014 | 2013 | ||||||||||||||
Deferred: | |||||||||||||||||
Federal | $ | (1,820,000 | ) | $ | 1,826,000 | ||||||||||||
State | (582,000 | ) | 348,000 | ||||||||||||||
Total income tax expense (benefit) | $ | (2,402,000 | ) | $ | 2,174,000 | ||||||||||||
Reconciliation of income tax expense (benefit) at the statutory federal tax rate to actual income tax expense (benefit) | 2014 | 2013 | |||||||||||||||
Statutory federal income tax | $ | (2,844,000 | ) | (34.0 | )% | $ | 673,000 | 34 | % | ||||||||
State income taxes, net of federal benefit | (374,000 | ) | (4.5 | )% | 298,000 | 15.1 | % | ||||||||||
Series A Preferred Stock dividends | 826,000 | 9.9 | % | 860,000 | 43.4 | % | |||||||||||
Other permanent differences | (10,000 | ) | (0.1 | )% | 343,000 | 17.3 | % | ||||||||||
Total income tax expense (benefit) | $ | (2,402,000 | ) | (28.7 | )% | $ | 2,174,000 | 109.8 | % | ||||||||
Summary of tax effects of temporary differences that give rise to deferred income taxes | 2014 | 2013 | |||||||||||||||
Deferred tax assets : | |||||||||||||||||
Note receivable from related party | $ | 2,023,000 | $ | 2,023,000 | |||||||||||||
Net operating loss carryforwards | 4,517,000 | 2,596,000 | |||||||||||||||
Other assets | 272,000 | 164,000 | |||||||||||||||
Subtotal | 6,812,000 | 4,783,000 | |||||||||||||||
Valuation allowance | (2,164,000 | ) | (2,164,000 | ) | |||||||||||||
Net deferred tax asset | 4,648,000 | 2,619,000 | |||||||||||||||
Deferred tax liabilities: | |||||||||||||||||
Investment in life settlements | (9,922,000 | ) | (10,294,000 | ) | |||||||||||||
Net deferred tax assets | $ | (5,274,000 | ) | $ | (7,675,000 | ) |
Stock_Incentive_Plan_Tables
Stock Incentive Plan (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Stock Incentive Plan [Abstract] | |||||||||||||
Schedule of outstanding stock options | Vested | Un-vested | Total | ||||||||||
Balance as of December 31, 2013 | 195,000 | 210,250 | 405,250 | ||||||||||
Granted during the year | 64,450 | 565,901 | 630,351 | ||||||||||
Vested during the year | 72,089 | (72,089 | ) | - | |||||||||
Exercised during the year | (334 | ) | - | (334 | ) | ||||||||
Forfeited during the year | (16,917 | ) | (18,249 | ) | (35,166 | ) | |||||||
Expired during the year | - | - | - | ||||||||||
Balance as of December 31, 2014 | 314,288 | 685,813 | 1,000,101 |
Net_loss_per_common_share_Tabl
Net loss per common share (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Net loss per common share [Abstract] | |||||||||
Summary of fully diluted net loss per common share calculation | As of December 31, | 2014 | 2013 | ||||||
NET LOSS | (5,962,909 | ) | (194,955 | ) | |||||
(Loss) attributable to preferred shareholders | (138,374 | ) | (806,624 | ) | |||||
LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | (6,101,283 | ) | $ | (1,001,579 | ) | |||
Basic and diluted weighted average shares outstanding | 4,909,657 | 4,758,699 | |||||||
NET LOSS PER COMMON SHARE (BASIC AND DILUTED) | |||||||||
Net loss | $ | (1.21 | ) | $ | (0.04 | ) | |||
(Loss) attributable to preferred shareholders | $ | (0.03 | ) | $ | (0.17 | ) | |||
Net loss attributable to common shareholders | $ | (1.24 | ) | $ | (0.21 | ) |
Guarantees_of_L_Bonds_Tables
Guarantees of L Bonds (Tables) | 12 Months Ended | ||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||
Guarantees of L Bonds [Abstract] | |||||||||||||||||||||
Condensed Consolidating Balance Sheets | Guarantor | Non-Guarantor | |||||||||||||||||||
31-Dec-14 | Parent | Subsidiary | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
A S S E T S | |||||||||||||||||||||
Cash and cash equivalents | $ | 30,446,473 | $ | 216,231 | $ | - | $ | - | $ | 30,662,704 | |||||||||||
Restricted cash | - | 82,500 | 4,213,553 | - | 4,296,053 | ||||||||||||||||
Investment in life settlements, at fair value | - | - | 282,883,010 | - | 282,883,010 | ||||||||||||||||
Deferred financing costs, net | 569,400 | 1,000,000 | - | - | 1,569,400 | ||||||||||||||||
Other assets | 1,104,328 | 777,534 | 1,777,500 | - | 3,659,362 | ||||||||||||||||
Investment in subsidiaries | 185,636,417 | 215,124,779 | - | (400,761,196 | ) | - | |||||||||||||||
TOTAL ASSETS | $ | 217,756,618 | $ | 217,201,044 | $ | 288,874,063 | $ | (400,761,196 | ) | $ | 323,070,529 | ||||||||||
L I A B I L I T I E S & S T O C K H O L D E R S' E Q U I T Y (D E F I C I T) | |||||||||||||||||||||
LIABILITIES | |||||||||||||||||||||
Revolving credit facility | $ | - | $ | - | $ | 72,161,048 | $ | - | $ | 72,161,048 | |||||||||||
Series I Secured Notes payable | - | 27,616,578 | - | - | 27,616,578 | ||||||||||||||||
L Bonds | 182,782,884 | - | - | - | 182,782,884 | ||||||||||||||||
Accounts payable | 410,895 | 242,680 | 550,000 | - | 1,203,575 | ||||||||||||||||
Interest payable | 6,598,250 | 3,513,615 | 1,016,654 | - | 11,128,519 | ||||||||||||||||
Other accrued expenses | 301,098 | 191,753 | 21,583 | - | 514,434 | ||||||||||||||||
Deferred taxes | 5,273,555 | - | - | - | 5,273,555 | ||||||||||||||||
TOTAL LIABILITIES | 195,366,682 | 31,564,626 | 73,749,285 | - | 300,680,593 | ||||||||||||||||
STOCKHOLDERS’ EQUITY (DEFICIT) | |||||||||||||||||||||
Member capital | - | 185,636,418 | 215,124,778 | (400,761,196 | ) | - | |||||||||||||||
Convertible preferred stock | 20,527,866 | - | - | - | 20,527,866 | ||||||||||||||||
Common stock | 5,870 | - | - | - | 5,870 | ||||||||||||||||
Additional paid-in capital | 16,257,686 | - | - | - | 16,257,686 | ||||||||||||||||
Accumulated deficit | (14,401,486 | ) | - | - | - | (14,401,486 | ) | ||||||||||||||
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | 22,389,936 | 185,636,418 | 215,124,778 | (400,761,196 | ) | 22,389,936 | |||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | 217,756,618 | $ | 217,201,044 | $ | 288,874,063 | $ | (400,761,196 | ) | $ | 323,070,529 | ||||||||||
Guarantor | Non-Guarantor | ||||||||||||||||||||
31-Dec-13 | Parent | Subsidiary | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
A S S E T S | |||||||||||||||||||||
Cash and cash equivalents | $ | 32,711,636 | $ | 738,157 | $ | - | $ | - | $ | 33,449,793 | |||||||||||
Restricted cash | - | 1,420,000 | 4,412,970 | - | 5,832,970 | ||||||||||||||||
Investment in life settlements, at fair value | - | - | 234,672,794 | - | 234,672,794 | ||||||||||||||||
Deferred financing costs, net | - | - | 357,901 | - | 357,901 | ||||||||||||||||
Other assets | 381,883 | 484,510 | 200,625 | - | 1,067,018 | ||||||||||||||||
Investment in subsidiaries | 129,839,241 | 159,798,490 | - | (289,637,731 | ) | - | |||||||||||||||
TOTAL ASSETS | $ | 162,932,760 | $ | 162,441,157 | $ | 239,644,290 | $ | (289,637,731 | ) | $ | 275,380,476 | ||||||||||
L I A B I L I T I E S & S T O C K H O L D E R S' E Q U I T Y (D E F I C I T) | |||||||||||||||||||||
LIABILITIES | |||||||||||||||||||||
Revolving credit facility | $ | - | $ | - | $ | 79,000,000 | $ | - | $ | 79,000,000 | |||||||||||
Series I Secured Notes payable | - | 29,275,202 | - | - | 29,275,202 | ||||||||||||||||
L Bonds | 131,646,062 | - | - | - | 131,646,062 | ||||||||||||||||
Accounts payable | 233,214 | 106,655 | 500,000 | - | 839,869 | ||||||||||||||||
Interest payable | 3,806,820 | 3,065,465 | 337,123 | - | 7,209,408 | ||||||||||||||||
Other accrued expenses | 340,812 | 154,594 | 8,677 | - | 504,083 | ||||||||||||||||
Deferred taxes | 7,675,174 | - | - | - | 7,675,174 | ||||||||||||||||
TOTAL LIABILITIES | 143,702,082 | 32,601,916 | 79,845,800 | - | 256,149,798 | ||||||||||||||||
CONVERTIBLE, REDEEMABLE PREFERRED STOCK | 24,722,693 | - | - | - | 24,722,693 | ||||||||||||||||
STOCKHOLDERS’ EQUITY (DEFICIT) | |||||||||||||||||||||
Member capital | - | 129,839,241 | 159,798,490 | (289,637,731 | ) | - | |||||||||||||||
Common stock | 4,562 | - | - | - | 4,562 | ||||||||||||||||
Additional paid-in capital | 2,942,000 | - | - | - | 2,942,000 | ||||||||||||||||
Accumulated deficit | (8,438,577 | ) | - | - | - | (8,438,577 | ) | ||||||||||||||
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | (5,492,015 | ) | 129,839,241 | 159,798,490 | (289,637,731 | ) | (5,492,015 | ) | |||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | 162,932,760 | $ | 162,441,157 | $ | 239,644,290 | $ | (289,637,731 | ) | $ | 275,380,476 | ||||||||||
Condensed Consolidating Statements of Operations | For the year ended December 31, 2014 | Parent | Guarantor Subsidiary | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
REVENUE | |||||||||||||||||||||
Contract servicing fees | $ | - | $ | 1,615,674 | $ | - | $ | (1,615,674 | ) | $ | - | ||||||||||
Gain on life settlements, net | - | - | 30,416,127 | - | 30,416,127 | ||||||||||||||||
Interest and other income | 24,037 | 231,034 | 33,469 | (228,092 | ) | 60,448 | |||||||||||||||
TOTAL REVENUE | 24,307 | 1,846,708 | 30,449,596 | (1,843,766 | ) | 30,476,575 | |||||||||||||||
EXPENSES | |||||||||||||||||||||
Origination and servicing fees | - | - | 1,615,674 | (1,615,674 | ) | - | |||||||||||||||
Interest expense | 18,248,599 | 3,110,165 | 5,358,034 | - | 26,716,798 | ||||||||||||||||
Employee compensation and benefits | 3,018,570 | 1,951,066 | - | - | 4,969,636 | ||||||||||||||||
Legal and professional fees | 2,021,763 | 307,386 | 10,086 | - | 2,339,235 | ||||||||||||||||
Other expenses | 2,832,867 | 1,929,557 | 281,102 | (228,092 | ) | 4,815,434 | |||||||||||||||
TOTAL EXPENSES | 26,121,799 | 7,298,174 | 7,264,896 | (1,843,766 | ) | 38,841,103 | |||||||||||||||
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES | (26,097,762 | ) | (5,451,466 | ) | 23,184,700 | - | (8,364,528 | ) | |||||||||||||
EQUITY IN INCOME OF SUBSIDIARIES | 17,733,234 | 23,184,700 | - | (40,917,934 | ) | - | |||||||||||||||
NET INCOME BEFORE INCOME TAXES | 8,364,528 | 17,733,234 | 23,184,700 | (40,917,934 | ) | (8,364,528 | ) | ||||||||||||||
INCOME TAX BENEFIT | (2,401,619 | ) | - | - | - | (2,401,619 | ) | ||||||||||||||
NET INCOME (LOSS) | (5,962,909 | ) | 17,733,234 | 23,184,700 | (40,917,934 | ) | (5,962,909 | ) | |||||||||||||
(Loss) attributable to preferred shareholders | (138,374 | ) | - | - | - | (138,374 | ) | ||||||||||||||
LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | (6,101,283 | ) | $ | - | $ | - | $ | - | $ | (6,101,283 | ) | |||||||||
For the year ended December 31, 2013 | Parent | Guarantor Subsidiary | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
REVENUE | |||||||||||||||||||||
Contract servicing fees | $ | - | $ | 3,710,737 | $ | - | $ | (3,710,737 | ) | $ | - | ||||||||||
Gain on life settlements, net | - | - | 29,513,642 | - | 29,513,642 | ||||||||||||||||
Interest and other income | 3,334,331 | 2,612,420 | 79,767 | (2,475,386 | ) | 3,551,132 | |||||||||||||||
TOTAL REVENUE | 3,334,331 | 6,323,157 | 29,593,409 | (6,186,123 | ) | 33,064,774 | |||||||||||||||
EXPENSES | |||||||||||||||||||||
Origination and servicing fees | - | - | 3,710,737 | (3,710,737 | ) | - | |||||||||||||||
Interest expense | 11,800,718 | 3,684,811 | 5,277,115 | - | 20,762,644 | ||||||||||||||||
Employee compensation and benefits | 3,424,383 | 1,619,465 | - | - | 5,043,848 | ||||||||||||||||
Legal and professional fees | 1,206,520 | 514,728 | 32,961 | - | 1,754,209 | ||||||||||||||||
Other expenses | 2,004,636 | 1,463,084 | 2,532,927 | (2,475,386 | ) | 3,525,261 | |||||||||||||||
TOTAL EXPENSES | 18,436,257 | 7,282,088 | 11,553,740 | (6,186,123 | ) | 31,085,962 | |||||||||||||||
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES | (15,101,926 | ) | (958,931 | ) | 18,039,669 | - | 1,978,812 | ||||||||||||||
EQUITY IN INCOME OF SUBSIDIARIES | 17,080,738 | 18,088,189 | - | (35,168,927 | ) | - | |||||||||||||||
NET INCOME BEFORE INCOME TAXES | 1,978,812 | 17,129,258 | 18,039,669 | (35,168,927 | ) | 1,978,812 | |||||||||||||||
INCOME TAX EXPENSE | 2,173,767 | - | - | - | 2,173,767 | ||||||||||||||||
NET INCOME (LOSS) | (194,955 | ) | 17,129,258 | 18,039,669 | (35,168,927 | ) | (194,955 | ) | |||||||||||||
Accretion of preferred stock to liquidation value | (806,624 | ) | - | - | - | (806,624 | ) | ||||||||||||||
LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | (1,001,579 | ) | $ | - | $ | - | $ | - | $ | (1,001,579 | ) | |||||||||
Condensed Consolidating Statements of Cash Flows | |||||||||||||||||||||
Consolidated Statements of Cash Flows | |||||||||||||||||||||
For the year ended December 31, 2014 | Parent | Guarantor Subsidiary | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||||||||||||
Net income (loss) | $ | (5,962,909 | ) | $ | 17,733,234 | $ | 23,184,700 | $ | (40,917,934 | ) | $ | (5,962,909 | ) | ||||||||
Adjustments to reconcile net income (loss) to cash flows from operating activities: | |||||||||||||||||||||
Equity of subsidiaries | (17,733,234 | ) | (23,184,700 | ) | - | 40,917,934 | - | ||||||||||||||
Gain on life settlements | - | - | (39,928,003 | ) | - | (39,928,003 | ) | ||||||||||||||
Amortization of deferred financing and issuance costs | 2,967,617 | 479,278 | 357,900 | - | 3,804,795 | ||||||||||||||||
Deferred income taxes | (2,401,619 | ) | - | - | - | (2,401,619 | ) | ||||||||||||||
Preferred stock issued for dividends | 774,085 | - | - | - | 774,085 | ||||||||||||||||
Convertible, redeemable preferred stock dividends payable | (116,207 | ) | - | - | - | (116,207 | ) | ||||||||||||||
(Increase) decrease in operating assets: | |||||||||||||||||||||
Due from related parties | - | (291 | ) | - | - | (291 | ) | ||||||||||||||
Insurance benefits receivable | - | - | (1,750,000 | ) | - | (1,750,000 | ) | ||||||||||||||
Other assets | (39,118,259 | ) | (33,434,321 | ) | - | 70,205,530 | (2,347,050 | ) | |||||||||||||
Increase (decrease) in operating liabilities: | |||||||||||||||||||||
Accounts payable | 177,681 | 136,025 | 50,000 | - | 363,706 | ||||||||||||||||
Interest payable | 3,359,926 | 599,419 | 679,531 | - | 4,638,876 | ||||||||||||||||
Other accrued expenses | 430,601 | 16,367 | 10,408 | - | 457,376 | ||||||||||||||||
NET CASH FLOWS USED IN OPERATING ACTIVITIES | (57,622,318 | ) | (37,654,989 | ) | (17,395,464 | ) | 70,205,530 | (42,467,241 | ) | ||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||||||||||||
Investment in life settlements | - | - | (12,292,401 | ) | - | (12,292,401 | ) | ||||||||||||||
Proceeds from settlement of life settlements | - | - | 4,185,813 | - | 4,185,813 | ||||||||||||||||
NET CASH FLOWS USED IN INVESTING ACTIVITIES | - | - | (8,106,588 | ) | - | (8,106,588 | ) | ||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||||||||||||
Net proceeds from revolving credit facility | - | - | (6,838,952 | ) | - | (6,838,952 | ) | ||||||||||||||
Payments for redemption of Series I Secured Notes payable | - | (2,268,379 | ) | - | - | (2,268,379 | ) | ||||||||||||||
Proceeds from issuance of debentures | 65,713,297 | - | - | - | 65,713,297 | ||||||||||||||||
Payments for issuance of debentures | (4,104,876 | ) | - | - | - | (4,104,876 | ) | ||||||||||||||
Payments for redemption of debentures | (14,429,017 | ) | - | - | - | (14,429,017 | ) | ||||||||||||||
Proceeds (payments) from restricted cash | - | 1,337,500 | 199,416 | - | 1,536,916 | ||||||||||||||||
Issuance of common stock | 8,642,990 | - | - | - | 8,642,990 | ||||||||||||||||
Issuance of member capital | - | 38,063,942 | 32,141,588 | (70,205,530 | ) | - | |||||||||||||||
Payments for redemption of preferred stock | (456,239 | ) | - | - | - | (465,239 | ) | ||||||||||||||
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 55,357,155 | 37,133,063 | 25,502,052 | (70,205,530 | ) | 47,786,740 | |||||||||||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (2,265,163 | ) | (521,926 | ) | - | - | (2,787,089 | ) | |||||||||||||
CASH AND CASH EQUIVALENTS | |||||||||||||||||||||
BEGINNING OF THE YEAR | 32,711,636 | 738,157 | - | - | 33,449,793 | ||||||||||||||||
END OF THE YEAR | $ | 30,446,473 | $ | 216,231 | $ | - | $ | - | $ | 30,662,704 | |||||||||||
For the year ended December 31, 2013 | Parent | Guarantor Subsidiary | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||||||||||||
Net income (loss) | $ | (194,955 | ) | $ | 17,129,258 | $ | 18,039,669 | $ | (35,168,927 | ) | $ | (194,955 | ) | ||||||||
Adjustments to reconcile net income (loss) to cash flows from operating activities: | |||||||||||||||||||||
Equity of subsidiaries | (17,080,738 | ) | (18,088,189 | ) | - | 35,168,927 | - | ||||||||||||||
Gain on life settlements | - | - | (39,337,542 | ) | - | (39,337,542 | ) | ||||||||||||||
Amortization of deferred financing and issuance costs | 1,908,248 | 823,004 | (260,861 | ) | - | 2,470,391 | |||||||||||||||
Deferred income taxes | 2,173,767 | - | - | - | 2,173,767 | ||||||||||||||||
Preferred stock issued for dividends | 623,899 | - | - | - | 623,899 | ||||||||||||||||
Convertible, redeemable preferred stock dividends payable | 255 | - | - | - | 255 | ||||||||||||||||
Repurchase of common stock | (3,252,400 | ) | (3,252,400 | ) | |||||||||||||||||
(Increase) decrease in operating assets: | |||||||||||||||||||||
Due from related parties | - | 8,613 | - | - | 8,613 | ||||||||||||||||
Insurance benefits receivable | - | - | 2,850,000 | - | 2,850,000 | ||||||||||||||||
Other assets | (51,522,808 | ) | (45,077,218 | ) | - | 96,033,606 | (566,420 | ) | |||||||||||||
Increase (decrease) in operating liabilities: | |||||||||||||||||||||
Accounts payable | 160,130 | 1,680 | 208,000 | - | 369,810 | ||||||||||||||||
Interest payable | 2,399,975 | 809,540 | 208,918 | - | 3,418,433 | ||||||||||||||||
Other accrued expenses | 277,321 | (224,990 | ) | (1,690 | ) | - | 50,641 | ||||||||||||||
NET CASH FLOWS USED IN OPERATING ACTIVITIES | (64,507,306 | ) | (44,618,302 | ) | (18,293,506 | ) | 96,033,606 | (31,385,508 | ) | ||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||||||||||||
Investment in life settlements | - | - | (34,997,500 | ) | - | (34,997,500 | ) | ||||||||||||||
Proceeds from settlement of life settlements | - | - | 4,563,896 | - | 4,563,896 | ||||||||||||||||
NET CASH FLOWS USED IN INVESTING ACTIVITIES | - | - | (30,433,604 | ) | - | (30,433,604 | ) | ||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||||||||||||
Net proceeds from revolving credit facility | - | - | 8,000,000 | - | 8,000,000 | ||||||||||||||||
Payments for redemption of Series I Secured Notes payable | - | (8,671,624 | ) | - | - | (8,671,624 | ) | ||||||||||||||
Proceeds from issuance of debentures | 85,260,976 | - | - | - | 85,260,976 | ||||||||||||||||
Payments for issuance of debentures | (4,320,542 | ) | - | - | - | (4,320,542 | ) | ||||||||||||||
Payments for redemption of debentures | (8,143,363 | ) | - | - | - | (8,143,363 | ) | ||||||||||||||
Proceeds (payments) from restricted cash | - | 328,700 | (4,068,578 | ) | - | (3,739,878 | ) | ||||||||||||||
Issuance of member capital | - | 51,237,918 | 44,795,688 | (96,033,606 | ) | - | |||||||||||||||
Payments for redemption of preferred stock | (613,708 | ) | - | - | - | (613,708 | ) | ||||||||||||||
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 72,183,363 | 42,894,994 | 48,727,110 | (96,033,606 | ) | 67,771,861 | |||||||||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 7,676,057 | (1,723,308 | ) | - | - | 5,952,749 | |||||||||||||||
CASH AND CASH EQUIVALENTS | |||||||||||||||||||||
BEGINNING OF THE YEAR | 25,035,579 | 2,461,465 | - | - | 27,497,044 | ||||||||||||||||
END OF THE YEAR | $ | 32,711,636 | $ | 738,157 | $ | - | $ | - | $ | 33,449,793 | |||||||||||
Concentrations_Tables
Concentrations (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Concentration [Abstract] | |||||||||
Summary of the face value of insurance contracts | As of December 31, | ||||||||
Life insurance company | 2014 | 2013 | |||||||
AXA Equitable | 14.55 | % | 16.58 | % | |||||
John Hancock | 11.48 | % | 11.34 | % | |||||
Summary of the number of insurance contracts | As of December 31, | ||||||||
State of residence | 2014 | 2013 | |||||||
California | 28.87 | % | 28.14 | % | |||||
Florida | 18.56 | % | 15.59 | % | |||||
New York | * | 10.65 | % | ||||||
* - percentage does not exceed 10% of the total face value. |
Nature_of_Business_and_Summary2
Nature of Business and Summary of Significant Accounting Policies (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Nature Of Business And Summary Of Significant Accounting Policies | ||
Deposits and direct cost advances | $27,000 | $201,000 |
Amortization of deferred financing costs | $358,000 | $455,000 |
Redemption period for amortization of discount related to financing cost | 3 years |
Restrictions_on_Cash_Details
Restrictions on Cash (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Restrictions on Cash (Textual) | ||
Restricted cash | $4,296,000 | $5,833,000 |
Investment_in_Life_Insurance_P2
Investment in Life Insurance Policies (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Contract | Contract | |
Summary of Company's life insurance policies accounted for under fair value method and their estimated maturity dates, based on remaining life expectancy | ||
Number of Contracts, 2015 | 3 | 4 |
Number of Contracts, 2016 | 7 | 8 |
Number of Contracts, 2017 | 17 | 25 |
Number of Contracts, 2018 | 30 | 33 |
Number of Contracts, 2019 | 45 | 34 |
Number of Contracts, 2020 | 41 | 34 |
Number of Contracts, 2021 | 36 | 33 |
Number of Contracts, Thereafter | 112 | 92 |
Life Settlement Contracts, Number of Contracts, Total | 291 | 263 |
Estimated Fair Value, 2015 | $5,063,000 | $5,065,000 |
Estimated Fair Value, 2016 | 8,144,000 | 8,174,000 |
Estimated Fair Value, 2017 | 21,916,000 | 33,345,000 |
Estimated Fair Value, 2018 | 41,994,000 | 37,243,000 |
Estimated Fair Value, 2019 | 47,303,000 | 32,844,000 |
Estimated Fair Value, 2020 | 43,429,000 | 27,741,000 |
Estimated Fair Value, 2021 | 29,789,000 | 29,041,000 |
Estimated Fair Value, Thereafter | 85,245,000 | 61,220,000 |
Life Settlement Contracts, Estimated Fair Value, Total | 282,883,000 | 234,673,000 |
Face Value, 2015 | 6,000,000 | 6,750,000 |
Face Value, 2016 | 11,550,000 | 13,750,000 |
Face Value, 2017 | 35,542,000 | 63,916,000 |
Face Value, 2018 | 76,206,000 | 80,318,000 |
Face Value, 2019 | 106,973,000 | 89,295,000 |
Face Value, 2020 | 102,614,000 | 75,644,000 |
Face Value, 2021 | 90,921,000 | 111,770,000 |
Face Value, Thereafter | 349,293,000 | 299,205,000 |
Life Settlement Contracts, Face Value, Total | $779,099,000 | $740,648,000 |
Investment_in_Life_Insurance_P3
Investment in Life Insurance Policies (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Summary of reconciliation of gain on life settlements | ||
Change in fair value | $39,928,000 | $39,338,000 |
Premiums and other annual fees | -23,376,000 | -21,860,000 |
Policy maturities | 13,864,000 | 12,036,000 |
Gain on life settlements, net | $30,416,000 | $29,514,000 |
Investment_in_Life_Insurance_P4
Investment in Life Insurance Policies (Details 2) (USD $) | Dec. 31, 2014 |
Summary of estimated expected premium payments to maintain the above life insurance policies assuming no mortalities | |
2015 | $26,349,000 |
2016 | 28,857,000 |
2017 | 32,365,000 |
2018 | 35,341,000 |
2019 | 39,423,000 |
Estimated expected premium payments | $162,335,000 |
Investment_in_Life_Insurance_P5
Investment in Life Insurance Policies (Details Textual) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Investment in Life Insurance Policies (Textual) | ||
Realized gains from life insurance policy | $13,864,000 | $12,036,000 |
Insurance benefit of mature securities | 21,125,000 | |
Benefit recognized from insurance policy | 18,050,000 | 16,600,000 |
Carrying value of life insurance policy | 4,186,000 | 4,564,000 |
Realized gains of policies | $18,194,000 |
Fair_Value_Definition_and_Hier2
Fair Value Definition and Hierarchy (Details) (Life Insurance policies [Member], USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Life Insurance policies [Member] | ||
Summary of reconciliation of investments in life insurance policies | ||
Beginning balance | $234,673,000 | $164,317,000 |
Purchases | 12,468,000 | 35,582,000 |
Maturities (cash in excess of carrying value) | -4,186,000 | -4,564,000 |
Net change in fair value | 39,928,000 | 39,338,000 |
Ending balance | $282,883,000 | $234,673,000 |
Fair_Value_Definition_and_Hier3
Fair Value Definition and Hierarchy (Details 1) (Life Insurance policies [Member], USD $) | 12 Months Ended | |||
Dec. 31, 2014 | Dec. 31, 2013 | |||
Life Insurance policies [Member] | ||||
Summary of inputs utilized in estimating the fair value | ||||
Weighted average age of insured | 82 years 9 months 18 days | 82 years 1 month 6 days | ||
Weighted average life expectancy, months* | 78 years 4 months 24 days | [1] | 87 years | [1] |
Average face amount per policy | $2,677,000 | $2,816,000 | ||
Discount rate | 11.43% | 11.69% | ||
[1] | * Standard life expectancy as adjusted for insured's specific circumstances. |
Fair_Value_Definition_and_Hier4
Fair Value Definition and Hierarchy (Details 2) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Plus 8 months [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life policies | ($38,864,000) | ($34,382,000) |
Minus 8 months [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life policies | 40,634,000 | 36,152,000 |
Plus 4 Months [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life policies | -19,664,000 | -17,417,000 |
Minus 4 Months [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life policies | 20,130,000 | 17,865,000 |
Plus 2% [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life policies | -24,085,000 | -22,944,000 |
Minus 2% [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life policies | 28,179,000 | 27,063,000 |
Plus 1% [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life policies | -12,502,000 | -11,933,000 |
Minus 1% [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life policies | $13,522,000 | $12,959,000 |
Fair_Value_Definition_and_Hier5
Fair Value Definition and Hierarchy (Details 3) (Level 3 [Member], USD $) | 12 Months Ended |
Dec. 31, 2014 | |
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 | |
Warrants issued date | 31-Dec-11 |
Warrants issued | 68,937 |
Fair value per share | 0.22 |
Risk free rate | 0.42% |
Volatility rate | 25.25% |
Term | 5 years |
March 2012 [Member] | |
Warrants Level 3 instruments and measured at fair value upon issuance | |
Warrants issued date | 31-Mar-12 |
Warrants issued | 38,130 |
Fair value per share | 0.52 |
Risk free rate | 0.38% |
Volatility rate | 36.20% |
Term | 5 years |
June 2012 [Member] | |
Warrants Level 3 instruments and measured at fair value upon issuance | |
Warrants issued date | 30-Jun-12 |
Warrants issued | 161,840 |
Fair value per share | 1.16 |
Risk free rate | 0.41% |
Volatility rate | 47.36% |
Term | 5 years |
July 2012 [Member] | |
Warrants Level 3 instruments and measured at fair value upon issuance | |
Warrants issued date | 31-Jul-12 |
Warrants issued | 144,547 |
Fair value per share | 1.16 |
Risk free rate | 0.41% |
Volatility rate | 47.36% |
Term | 5 years |
September 2012 [Member] | |
Warrants Level 3 instruments and measured at fair value upon issuance | |
Warrants issued date | 30-Sep-12 |
Warrants issued | 2,500 |
Fair value per share | 0.72 |
Risk free rate | 0.31% |
Volatility rate | 40.49% |
Term | 5 years |
September 2014 [Member] | |
Warrants Level 3 instruments and measured at fair value upon issuance | |
Warrants issued date | 30-Sep-14 |
Warrants issued | 16,000 |
Fair value per share | 1.26 |
Risk free rate | 1.85% |
Volatility rate | 17.03% |
Term | 5 years |
Fair_Value_Definition_and_Hier6
Fair Value Definition and Hierarchy (Details Textual) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Fair Value Definition and Hierarchy (Textual) | |
Estimated fair value of Series I Secured notes payable | $216,837,000 |
Weighted average market interest rate of Secured notes payable | 7.17% |
Face value of notes | $214,421,000 |
Description for change in discount factor | If the life expectancy estimates were increased or decreased by four and eight months on each outstanding policy and the discount factors were increased or decreased by 1% and 2%, while all other variables are held constant. |
Increase decrease in life expectancy | Four and eight months |
Increase decrease in discount rate | 1% and 2 |
IPO [Member] | |
Fair Value Definition and Hierarchy (Textual) | |
Issuance of common stock, Share | 16,000 |
Credit_Facilities_Details
Credit Facilities (Details) (USD $) | 0 Months Ended | 12 Months Ended | ||
Jan. 29, 2013 | Jul. 15, 2008 | Dec. 31, 2014 | Dec. 31, 2013 | |
Credit Facilities (Textual) | ||||
Maximum borrowing amount under line of credit facility | $100,000,000 | |||
Expiry date of line of credit | 15-Jul-13 | |||
Amount outstanding under line of credit facility | 72,161,000 | 79,000,000 | ||
Effective rate of interest | 6.24% | 6.19% | ||
Total funds available for additional borrowings under the borrowing base formula criteria | 20,585,000 | 3,937,000 | ||
Extended date of line of credit facility | 31-Dec-14 | |||
Weighted average effective interest rate | 6.24% | 6.14% | ||
Minimum tangible net worth to be maintained by company | 15,000,000 | |||
Consolidated net income under credit and security agreement | 29,369,000 | |||
Consolidated tangible net worth under credit and security agreement | $87,381,000 |
Series_I_Secured_Notes_Payable2
Series I Secured Notes Payable (Details) (Series I Secured Notes Payable [Member], USD $) | Dec. 31, 2014 |
Series I Secured Notes Payable [Member] | |
Summary of future contractual maturities of notes payable | |
2015 | $13,887,000 |
2016 | 8,242,000 |
2017 | 4,713,000 |
2018 | 754,000 |
2019 | 347,000 |
Thereafter | 104,000 |
Total | 28,047,000 |
Summary of amortization of deferred financing costs of notes payable | |
2015 | 92,000 |
2016 | 161,000 |
2017 | 134,000 |
2018 | 30,000 |
2019 | 8,000 |
Thereafter | 5,000 |
Total | $430,000 |
Series_I_Secured_Notes_Payable3
Series I Secured Notes Payable (Details Textual) (USD $) | 0 Months Ended | 12 Months Ended | |
Jun. 14, 2011 | Dec. 31, 2014 | Dec. 31, 2013 | |
Series I Secured Notes Payable (Textual) | |||
Weighted average market interest rate of Secured notes payable | 7.17% | ||
principal amount outstanding under Series I Secured notes | $131,646,062 | ||
Amortization of deferred financing and issuance costs | 358,000 | 455,000 | |
Series I Secured Notes Payable [Member] | |||
Series I Secured Notes Payable (Textual) | |||
Interest rate on secured notes, Minimum | 5.65% | ||
Interest rate on secured notes, Maximum | 9.55% | ||
Description of interest payment | Interest is payable monthly, quarterly, annually or at maturity depending on the terms of the note. | ||
Weighted average market interest rate of Secured notes payable | 8.37% | 8.35% | |
principal amount outstanding under Series I Secured notes | 28,047,000 | 29,744,000 | |
Amortization of deferred financing and issuance costs | 552,000 | 606,000 | |
Future expected amortization of deferred financing costs | $430,000 | ||
Minimum maturity period of secured notes | 6 months | ||
Maximum maturity period of secured notes | 7 years | ||
Amortizatoin period of deferred financing cost | 6 years |
Renewable_Secured_Debentures_S2
Renewable Secured Debentures (Subsequently Renamed L Bonds) (Details) (Renewable Secured Debentures [Member], USD $) | Dec. 31, 2014 |
Renewable Secured Debentures [Member] | |
Summary of future contractual maturities of L Bonds | |
2015 | $63,375,000 |
2016 | 50,270,000 |
2017 | 29,546,000 |
2018 | 13,551,000 |
2019 | 14,262,000 |
Thereafter | 15,373,000 |
Total | 186,377,000 |
Summary of amortization of deferred financing costs of L Bonds | |
2015 | 871,000 |
2016 | 1,578,000 |
2017 | 1,253,000 |
2018 | 668,000 |
2019 | 670,000 |
Thereafter | 842,000 |
Total | $5,882,000 |
Renewable_Secured_Debentures_S3
Renewable Secured Debentures (Subsequently Renamed L Bonds) (Details Textual) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Renewable Secured Debentures (Textual) | ||
Debentures offer for sale | $214,421,000 | |
Weighted average market interest rate of Secured notes payable | 7.17% | |
Proceeds from Issuance of Secured Debt | 65,713,297 | 85,260,976 |
Additional principal amount of L bonds | 19,051,000 | |
Renewable Secured Debentures [Member] | ||
Renewable Secured Debentures (Textual) | ||
Debentures offer for sale | 250,000,000 | |
Interest rates, minimum | 4.25% | |
Interest rates, maximum | 9.50% | |
Description of interest payment | Interest is payable monthly, annually or at maturity depending on the terms of the debenture. | |
Weighted average market interest rate of Secured notes payable | 7.45% | 7.53% |
Amount outstanding under L Bonds | 186,377,000 | 134,891,000 |
Amortization of deferred issuance costs | 3,537,000,000 | 1,843,000 |
Future expected amortization of deferred financing costs | $5,882,000 | |
Maturity period of debentures, Minimum | 6 months | |
Maturity period of debentures, Maximum | 7 years | |
Conditions for proceed from issuance of debenture | (1) payment of commissions on sales of L Bonds, (2) payment of offering expenses, (3) purchase of life insurance policies, (4) payment of premiums on life insurance policies, (5) payment of principal and interest on L Bonds, (6) payment of portfolio operations expenses, and (7) general working capital. |
Convertible_Preferred_Stock_De
Convertible Preferred Stock (Details) (USD $) | 12 Months Ended | 0 Months Ended | 1 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | Sep. 02, 2012 | Jul. 31, 2011 | |
Convertible Preferred Stock (Textual) | ||||
Exercise price of warrants | $12.50 | |||
Exercise period | 3 years | |||
Maturity period of warrant | 3 years | |||
Conversion of Series A preferred stock into common stock, description | One share of common stock for every 40 shares of Series A Preferred Stock purchased. | |||
Preferred stock redemption terms | The Company may redeem the Series A preferred shares at a price equal to 110% of their liquidation preference ($7.50 per share) at any time. | |||
Preferred stock, liquidation preference per share | $7.50 | |||
Redemption price of preferred shares | $7.50 | |||
Series A preferred stock outstanding | 2,739,000 | |||
Gross consideration from convertible preferred stock | $20,528,000 | |||
Series A preferred stock issuance costs | 2,838,000 | |||
Warrant outstanding | 431,954 | 415,955 | ||
Weighted average remaining life of warrants outstanding | 2 years 5 months 5 days | 1 year 4 months 2 days | ||
Accrued preferred dividend | 513,000 | |||
Payable date of accrued preferred dividends | 15-Jan-15 | |||
Percentage of unredeemed shares redeemed one year after issuance | 33.00% | |||
Percentage of unredeemed shares redeemed two year after issuance | 66.00% | |||
Percentage of unredeemed shares redeemed three year after issuance | 100.00% | |||
Redeemed shares of Series A preferred stock | 145,000 | |||
Minimum gross proceeds from common stock offering | 5,000,000 | |||
Maximum offering price of common stock | $11 | |||
Fair value of outstanding warrants attached to Series A preferred stock | 428,000 | |||
Term of redemption of warrants prior to expiration | The Company may redeem outstanding warrants prior to their expiration, at a price of $0.01 per share upon 30 days written notice to the investors at any time after (i) the Company has completed a registration of its common stock with the SEC and (ii) the volume of weighted average sale price per share of common stock equals or exceeds $14.00 per share for ten consecutive trading days ending on the third business day prior to proper notice of such redemption. | |||
Declared and accrued dividends | 2,428,000 | 2,528,000 | ||
Preferred stock issued in lieu of cash dividend | 111,000 | 89,000 | ||
Cash dividend rate, per share | $7 | |||
Warrants expire date | 18-Sep-19 | |||
Common Stock [Member] | ||||
Convertible Preferred Stock (Textual) | ||||
Series A Preferred Stock conversion, Shares | 508,193 | |||
Payments for purchase of warrant initial public offering | 16,000 | |||
Initial public offering [Member] | ||||
Convertible Preferred Stock (Textual) | ||||
Convertible preferred stock, shares issued upon conversion | 677,566 | |||
Conversion of stock, shares converted into common stock | 508,193 | |||
Series A 10 % convertible Preferred Stock [Member] | ||||
Convertible Preferred Stock (Textual) | ||||
Company offering shares of convertible redeemable preferred stock | 3,333,333 | |||
Series A preferred stock shares sold for cash | 3,278,000 | |||
Consideration received on sale of Series A preferred stock | 24,582,000 | |||
Series A preferred stock shares issued in conversion of dividends | 277,000 | |||
Series A preferred stock value issued in conversion of dividends | $1,936,681 | |||
Offering price of series A preferred stock | $7.50 | |||
Series A preferred stock, Dividend rate | 10.00% | |||
Conversion term for series A preferred stock | Each share has the right to convert into 0.75 shares of the Company's common stock. | |||
Convertible preferred stock, shares issued upon conversion | 678,000 | |||
Conversion of stock, shares converted into common stock | 508,000 |
Income_Taxes_Details
Income Taxes (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Deferred: | ||
Federal | ($1,820,000) | $1,826,000 |
State | -582,000 | 348,000 |
Total income tax expense (benefit) | ($2,401,619) | $2,173,767 |
Income_Taxes_Details_1
Income Taxes (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Summary of Reconciliation of income tax expense at the statutory federal tax rate to actual income tax expense | ||
Statutory federal income tax | ($2,844,000) | $673,000 |
State income taxes, net of federal benefit | -374,000 | 298,000 |
Series A Preferred Stock dividends | 826,000 | 860,000 |
Other permanent differences | -10,000 | 343,000 |
Total income tax expense | ($2,402,000) | $2,174,000 |
Statutory federal income tax, Tax rate | -34.00% | 34.00% |
State income taxes, net of federal benefit, Tax rate | -4.50% | 15.10% |
Series A Preferred Stock dividends, Tax rate | 9.90% | 43.40% |
Other permanent differences, Tax rate | -0.10% | 17.30% |
Total income tax expense (benefit), Tax rate | -28.70% | 109.80% |
Income_Taxes_Details_2
Income Taxes (Details 2) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Deferred tax assets : | ||
Note receivable from related party | $2,023,000 | $2,023,000 |
Net operating loss carryforwards | 4,517,000 | 2,596,000 |
Other assets | 272,000 | 164,000 |
Subtotal | 6,812,000 | 4,783,000 |
Valuation allowance | -2,164,000 | -2,164,000 |
Net deferred tax asset | 4,648,000 | 2,619,000 |
Deferred tax liabilities: | ||
Investment in life settlements | -9,922,000 | -10,294,000 |
Net deferred tax assets | ($5,274,000) | ($7,675,000) |
Income_Taxes_Detail_Textuals
Income Taxes (Detail Textuals) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Taxes (Textual) | ||
Federal net operating loss carryforwards | $11,163,000 | $4,182,000 |
Operating loss carry forward expiration period | Begin to expire in 2031. | |
Current income taxes | ||
Accrual of non-deductible preferred stock dividend expense | 2,428,000 | |
Valuation allowance | 2,164,000 | 2,164,000 |
Accrued interest or penalties related to uncertain tax positions | 0 | 0 |
State net operating loss carryforwards | $7,334,000 | $2,748,000 |
Common_Stock_Details
Common Stock (Details) (USD $) | 1 Months Ended | 12 Months Ended | 0 Months Ended | |||
Jun. 24, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Jul. 11, 2011 | Jun. 28, 2013 | Sep. 24, 2014 | |
Common Stock Disclosure [Textual] | ||||||
Common stock, par value | $0.00 | $0.00 | ||||
Net proceeds | $8,642,990 | |||||
Reverse stock split | 2-for-1 | |||||
Purchase and Sale Agreement [Member] | ||||||
Common Stock Disclosure [Textual] | ||||||
Terms for acquisition of equity interest in subsidiary | GWG issued to Athena Securities Group, Ltd. (Athena) 494,500 shares of common stock, which was equal to 9.9% of GWG's outstanding shares, in exchange for shares equal to 9.9% of the outstanding shares in Athena Structured Funds, PLC and cash of $5,000. | |||||
Athena Securities Group Ltd [Member] | Purchase and Sale Agreement [Member] | ||||||
Common Stock Disclosure [Textual] | ||||||
Amount of cash paid under acquisition terms | 5,000 | |||||
Shares of common stock issued | 494,500 | 432,500 | ||||
Retained Common Stock | 62,000 | |||||
GWG (Member) | ||||||
Common Stock Disclosure [Textual] | ||||||
Shares of common stock issued | 800,000 | |||||
Common stock, par value | $12.50 |
Stock_Incentive_Plan_Details
Stock Incentive Plan (Details) | 12 Months Ended |
Dec. 31, 2014 | |
Outstanding stock options | |
Beginning Balance | 405,250 |
Granted during the year | 53,000 |
Vested during the year | |
Exercised during the year | -334 |
Forfeited during the year | -35,166 |
Expired during the year | |
Ending Balance | 991,601 |
Vested [Member] | |
Outstanding stock options | |
Beginning Balance | 195,000 |
Granted during the year | 64,450 |
Vested during the year | 72,089 |
Exercised during the year | -334 |
Forfeited during the year | -16,917 |
Expired during the year | |
Ending Balance | 314,288 |
Non-Vested [Member] | |
Outstanding stock options | |
Beginning Balance | 210,250 |
Granted during the year | 565,901 |
Vested during the year | -72,089 |
Exercised during the year | |
Forfeited during the year | -18,249 |
Expired during the year | |
Ending Balance | 685,813 |
Stock_Incentive_Plan_Details_T
Stock Incentive Plan (Details Textual) (USD $) | 0 Months Ended | 12 Months Ended |
Mar. 27, 2013 | Dec. 31, 2014 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares issued to employees, officers and directors | 53,000 | |
Number of options vested | 72,089 | |
Exercise Price | 12.5 | |
Options vesting period | 3 years | |
Forfeited during the year | -35,166 | |
Compensation expense related to un-vested options not yet recognized | 591,000 | |
Compensation expense related to un-vested options, period of recognition | 3 years | |
Ownership Percentage | 10.00% | |
Compensation Expense in 2015 | 221,000 | |
Compensation Expense in 2016 | 212,000 | |
Compensation Expense in 2017 | 158,000 | |
Exercised during the year | -334 | |
Maximum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Exercise Price | 9.01 | |
Minimum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Exercise Price | 8.2 | |
Employee Stock Option [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares issued to employees, officers and directors | 517,101 | |
Number of options vested | 53,505 | |
Forfeited during the year | -32,750 | |
Exercised during the year | ||
Common Stock [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares issued to employees, officers and directors | 745,601 | |
Number of options vested | 314,288 | |
Others [Member] | Maximum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Exercise Price | 10.25 | |
Others [Member] | Minimum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Exercise Price | 7.46 | |
2013 Stock Incentive Plan [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares issuable | 2,000,000 | |
Stock based compensation, Method used | The expected volatility used in the Black-Scholes model valuation of options issued during the year was 17.03% annualized. The annual volatility rate is based on the standard deviation of the average continuously compounded rate of return of five selected comparable companies over the previous 52 weeks. | |
Expected volatility rate | 17.03% | |
2013 Stock Incentive Plan [Member] | Maximum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock option period | 10 years | |
2013 Stock Incentive Plan [Member] | Employee Stock Option [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Maximum number of shares for an employee | 53,000 | |
Employee granting right purchase of common stock | 318,000 | |
Number of options vested | 159,000 | |
Exercise Price | 12.5 | |
Options vesting period | 1 year | |
2013 Stock Incentive Plan [Member] | Common Stock [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Maximum number of shares for an employee | 400,000 | |
Forfeited during the year | 63,166 | |
Forfeited during the year, Percent | 15.00% | |
Exercised during the year | 334 |
Net_loss_per_common_share_Deta
Net loss per common share (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Earnings Per Share, Pro Forma [Abstract] | ||
NET LOSS | ($5,962,909) | ($194,955) |
(Loss) attributable to preferred shareholders | -138,374 | -806,624 |
LOSS ATTRIBUTABE TO COMMON SHAREHOLDERS | ($6,101,283) | ($1,001,579) |
Basic and diluted weighted average shares outstanding | 4,909,657 | 4,758,699 |
NET LOSS PER COMMON SHARE (BASIC AND DILUTED) | ||
Net loss | ($1.21) | ($0.04) |
(Loss) attributable to preferred shareholders | ($0.03) | ($0.17) |
Net loss attributable to common shareholders | ($1.24) | ($0.21) |
Commitments_Details
Commitments (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
sqft | ||
Commitments (Textual) | ||
Lease expiration date | 31-Aug-15 | |
Office space in square feet | 11,695 | |
Rent expenses | $211,000 | $200,000 |
Minimum lease payments | $70,000 |
Contingencies_Details
Contingencies (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Contingencies (Textual) | |
Loaned to Opportunity Finance, LLC | $1,000,000 |
Repayments of loan | $177,000 |
Guarantees_of_L_Bonds_Details
Guarantees of L Bonds (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
A S S E T S | |||
Cash and cash equivalents | $30,662,704 | $33,449,793 | $27,497,044 |
Restricted cash | 4,296,053 | 5,832,970 | |
Investment in life settlements, at fair value | 282,883,010 | 234,672,794 | |
Deferred financing costs, net | 1,569,400 | 357,901 | |
Other assets | 1,909,362 | 1,067,018 | |
Investment in subsidiaries | |||
TOTAL ASSETS | 323,070,529 | 275,380,476 | |
LIABILITIES | |||
Revolving credit facility | 72,161,048 | 79,000,000 | |
Series I Secured Notes payable | 27,616,578 | 29,275,202 | |
L Bonds | 182,782,884 | 131,646,062 | |
Accounts payable | 1,203,575 | 839,869 | |
Interest payable | 11,128,519 | 7,209,408 | |
Other accrued expenses | 514,434 | 504,083 | |
Deferred taxes | 5,273,555 | 7,675,174 | |
TOTAL LIABILITIES | 300,680,594 | 256,149,798 | |
STOCKHOLDERS EQUITY (DEFICIT) | |||
Member capital | |||
Convertible preferred stock | 20,527,866 | 24,722,693 | |
Common stock | 5,870 | 4,562 | |
Additional paid-in capital | 16,257,686 | 2,942,000 | |
Accumulated deficit | -14,401,486 | -8,438,577 | |
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | 22,389,936 | -5,492,015 | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | 323,070,529 | 275,380,476 | |
Parent [Member] | |||
A S S E T S | |||
Cash and cash equivalents | 30,446,473 | 32,711,636 | 25,035,579 |
Restricted cash | |||
Investment in life settlements, at fair value | |||
Deferred financing costs, net | 569,400 | ||
Other assets | 1,104,328 | 381,883 | |
Investment in subsidiaries | 185,636,417 | 129,839,241 | |
TOTAL ASSETS | 217,756,618 | 162,932,760 | |
LIABILITIES | |||
Series I Secured Notes payable | |||
Accounts payable | 410,895 | 233,214 | |
Interest payable | 6,598,250 | 3,806,820 | |
Other accrued expenses | 301,098 | 340,812 | |
Deferred taxes | 5,273,555 | 7,675,174 | |
TOTAL LIABILITIES | 195,366,682 | 143,702,082 | |
STOCKHOLDERS EQUITY (DEFICIT) | |||
Member capital | |||
Convertible preferred stock | 20,527,866 | 24,722,693 | |
Common stock | 5,870 | 4,562 | |
Additional paid-in capital | 16,257,686 | 2,942,000 | |
Accumulated deficit | -14,401,486 | -8,438,577 | |
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | 22,389,936 | -5,492,015 | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | 217,756,618 | 162,932,760 | |
Guarantor Subsidiary [Member] | |||
A S S E T S | |||
Cash and cash equivalents | 216,231 | 738,157 | 2,461,465 |
Restricted cash | 82,500 | 1,420,000 | |
Investment in life settlements, at fair value | |||
Deferred financing costs, net | 1,000,000 | ||
Other assets | 777,534 | 484,510 | |
Investment in subsidiaries | 215,124,779 | 159,798,490 | |
TOTAL ASSETS | 217,201,044 | 162,441,157 | |
LIABILITIES | |||
Series I Secured Notes payable | 27,616,578 | 29,275,202 | |
Accounts payable | 242,680 | 106,655 | |
Interest payable | 3,513,615 | 3,065,465 | |
Other accrued expenses | 191,753 | 154,594 | |
Deferred taxes | |||
TOTAL LIABILITIES | 31,564,626 | 32,601,916 | |
STOCKHOLDERS EQUITY (DEFICIT) | |||
Member capital | 185,636,418 | 129,839,241 | |
Convertible preferred stock | |||
Common stock | |||
Additional paid-in capital | |||
Accumulated deficit | |||
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | 185,636,418 | 129,839,241 | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | 217,201,044 | 162,441,157 | |
Non-Guarantor Subsidiaries [Member] | |||
A S S E T S | |||
Cash and cash equivalents | |||
Restricted cash | 4,213,553 | 4,412,970 | |
Investment in life settlements, at fair value | 282,883,010 | 234,672,794 | |
Deferred financing costs, net | 357,901 | ||
Other assets | 1,777,500 | 200,625 | |
Investment in subsidiaries | |||
TOTAL ASSETS | 288,874,063 | 239,644,290 | |
LIABILITIES | |||
Series I Secured Notes payable | |||
Accounts payable | 550,000 | 500,000 | |
Interest payable | 1,016,654 | 337,123 | |
Other accrued expenses | 21,583 | 8,677 | |
Deferred taxes | |||
TOTAL LIABILITIES | 73,749,285 | 79,845,800 | |
STOCKHOLDERS EQUITY (DEFICIT) | |||
Member capital | 215,124,778 | 159,798,490 | |
Convertible preferred stock | |||
Common stock | |||
Additional paid-in capital | |||
Accumulated deficit | |||
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | 215,124,778 | 159,798,490 | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | 288,874,063 | 239,644,290 | |
Eliminations [Member] | |||
A S S E T S | |||
Cash and cash equivalents | |||
Restricted cash | |||
Investment in life settlements, at fair value | |||
Other assets | |||
Investment in subsidiaries | -400,761,196 | -289,637,731 | |
TOTAL ASSETS | -400,761,196 | -289,637,731 | |
LIABILITIES | |||
Series I Secured Notes payable | |||
Accounts payable | |||
Interest payable | |||
Other accrued expenses | |||
Deferred taxes | |||
TOTAL LIABILITIES | |||
STOCKHOLDERS EQUITY (DEFICIT) | |||
Member capital | -400,761,196 | -289,637,731 | |
Convertible preferred stock | |||
Common stock | |||
Additional paid-in capital | |||
Accumulated deficit | |||
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | -400,761,196 | -289,637,731 | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ($400,761,196) | ($289,637,731) |
Guarantees_of_L_Bonds_Details_
Guarantees of L Bonds (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
REVENUE | ||
Contract servicing fees | ||
Gain on life settlements, net | 30,416,127 | 29,513,642 |
Interest and other income | 60,448 | 298,732 |
TOTAL REVENUE | 30,476,575 | 33,064,774 |
EXPENSES | ||
Origination and servicing fees | ||
Interest expense | 26,716,798 | 20,762,644 |
Employee compensation and benefits | 4,969,636 | 5,043,848 |
Legal and professional fees | 2,339,235 | 1,754,209 |
Other expenses | 4,815,434 | 3,525,261 |
TOTAL EXPENSES | 38,841,103 | 31,085,962 |
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES | -8,364,528 | 1,978,812 |
EQUITY IN INCOME OF SUBSIDIARIES | ||
NET INCOME BEFORE INCOME TAXES | -8,364,528 | 1,978,812 |
INCOME TAX BENEFIT | -2,401,619 | 2,173,767 |
NET INCOME (LOSS) | -5,962,909 | -194,955 |
(Loss) attributable to preferred shareholders | -138,374 | -806,624 |
LOSS ATTRIBUTABE TO COMMON SHAREHOLDERS | -6,101,283 | -1,001,579 |
Parent [Member] | ||
REVENUE | ||
Contract servicing fees | ||
Gain on life settlements, net | ||
Interest and other income | 24,037 | 3,334,331 |
TOTAL REVENUE | 24,307 | 3,334,331 |
EXPENSES | ||
Origination and servicing fees | ||
Interest expense | 18,248,599 | 11,800,718 |
Employee compensation and benefits | 3,018,570 | 3,424,383 |
Legal and professional fees | 2,021,763 | 1,206,520 |
Other expenses | 2,832,867 | 2,004,636 |
TOTAL EXPENSES | 26,121,799 | 18,436,257 |
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES | -26,097,762 | -15,101,926 |
EQUITY IN INCOME OF SUBSIDIARIES | -17,733,234 | -17,080,738 |
NET INCOME BEFORE INCOME TAXES | 8,364,528 | 1,978,812 |
INCOME TAX BENEFIT | -2,401,619 | 2,173,767 |
NET INCOME (LOSS) | -5,962,909 | -194,955 |
(Loss) attributable to preferred shareholders | -138,374 | -806,624 |
LOSS ATTRIBUTABE TO COMMON SHAREHOLDERS | -6,101,283 | -1,001,579 |
Guarantor Subsidiary [Member] | ||
REVENUE | ||
Contract servicing fees | 1,615,674 | 3,710,737 |
Gain on life settlements, net | ||
Interest and other income | 231,034 | 2,612,420 |
TOTAL REVENUE | 1,846,708 | 6,323,157 |
EXPENSES | ||
Origination and servicing fees | ||
Interest expense | 3,110,165 | 3,684,811 |
Employee compensation and benefits | 1,951,066 | 1,619,465 |
Legal and professional fees | 307,386 | 514,728 |
Other expenses | 1,929,557 | 1,463,084 |
TOTAL EXPENSES | 7,298,174 | 7,282,088 |
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES | -5,451,466 | -958,931 |
EQUITY IN INCOME OF SUBSIDIARIES | -23,184,700 | -18,088,189 |
NET INCOME BEFORE INCOME TAXES | 17,733,234 | 17,129,258 |
INCOME TAX BENEFIT | ||
NET INCOME (LOSS) | 17,733,234 | 17,129,258 |
(Loss) attributable to preferred shareholders | ||
LOSS ATTRIBUTABE TO COMMON SHAREHOLDERS | ||
Non-Guarantor Subsidiaries [Member] | ||
REVENUE | ||
Contract servicing fees | ||
Gain on life settlements, net | 30,416,127 | 29,513,642 |
Interest and other income | 33,469 | 79,767 |
TOTAL REVENUE | 30,449,596 | 29,593,409 |
EXPENSES | ||
Origination and servicing fees | 1,615,674 | 3,710,737 |
Interest expense | 5,358,034 | 5,277,115 |
Employee compensation and benefits | ||
Legal and professional fees | 10,086 | 32,961 |
Other expenses | 281,102 | 2,532,927 |
TOTAL EXPENSES | 7,264,896 | 11,553,740 |
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES | 23,184,700 | 18,039,669 |
EQUITY IN INCOME OF SUBSIDIARIES | ||
NET INCOME BEFORE INCOME TAXES | 23,184,700 | 18,039,669 |
INCOME TAX BENEFIT | ||
NET INCOME (LOSS) | 23,184,700 | 18,039,669 |
(Loss) attributable to preferred shareholders | ||
LOSS ATTRIBUTABE TO COMMON SHAREHOLDERS | ||
Eliminations [Member] | ||
REVENUE | ||
Contract servicing fees | -1,615,674 | -3,710,737 |
Gain on life settlements, net | ||
Interest and other income | -228,092 | -2,475,386 |
TOTAL REVENUE | -1,843,766 | -6,186,123 |
EXPENSES | ||
Origination and servicing fees | -1,615,674 | -3,710,737 |
Interest expense | ||
Employee compensation and benefits | ||
Other expenses | -228,092 | -2,475,386 |
TOTAL EXPENSES | -1,843,766 | -6,186,123 |
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES | ||
EQUITY IN INCOME OF SUBSIDIARIES | -40,917,934 | -35,168,927 |
NET INCOME BEFORE INCOME TAXES | -40,917,934 | -35,168,927 |
INCOME TAX BENEFIT | ||
NET INCOME (LOSS) | -40,917,934 | -35,168,927 |
(Loss) attributable to preferred shareholders | ||
LOSS ATTRIBUTABE TO COMMON SHAREHOLDERS |
Guarantees_of_L_Bonds_Details_1
Guarantees of L Bonds (Details 2) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
NET INCOME (LOSS) | ($5,962,909) | ($194,955) |
Adjustments to reconcile net income (loss) to cash flows from operating activities: | ||
Equity of subsidiaries | ||
Gain on life settlements | 39,928,003 | 39,337,542 |
Amortization of deferred financing and issuance costs | 3,804,795 | 2,470,390 |
Deferred income taxes | -2,401,619 | 2,173,767 |
Preferred stock issued for dividends | 774,085 | 623,899 |
Convertible, redeemable preferred stock issued in lieu of cash dividends | -116,207 | 255 |
Repurchase of common stock | -8,642,990 | |
(Increase) decrease in operating assets: | ||
Due from related parties | 291 | -8,613 |
Insurance benefits receivable | -1,750,000 | 2,850,000 |
Other assets | -2,347,050 | -566,418 |
Increase in operating liabilities: | ||
Accounts payable | 363,706 | 369,810 |
Interest payable | 4,638,876 | 3,418,432 |
Other accrued expenses | 457,376 | 50,642 |
NET CASH FLOWS USED IN OPERATING ACTIVITIES | -42,467,241 | -31,385,508 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Investment in life settlements | -12,292,401 | -34,997,500 |
Proceeds from settlement of life settlements | 4,185,813 | 4,563,896 |
NET CASH FLOWS USED IN INVESTING ACTIVITIES | -8,106,588 | -30,433,604 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Net proceeds from revolving credit facility | -6,838,952 | 8,000,000 |
Payments for redemption of Series I Secured Notes payable | -2,268,379 | -8,671,624 |
Proceeds from issuance of debentures | 65,713,297 | 85,260,976 |
Payments for issuance of debentures | 4,104,876 | 4,320,542 |
Payments for redemption of debentures | -14,429,017 | -8,143,363 |
Proceeds from (uses of) restricted cash | 1,536,916 | -3,739,878 |
Issuance of common stock | -8,642,990 | |
Issuance of member capital | ||
Payments for redemption of preferred stock | -465,239 | -613,708 |
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 47,786,740 | 67,771,861 |
NET DECREASE IN CASH AND CASH EQUIVALENTS | -2,787,089 | 5,952,749 |
CASH AND CASH EQUIVALENTS | ||
BEGINNING OF PERIOD | 33,449,793 | 27,497,044 |
END OF PERIOD | 30,662,704 | 33,449,793 |
Parent [Member] | ||
CASH FLOWS FROM OPERATING ACTIVITIES | ||
NET INCOME (LOSS) | -5,962,909 | -194,955 |
Adjustments to reconcile net income (loss) to cash flows from operating activities: | ||
Equity of subsidiaries | -17,733,234 | -17,080,738 |
Gain on life settlements | ||
Amortization of deferred financing and issuance costs | 2,967,617 | 1,908,248 |
Deferred income taxes | -2,401,619 | 2,173,767 |
Preferred stock issued for dividends | 774,085 | 623,899 |
Convertible, redeemable preferred stock issued in lieu of cash dividends | -116,207 | 255 |
Repurchase of common stock | -3,252,400 | |
(Increase) decrease in operating assets: | ||
Due from related parties | ||
Insurance benefits receivable | ||
Other assets | -39,118,259 | -51,522,808 |
Increase in operating liabilities: | ||
Accounts payable | 177,681 | 160,130 |
Interest payable | 3,359,926 | 2,399,975 |
Other accrued expenses | 430,601 | 277,321 |
NET CASH FLOWS USED IN OPERATING ACTIVITIES | -57,622,318 | -64,507,306 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Investment in life settlements | ||
Proceeds from settlement of life settlements | ||
NET CASH FLOWS USED IN INVESTING ACTIVITIES | ||
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Net proceeds from revolving credit facility | ||
Payments for redemption of Series I Secured Notes payable | ||
Proceeds from issuance of debentures | 65,713,297 | 85,260,976 |
Payments for issuance of debentures | -4,104,876 | -4,320,542 |
Payments for redemption of debentures | -14,429,017 | -8,143,363 |
Proceeds from (uses of) restricted cash | ||
Issuance of common stock | -8,642,990 | |
Issuance of member capital | ||
Payments for redemption of preferred stock | -456,239 | -613,708 |
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 55,357,155 | 72,183,363 |
NET DECREASE IN CASH AND CASH EQUIVALENTS | -2,265,163 | 7,676,057 |
CASH AND CASH EQUIVALENTS | ||
BEGINNING OF PERIOD | 32,711,636 | 25,035,579 |
END OF PERIOD | 30,446,473 | 32,711,636 |
Guarantor Subsidiary [Member] | ||
CASH FLOWS FROM OPERATING ACTIVITIES | ||
NET INCOME (LOSS) | 17,733,234 | 17,129,258 |
Adjustments to reconcile net income (loss) to cash flows from operating activities: | ||
Equity of subsidiaries | -23,184,700 | -18,088,189 |
Gain on life settlements | ||
Amortization of deferred financing and issuance costs | 479,278 | 823,004 |
Deferred income taxes | ||
Preferred stock issued for dividends | ||
Convertible, redeemable preferred stock issued in lieu of cash dividends | ||
Repurchase of common stock | ||
(Increase) decrease in operating assets: | ||
Due from related parties | -291 | 8,613 |
Insurance benefits receivable | ||
Other assets | -33,434,321 | -45,077,218 |
Increase in operating liabilities: | ||
Accounts payable | 136,025 | 1,680 |
Interest payable | 599,419 | 809,540 |
Other accrued expenses | 16,367 | -224,990 |
NET CASH FLOWS USED IN OPERATING ACTIVITIES | -37,654,989 | -44,618,302 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Investment in life settlements | ||
Proceeds from settlement of life settlements | ||
NET CASH FLOWS USED IN INVESTING ACTIVITIES | ||
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Net proceeds from revolving credit facility | ||
Payments for redemption of Series I Secured Notes payable | -2,268,379 | -8,671,624 |
Proceeds from issuance of debentures | ||
Payments for issuance of debentures | ||
Payments for redemption of debentures | ||
Proceeds from (uses of) restricted cash | 1,337,500 | 328,700 |
Issuance of common stock | ||
Issuance of member capital | 38,063,942 | 51,237,918 |
Payments for redemption of preferred stock | ||
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 37,133,063 | 42,894,994 |
NET DECREASE IN CASH AND CASH EQUIVALENTS | -521,926 | -1,723,308 |
CASH AND CASH EQUIVALENTS | ||
BEGINNING OF PERIOD | 738,157 | 2,461,465 |
END OF PERIOD | 216,231 | 738,157 |
Non-Guarantor Subsidiaries [Member] | ||
CASH FLOWS FROM OPERATING ACTIVITIES | ||
NET INCOME (LOSS) | 23,184,700 | 18,039,669 |
Adjustments to reconcile net income (loss) to cash flows from operating activities: | ||
Equity of subsidiaries | ||
Gain on life settlements | -39,928,003 | -39,337,542 |
Amortization of deferred financing and issuance costs | 357,900 | -260,861 |
Deferred income taxes | ||
Preferred stock issued for dividends | ||
Convertible, redeemable preferred stock issued in lieu of cash dividends | ||
Repurchase of common stock | ||
(Increase) decrease in operating assets: | ||
Due from related parties | ||
Insurance benefits receivable | -1,750,000 | 2,850,000 |
Other assets | ||
Increase in operating liabilities: | ||
Accounts payable | 50,000 | 208,000 |
Interest payable | 679,531 | 208,918 |
Other accrued expenses | 10,408 | -1,690 |
NET CASH FLOWS USED IN OPERATING ACTIVITIES | -17,395,464 | -18,293,506 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Investment in life settlements | -12,292,401 | -34,997,500 |
Proceeds from settlement of life settlements | 4,185,813 | 4,563,896 |
NET CASH FLOWS USED IN INVESTING ACTIVITIES | -8,106,588 | -30,433,604 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Net proceeds from revolving credit facility | -6,838,952 | 8,000,000 |
Payments for redemption of Series I Secured Notes payable | ||
Proceeds from issuance of debentures | ||
Payments for issuance of debentures | ||
Payments for redemption of debentures | ||
Proceeds from (uses of) restricted cash | 199,416 | -4,068,578 |
Issuance of common stock | ||
Issuance of member capital | 32,141,588 | 44,795,688 |
Payments for redemption of preferred stock | ||
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 25,502,052 | 48,727,110 |
NET DECREASE IN CASH AND CASH EQUIVALENTS | ||
CASH AND CASH EQUIVALENTS | ||
BEGINNING OF PERIOD | ||
END OF PERIOD | ||
Eliminations [Member] | ||
CASH FLOWS FROM OPERATING ACTIVITIES | ||
NET INCOME (LOSS) | -40,917,934 | -35,168,927 |
Adjustments to reconcile net income (loss) to cash flows from operating activities: | ||
Equity of subsidiaries | -40,917,934 | -35,168,927 |
Gain on life settlements | ||
Amortization of deferred financing and issuance costs | ||
Deferred income taxes | ||
Preferred stock issued for dividends | ||
Convertible, redeemable preferred stock issued in lieu of cash dividends | ||
Repurchase of common stock | ||
(Increase) decrease in operating assets: | ||
Due from related parties | ||
Insurance benefits receivable | ||
Other assets | 70,205,530 | 96,033,606 |
Increase in operating liabilities: | ||
Accounts payable | ||
Interest payable | ||
Other accrued expenses | ||
NET CASH FLOWS USED IN OPERATING ACTIVITIES | 70,205,530 | 96,033,606 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Investment in life settlements | ||
Proceeds from settlement of life settlements | ||
NET CASH FLOWS USED IN INVESTING ACTIVITIES | ||
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Net proceeds from revolving credit facility | ||
Payments for redemption of Series I Secured Notes payable | ||
Proceeds from issuance of debentures | ||
Payments for issuance of debentures | ||
Payments for redemption of debentures | ||
Proceeds from (uses of) restricted cash | ||
Issuance of common stock | ||
Issuance of member capital | -70,205,530 | -96,033,606 |
Payments for redemption of preferred stock | ||
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | -70,205,530 | -96,033,606 |
NET DECREASE IN CASH AND CASH EQUIVALENTS | ||
CASH AND CASH EQUIVALENTS | ||
BEGINNING OF PERIOD | ||
END OF PERIOD |
Guarantees_of_L_Bonds_Details_2
Guarantees of L Bonds (Details Textual) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Guarantees of L Bonds (Textual) | |
Debentures offer for sale | $214,421,000 |
Maximum rate of return on equity fund amount | 18.00% |
Guarantees of L Bonds [Member] | |
Guarantees of L Bonds (Textual) | |
Debentures offer for sale | $250,000,000 |
Concentrations_Details
Concentrations (Details) | Dec. 31, 2014 | Dec. 31, 2013 |
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 | 14.55% | 16.58% |
John Hancock [Member] | ||
Summary of the face value of insurance contracts with specific life insurance companies | ||
Face value percentage of insurance contracts with specific life insurance companies | 11.48% | 11.34% |
Concentrations_Details_1
Concentrations (Details 1) | Dec. 31, 2014 | Dec. 31, 2013 | |
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 | 28.87% | 28.14% | |
Florida [Member] | |||
Summary of the number of insurance contracts held in specific states exceeding 10% of the total face value held by the Company | |||
Percentage of insurance contracts held in specific states | 18.56% | 15.59% | |
New York [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 | [1] | 10.65% | |
[1] | * percentage does not exceed 10% of the total face value. |
Concentration_Details_Textual
Concentration (Details Textual) | 12 Months Ended |
Dec. 31, 2014 | |
Concentration (Textual) | |
Description of issuance contracts with specific life insurance companies and contracts held in specific states | Exceeding 10% of the total face value |
Subsequent_events_Details
Subsequent events (Details) (USD $) | 0 Months Ended | 12 Months Ended |
Jan. 09, 2015 | Dec. 31, 2014 | |
Policy | ||
individual | ||
Subsequent events (Textual) | ||
Insurance benefit of mature securities | $21,125,000 | |
Realized gains of policies | 18,194,000 | |
Additional principal amount of L bonds | 19,051,000 | |
Subsequent Event [Member] | ||
Subsequent events (Textual) | ||
Number of policies | 4 | |
Number of individuals | 3 | |
Insurance benefit of mature securities | 21,125,000 | |
Realized gains of policies | 18,194,000 | |
Publicly registered L Bond offering amount | 1,000,000,000 | |
Minimum increments for broker-dealer subsidiary | $25,000 |