Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2015 | Aug. 13, 2015 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | GWG Holdings, Inc. | |
Entity Central Index Key | 1,522,690 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q2 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 5,933,041 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
ASSETS | ||
Cash and cash equivalents | $ 38,198,189 | $ 30,662,704 |
Restricted cash | 7,923,190 | 4,296,053 |
Policy benefits receivable | 2,500,000 | 1,750,000 |
Investment in life settlements, at fair value | 301,498,527 | 282,883,010 |
Other assets | 6,623,561 | 3,478,762 |
TOTAL ASSETS | 356,743,467 | 323,070,529 |
LIABILITIES | ||
Revolving credit facility | 65,011,048 | 72,161,048 |
Series I Secured notes | 24,347,531 | 27,616,578 |
L Bonds | 223,118,514 | 182,782,884 |
Interest payable | 11,593,220 | 11,128,519 |
Accounts payable and accrued expenses | 2,071,879 | 1,718,009 |
Deferred taxes, net | 6,525,336 | 5,273,555 |
TOTAL LIABILITIES | 332,667,528 | 300,680,593 |
STOCKHOLDERS' EQUITY | ||
CONVERTIBLE PREFERRED STOCK (par value $0.001; shares authorized 40,000,000; shares outstanding 2,746,412 and 2,738,966; liquidation preference of $20,598,000 and $20,542,000, respectively) | 20,559,823 | 20,527,866 |
COMMON STOCK Common stock (par value $0.001: shares authorized 210,000,000; shares issued and outstanding is 5,933,041 and 5,870,193 on June 30, 2015 and December 31, 2014, respectively) | 5,933 | 5,870 |
Additional paid-in capital | 16,900,193 | 16,257,686 |
Accumulated deficit | (13,390,010) | (14,401,486) |
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | 24,075,939 | 22,389,936 |
TOTAL LIABILITIES & EQUITY (DEFICIT) | $ 356,743,467 | $ 323,070,529 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Convertible preferred stock, par value | $ 0.001 | $ 0.001 |
Convertible preferred stock, shares authorized | 40,000,000 | 40,000,000 |
Convertible preferred stock, shares outstanding | 2,746,412 | 2,738,966 |
Convertible preferred stock, liquidation preference | $ 20,598,000 | $ 20,542,000 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 210,000,000 | 210,000,000 |
Common stock, shares issued | 5,933,041 | 5,870,193 |
Common stock, shares outstanding | 5,933,041 | 5,870,193 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
REVENUE | ||||
Gain on life settlements, net | $ 8,473,886 | $ 5,484,889 | $ 25,257,295 | $ 11,001,094 |
Interest and other income | 90,380 | 6,380 | 139,676 | 13,747 |
TOTAL REVENUE | 8,564,266 | 5,491,269 | 25,396,971 | 11,014,841 |
EXPENSES | ||||
Employee compensation and benefits | 2,144,725 | 1,178,819 | 3,872,642 | 2,147,564 |
Legal and professional fees | 642,931 | 419,337 | 1,166,184 | 826,339 |
Interest expense | 7,322,347 | 6,608,043 | 14,498,881 | 12,934,591 |
Other expenses | 1,881,321 | 1,188,479 | 3,415,060 | 1,865,784 |
TOTAL EXPENSES | 11,991,324 | 9,394,678 | 22,952,767 | 17,774,278 |
INCOME (LOSS) BEFORE INCOME TAXES | (3,427,058) | (3,903,409) | 2,444,204 | (6,759,437) |
INCOME TAX EXPENSE (BENEFIT) | (1,176,643) | (1,316,712) | 1,432,728 | (2,271,570) |
NET INCOME (LOSS) | (2,250,415) | (2,586,697) | 1,011,476 | (4,487,867) |
(Income) loss attributable to preferred shareholders | 344,847 | (101,271) | 698,003 | (226,984) |
INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ (1,905,568) | $ (2,687,968) | $ 1,709,479 | $ (4,714,851) |
NET INCOME (LOSS) PER SHARE | ||||
Basic | $ (0.32) | $ (0.59) | $ 0.29 | $ (1.03) |
Diluted | $ (0.32) | $ (0.59) | $ 0.21 | $ (1.03) |
WEIGHTED AVERAGE SHARES OUTSTANDING | ||||
Basic | 5,876,618 | 4,562,000 | 5,873,423 | 4,562,000 |
Diluted | 5,876,618 | 4,562,000 | 7,987,923 | 4,562,000 |
Condensed Consolidated Stateme5
Condensed Consolidated Statement of Cash Flows - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||||
Net income (loss) | $ (2,250,415) | $ (2,586,697) | $ 1,011,476 | $ (4,487,867) |
Adjustments to reconcile net income (loss) to net cash flows from operating activities: | ||||
Gain on life settlements | (14,028,327) | (10,852,425) | (12,134,482) | (22,211,338) |
Amortization of deferred financing and issuance costs | 507,026 | 1,354,007 | (42,004) | 1,707,664 |
Deferred income taxes | (930,470) | (1,316,712) | 1,251,781 | (2,271,570) |
Convertible, redeemable preferred stock dividends payable | 146,420 | 196,991 | 335,232 | 389,331 |
(Increase) decrease in operating assets: | ||||
Policy benefits receivable | 17,140,000 | (300,000) | (750,000) | (300,000) |
Other assets | (225,376) | (697,073) | (356,549) | (948,919) |
Increase (decrease) in operating liabilities: | ||||
Accounts payable and accrued expenses | (1,333,241) | 1,890,337 | 1,302,446 | 3,168,163 |
NET CASH FLOWS USED IN OPERATING ACTIVITIES | (974,383) | (12,311,572) | (9,382,100) | (24,954,536) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||||
Investment in life settlements | (7,777,541) | (2,608,232) | (10,224,018) | (10,879,435) |
Proceeds from settlement of life settlements | 132,388 | 68,500 | 3,742,983 | 68,500 |
NET CASH FLOWS USED IN INVESTING ACTIVITIES | (7,645,153) | $ (2,539,732) | (6,481,035) | $ (10,810,935) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||||
Repayment of revolving credit facility | (7,150,000) | (7,150,000) | ||
Payments for redemption of Series I Secured notes | (2,344,355) | $ (670,621) | (3,617,544) | $ (1,538,924) |
Proceeds from issuance of L Bonds | 22,538,059 | 14,868,830 | 50,498,356 | 33,234,487 |
Payments for redemption and issuance of L Bonds | (6,134,935) | (4,393,523) | (13,013,057) | (9,322,411) |
Proceeds from restricted cash | 3,410,427 | $ 43,330 | (3,627,137) | $ 3,022,537 |
Issuance of common stock | 582,000 | 582,000 | ||
Redemptions of convertible, redeemable preferred stock | (273,998) | $ (20,056) | (273,998) | $ (20,056) |
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 10,627,198 | 9,827,960 | 23,398,620 | 25,375,633 |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 2,007,662 | (5,023,344) | 7,535,485 | (10,389,838) |
CASH AND CASH EQUIVALENTS | ||||
BEGINNING OF PERIOD | 36,190,527 | 28,083,299 | 30,662,704 | 33,449,793 |
END OF PERIOD | 38,198,189 | 23,059,955 | 38,198,189 | 23,059,955 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||
Interest paid | 7,041,000 | 3,531,000 | 13,143,000 | 7,781,000 |
Series I Secured notes: | ||||
Non-cash conversion of accrued interest and commissions payable to principal | 86,000 | 40,000 | 127,000 | 105,000 |
L Bonds: | ||||
Non-cash conversion of accrued interest and commission payable to principal | 219,000 | 162,000 | 438,000 | 282,000 |
Convertible, redeemable preferred stock | ||||
Non-cash conversion of dividends payable | $ 150,000 | 193,000 | $ 334,000 | 380,000 |
Non-cash accretion of convertible, redeemable preferred stock to redemption value | 101,000 | 227,000 | ||
Investment in life settlements included in accounts payable | $ 61,000 | $ 75,000 | $ 61,000 | $ 75,000 |
Condensed Consolidated Stateme6
Condensed Consolidated Statement of Stockholders' Equity - USD ($) | Total | Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | |
Beginning balance at Dec. 31, 2013 | $ (5,492,015) | $ 4,562 | $ 2,942,000 | $ (8,438,577) | ||
Begining balance, Shares at Dec. 31, 2013 | 4,562,000 | |||||
Net income (loss) | (5,962,909) | $ (5,962,909) | ||||
Issuance of common stock | 8,643,790 | $ 800 | $ 8,642,990 | |||
Issuance of common stock, Share | 800,000 | |||||
Series A Preferred Stock conversion to common stock | 4,957,099 | $ 508 | $ 4,956,591 | |||
Series A Preferred Stock conversion to common stock, Shares | 508,193 | |||||
Issuance of preferred stock | 201,261 | $ 201,261 | ||||
Issuance of preferred stock, Shares | 28,752 | |||||
Issuance of stock options | 122,412 | $ 122,412 | ||||
Reclassification of preferred stock from temporary equity to permanent equity due to initial public offering (*) | [1] | 20,326,605 | $ 20,326,605 | |||
Reclassification of preferred stock from temporary equity to permanent equity due to initial public offering (*), Shares | [1] | 2,710,214 | ||||
Extension of warrants | 47,120 | $ 47,120 | ||||
Accretion of preferred stock to liquidation value | (453,427) | (453,427) | ||||
Ending balance at Dec. 31, 2014 | 22,389,936 | $ 20,527,866 | $ 5,870 | $ 16,257,686 | $ (14,401,486) | |
Ending balance, Shares at Dec. 31, 2014 | 2,738,966 | 5,870,193 | ||||
Net income (loss) | 1,011,476 | $ 1,011,476 | ||||
Issuance of common stock | $ 582,000 | $ 60 | $ 581,940 | |||
Issuance of common stock, Share | 60,000 | |||||
Series A Preferred Stock conversion to common stock | $ (28,478) | $ 3 | $ 28,475 | |||
Series A Preferred Stock conversion to common stock, Shares | (3,797) | 2,848 | ||||
Issuance of preferred stock | $ 60,435 | $ 60,435 | ||||
Issuance of preferred stock, Shares | 11,243 | |||||
Issuance of stock options | 32,092 | $ 32,092 | ||||
Ending balance at Jun. 30, 2015 | $ 24,075,939 | $ 20,559,823 | $ 5,933 | $ 16,900,193 | $ (13,390,010) | |
Ending balance, Shares at Jun. 30, 2015 | 2,746,412 | 5,933,041 | ||||
[1] | Subject to the terms of the Certificate of Designation for Series A Convertible Preferred Stock, the listing of our common stock on The Nasdaq Capital Market on September 25, 2014 resulted in the termination of a redemption right in favor of the holders of such preferred stock. Preferred stock that is not redeemable by a shareholder is treated as stockholders' equity as shown in the table above. |
Nature of Business and Summary
Nature of Business and Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2015 | |
Nature of Business and Summary of Significant Accounting Policies [Abstract] | |
Nature of business and summary of significant accounting policies | (1) Nature of business and summary of significant accounting policies Nature of business Use of estimates Cash and cash equivalents Life settlements Investments in Insurance Contracts The Company recognizes realized gains (revenue) from life settlement contracts upon one of the two following events: 1) Receipt of death notice or verified obituary of insured 2) Sale of policy and filing of change of ownership forms and receipt of payment The Company recognizes the difference between the death benefits and carrying values of the policy when an insured event has occurred and the Company determines that settlement and ultimate collection of the death benefits is realizable and reasonably assured. Revenue from a transaction must meet both criteria in order to be recognized. In an event of a sale of a policy, the Company recognizes gain or loss as the difference between the sale price and the carrying value of the policy on the date of the receipt of payment on such sale. Deposits and initial direct costs advanced on unsettled policy acquisitions are recorded as other assets until policy ownership has been transferred to the Company. Such deposits and direct cost advances were $222,000 and $27,000 at June 30, 2015 and December 31, 2014, respectively. Deferred financing and issuance costs Earnings (loss) per share Subsequent events Recently adopted pronouncements - On April 7, 2015 the FASB issued Accounting Standards Update (ASU) No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” as part of its simplification initiative. The ASU changes the presentation of debt issuance costs in financial statements. Under the ASU, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. For public business entities, the guidance in the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. For entities other than public business entities, the guidance is effective for fiscal years beginning after December 15, 2015, and interim periods beginning after December 15, 2016. Early adoption is allowed for all entities for financial statements that have not been previously issued. Entities would apply the new guidance retrospectively to all prior periods (i.e., the balance sheet for each period is adjusted). The impact of the new ASU on the Company’s balance sheet would be a reduction of approximately $3,629,000 to assets and the corresponding reduction to liabilities. There would be no impact on the Company’s statements of operations. |
Restrictions on Cash
Restrictions on Cash | 6 Months Ended |
Jun. 30, 2015 | |
Restrictions on Cash [Abstract] | |
Restrictions on cash | (2) Restrictions on cash The Company is required by its lenders to maintain collection and escrow accounts. These accounts are used to fund the acquisition, pay annual premiums of insurance policies, pay interest and other charges under the revolving credit facility, and collect policy benefits. DZ Bank AG, as agent for Autobahn Funding Company, LLC, the lender for the revolving credit facility as described in note 6, authorizes the disbursements from these accounts. At June 30, 2015 and December 31, 2014 there was a balance of $7,923,000, and $4,296,000, respectively, maintained in these restricted cash accounts. |
Investment in Life Insurance Po
Investment in Life Insurance Policies | 6 Months Ended |
Jun. 30, 2015 | |
Investment in Life Insurance Policies [Abstract] | |
Investment in life insurance policies | (3) Investment in life insurance policies The life insurance policies (Level 3 fair value measurements) are valued based on unobservable inputs that are significant to the overall fair value measurement. Changes in the fair value of these instruments are recorded in gain or loss on life insurance policies in the consolidated statements of operations (net of the cash premiums paid on the policies). The fair value is determined on a discounted cash flow basis that incorporates life expectancy assumptions. Life expectancy reports have been obtained from widely accepted life expectancy providers. The discount rate incorporates current information about market interest rates, the credit exposure to the insurance company that issued the life insurance policy and our estimate of the risk premium an investor in the policy would require. As a result of management’s analysis, discount rates of 11.19% and 11.38% were applied to the portfolio as of June 30, 2015 and December 31, 2014. A summary of the Company’s life insurance policies accounted for under the fair value method and their estimated maturity dates, based on remaining life expectancy is as follows: As of June 30, 2015 As of December 31, 2014 Years Ending December 31, Number of Contracts Estimated Fair Value Face Value Number of Contracts Estimated Fair Value Face Value 2015 - $ - $ - 3 $ 5,063,000 $ 6,000,000 2016 5 7,198,000 8,500,000 7 8,144,000 11,550,000 2017 16 17,063,000 23,857,000 17 21,916,000 35,542,000 2018 30 42,478,000 72,171,000 30 41,994,000 76,206,000 2019 48 53,052,000 109,810,000 45 47,303,000 106,973,000 2020 43 46,597,000 101,574,000 41 43,429,000 102,614,000 2021 42 34,486,000 96,956,000 36 29,789,000 90,921,000 Thereafter 130 100,625,000 393,406,000 112 85,245,000 349,293,000 Totals 314 301,499,000 806,274,000 291 $ 282,883,000 $ 779,099,000 The Company recognized policy benefits of $750,000 and $300,000 during the three-month periods ended June 30, 2015 and 2014, respectively, related to policies with a carrying value of $132,000 and $68,000, respectively. The Company recorded realized gains of $618,000 and $232,000 on such policies. The Company recognized policy benefits of $29,375,000 and $300,000 during the six-month periods ended June 30, 2015 and 2014, respectively, related to policies with carrying value of $3,743,000 and $68,000, respectively. The company recorded realized gains of $25,632,000 and $232,000, respectively on such policies. Reconciliation of gain on life settlements: Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2012 Change in fair value $ 14,028,000 $ 10,852,000 $ 12,134,000 $ 22,211,000 Premiums and other annual fees (6,172,000 ) (5,599,000 ) (12,509,000 ) (11,442,000 ) Policy maturities 618,000 232,000 25,632,000 232,000 Gain on life settlements, net $ 8,474,000 $ 5,485,000 $ 25,257,000 $ 11,001,000 The estimated expected premium payments to maintain the above life insurance policies in force through 2020, assuming no mortalities, are as follows: Years Ending December 31, Premiums Servicing Premiums and Servicing Fees Six months ending December 31 ,2015 $ 13,292,000 $ 377,000 $ 13,669,000 2016 27,985,000 377,000 28,362,000 2017 31,333,000 377,000 31,710,000 2018 34,191,000 377,000 34,568,000 2019 38,001,000 377,000 38,378,000 2020 42,158,000 377,000 42,535,000 $ 186,960,000 $ 2,262,000 $ 189,222,000 Management anticipates funding the estimated premium payments as noted above with proceeds from the DZ Bank revolving credit facility and through additional debt and equity financing as well as from cash proceeds from maturities of life insurance policies. The proceeds of these capital sources are also intended to be used for the purchase, financing, and maintenance of additional life insurance policies. |
Fair Value Definition and Hiera
Fair Value Definition and Hierarchy | 6 Months Ended |
Jun. 30, 2015 | |
Fair Value Definition and Hierarchy [Abstract] | |
Fair value definition and hierarchy | (4) Fair value definition and hierarchy ASC 820 establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring assets and liabilities at fair value. Market price observability is affected by a number of factors, including the type of investment, the characteristics specific to the investment and the state of the marketplace including the existence and transparency of transactions between market participants. Assets and liabilities with readily available active quoted prices or for which fair value can be measured from actively quoted prices in an orderly market generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. ASC 820 establishes a three-level valuation hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. The hierarchy is broken down into three levels based on the observability of inputs as follows: ● Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. ● Level 2 - Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. ● Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The availability of observable inputs can vary by types of assets and liabilities and is affected by a wide variety of factors, including, for example, whether instrument is established in the marketplace, the liquidity of markets and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by management in determining fair value is greatest for assets and liabilities categorized in Level 3. Level 3 Valuation Process The estimated fair value of the Company’s life settlements are determined on a quarterly basis by the Company’s portfolio management committee, taking into consideration changes in discount rate assumptions, estimated premium payments and life expectancy assumptions, as well as any changes in economic and other relevant conditions. These inputs are then used to estimate the discounted cash flows using the MAPS probabilistic portfolio pricing model, which estimates the cash flows using various different probabilities and scenarios. The valuation process includes a review by senior management as of each valuation date. Management also engages a third party expert to independently test the accuracy of the valuations using the inputs provided by management. Life insurance policies represent financial instruments recorded at fair value on a recurring basis. The following table reconciles the beginning and ending fair value of the Company’s Level 3 investments in life insurance policies for the three and six-month periods ending June 30, as follows: Three month ended June 30, Six months ended June 30, 2015 2014 2015 2014 Beginning balance $ 278,395,000 $ 254,504,000 $ 282,883,000 $ 234,673,000 Purchases 9,208,000 2,608,000 10,225,000 11,080,000 Maturities (cash in excess of carrying value) (132,000 ) (68,000 ) (3,743,000 ) (68,000 ) Net change in fair value 14,028,000 10,852,000 12,134,000 22,211,000 Ending balance (June 30) $ 301,499,000 $ 267,896,000 $ 301,499,000 $ 267,896,000 The fair value of a portfolio of life insurance policies is based on information available to the Company at the reporting date. Fair value is based upon a discounted cash flow model that incorporates life expectancy estimate assumptions. Life expectancy estimates are obtained from independent, third-party, widely accepted life expectancy estimate providers at policy acquisition. The life expectancy values of each insured, as determined at policy acquisition, are rolled down monthly for the passage of time by the MAPS actuarial software the Company uses for ongoing valuation of its portfolio of life insurance policies. The discount rate incorporates current information about discount rates applied by other reporting companies owning portfolios of life insurance policies, discount rates observed in the life insurance secondary market, market interest rates, the credit exposure to the insurance company that issued the life insurance policy and management’s estimate of the risk premium a purchaser would require to receive the future cash flows derived from our portfolio of life insurance policies. On September 15, 2014, 21st Services announced changes to its mortality tables primarily for insureds age 90 and older, as well as updated adjustment factors designed to better underwrite seniors with multiple impairments. These changes represent small portions of 21st Services’ historical underwritings. We expect medical-actuarial underwriting firms to continue improving and refining their underwriting methodology. The fair value of life insurance policies is estimated using present value calculations of estimated cash flows based on the data specific to each individual life insurance policy. Estimated future policy premium payments are calculated based on the terms of the policy and the premium payment history. The following summarizes the unobservable inputs utilized in estimating the fair value of the portfolio of life insurance policies: As of June 30, 2015 As of December 31, 2014 Weighted average age of insured 82.9 82.8 Weighted average life expectancy, months* 78.7 78.4 Average face amount per policy $ 2,568,000 $ 2,677,000 Discount rate 11.19 % 11.43 % * Standard life expectancy as adjusted for insured’s specific circumstances. These assumptions are, by their nature, inherently uncertain and the effect of changes in estimates may be significant. The techniques used in estimating the present value of estimated cash flows are derived from valuation techniques generally used in the industry that include inputs for the asset that are not based on observable market data. The extent to which the fair value could reasonably vary in the near term has been quantified by evaluating the effect of changes in significant underlying assumptions used to estimate the fair value. If the life expectancy estimates were increased or decreased by four and eight months on each outstanding policy and the discount factors were increased or decreased by 1% and 2%, while all other variables are held constant, the fair value of the investment in life insurance policies would increase or (decrease) by the amounts summarized below: Change in life expectancy estimates minus 8 months minus months plus 4 months plus 8 months June 30, 2015 $ 41,402,000 $ 20,590,000 $ (20,105,000 ) $ (39,752,000 ) December 31, 2014 $ 40,634,000 $ 20,130,000 $ (19,664,000 ) $ (38,864,000 ) Change in discount rate minus 2% minus 1% plus 1% plus 2% June 30, 2015 $ 29,494,000 $ 14,144,000 $ (13,061,000 ) $ (25,148,000 ) December 31, 2014 $ 28,179,000 $ 13,522,000 $ (12,502,000 ) $ (24,085,000 ) Other Fair Value Considerations Carrying value of receivables, prepaid expenses, accounts payable and accrued expenses approximate fair value due to their short-term maturities and low credit risk. The estimated fair value of the Company’s Series I Secured notes and L Bonds is approximately $253,263,000 based on a weighted average market interest rate of 7.08% based on an income approach, the combined face value of these notes is $251,038,000 as of June 30, 2015. The carrying value of the revolving credit facility reflects interest charged at the commercial paper rate plus an applicable margin. The margin represents our credit risk, and the strength of the portfolio of life insurance policies collateralizing the debt. The overall rate reflects market, and the carrying value of the revolver approximates fair value. All of the financial instruments are Level 3 fair value measurements. The Company has issued warrants to purchase common stock in connection with the issuance of its convertible, redeemable preferred stock. Warrants were determined by the Company as permanent equity. The fair value measurements associated with the warrants, measured at issuance represent level 3 instruments. As of June 30, 2015: Month issued Warrants issued Fair value per share Risk free Volatility Term December 2011 68,937 $ 0.22 0.42 % 25.25 % 5 years March 2012 38,130 $ 0.52 0.38 % 36.20 % 5 years June 2012 161,840 $ 1.16 0.41 % 47.36 % 5 years July 2012 144,547 $ 1.16 0.41 % 47.36 % 5 years September 2012 2,500 $ 0.72 0.31 % 40.49 % 5 years September 2014 16,000 $ 1.26 1.85 % 17.03 % 5 years 431,954 Volatility is based upon the weekly percentage change in the stock price of selected comparable insurance companies. The percentage change is calculated on the average price of those selected stocks at the weekly close of business for the year preceding the balance sheet date. We compare annual volatility based on this weekly information. |
Credit Facilities
Credit Facilities | 6 Months Ended |
Jun. 30, 2015 | |
Credit Facilities / Series I Secured Notes / L Bonds (formerly Renewable Secured Debentures) [Abstract] | |
Credit facilities | (5) Credit facilities Revolving credit facility – Autobahn Funding Company LLC On July 15, 2008, DLP II and United Lending entered into a revolving credit facility pursuant to a Credit and Security Agreement (Agreement) with Autobahn Funding Company LLC (Autobahn), providing the Company with a maximum borrowing amount of $100,000,000. Autobahn is a commercial paper conduit that issues commercial paper to investors in order to provide funding to DLP II. DZ Bank AG Deutsche Zentral-Genossenschaftsbank (DZ Bank) acts as the agent for Autobahn. The original Agreement was to expire on July 15, 2013. On January 29, 2013, GWG Holdings, together with GWG Life and DLP II, entered into an Amended and Restated Credit and Security Agreement with Autobahn, extending the facility expiration date to December 31, 2014. On May 29, 2014, GWG Holdings, together with GWG Life and DLP II, entered into an Amendment No. 1 to Amended and Restated Credit and Security Agreement with Autobahn and DZ Bank (as committed lender and Agent). The amendment was entered into for the purpose of extending the maturity date for borrowings under the Agreement to December 31, 2016. Effective May 11, 2015, GWG Holdings, together with certain of its subsidiaries, entered into a Second Amended and Restated Credit and Security Agreement with Autobahn Funding Company LLC, as the conduit lender, and DZ Bank AG Deutsche Zentral-Genossenschaftsbank, as the committed lender and as the agent on behalf of secured parties under such agreement. The Second Amended and Restated Credit and Security Agreement extends the maturity date of borrowings made by the Company’s subsidiaries, GWG DLP Funding II, LLC and GWG DLP Funding III, LLC, to June 30, 2018. Advances under the credit facility made after May 11, 2015 will bear interest at the commercial paper rate of the lender at the time of the advance, or at the lender’s cost of borrowing plus 4.25 percent, which is 1.75 percent less than under the previous Credit and Security Agreement executed on January 25, 2013. In addition to the extended term and decreased interest rate and borrowing cost, the Second Amended and Restated Credit and Security Agreement also removes the requirement that the Company maintain a reserve for certain projected expenditures (including anticipated premium payments required to service its life insurance portfolio), thereby allowing for the Company’s full use of the credit facility up to its limit of $105,000,000. In connection with the Second Amended and Restated Credit and Security Agreement, GWG Holdings and its subsidiaries entered into certain other agreements and amendments and restatements of earlier agreements entered into in connection with the original and renewal Credit and Security Agreements. Included among these other agreements was an Amended and Restated Performance Guaranty affirming the performance guaranty that GWG Holdings earlier provided in connection with the original and first amended and restated Credit and Security Agreements to DZ Bank AG Deutsche Zentral-Genossenschaftsbank, as agent. The amount outstanding under this facility was $65,011,000 and $72,161,000 at June 30, 2015 and December 31, 2014, respectively. The Agreement requires DLP II to pay, on a monthly basis, interest at the commercial paper rate plus an applicable margin, as defined in the Agreement. The effective rate was 5.41% at June 30, 2015 and 6.24% at December 31, 2014. The Agreement also requires payment of an unused line fee on the unfunded amount under the revolving credit facility. The weighted-average effective interest rate (excluding the unused line fee) was 5.37% and 6.20% for the three months ended June 30, 2015 and 2014, respectively, and 6.00% and 6.21% for the six months ended June 30, 2015 and 2014, respectively. The note is secured by substantially all of DLP II’s and DLP III’s assets, which consist primarily of life insurance policies. The Agreement has certain financial and nonfinancial covenants. The Company was in compliance with these covenants at June 30, 2015 and December 31, 2014. The Agreement generally prohibits the Company from: ● changing its corporate name, offices, and jurisdiction of incorporation ● changing any deposit accounts or payment instructions to insurers; ● changing any operating policies and practices such that it would be reasonably likely to adversely affect the collectability of any asset in any material respect; ● merging or consolidating with, or selling all or substantially all of its assets to, any third party; ● selling any collateral or creating or permitting to exist any adverse claim upon any collateral; ● engaging in any other business or activity than that contemplated by the Agreement; ● incurring or guaranteeing any debt for borrowed money; ● amending the Company’s certificate of incorporation or bylaws, making any loans or advances to, investments in, or paying any dividends to, any person unless both before and after any such loan, advance, investment or dividend there exists no actual event of default, potential event of default or termination event; ● removing an independent director on the board of directors except for cause or with the consent of the lender; or ● making payment on or issuing any subsidiary secured notes or debentures, or amending any agreements respecting such notes or debentures, if an event of default, potential event of default or termination event exists or would arise from any such action. In addition, the Company has agreed to maintain (i) a positive consolidated net income on a non-GAAP basis (as defined and calculated under the Agreement) for each complete fiscal year and (ii) a tangible net worth on a non-GAAP basis (again, as defined and calculated under the Agreement) of not less than $45 million, and (iii) maintain cash and eligible investments at $15 million or above. Consolidated tangible net worth and net income as of and for the four quarters ended June 30, 2015, as calculated on non-GAAP basis under the agreement, was $101,427,000 and $44,503,000, respectively. Advances under the Agreement are subject to a borrowing base formula, which limits the availability of advances on the borrowing base calculation based on attributes of policies pledged to the facility. Over-concentration of policies by insurance carrier, over-concentration of policies by insurance carriers with ratings below a AA- rating, and the premiums and facility fees reserve are the three primary factors with the potential of limiting availability of funds on the facility. Total funds available for additional borrowings under the borrowing base formula criteria at June 30, 2015 and December 31, 2014, were $33,409,000 and $20,585,000 respectively. On July 15, 2008, Holdings delivered a performance guaranty in favor of Autobahn pursuant to which it guaranteed the obligations of GWG Life, in its capacity as the seller and master servicer, under the Credit and Security Agreement and related documents. On January 29, 2014 and in connection with the Amended and Restated Credit and Security Agreement, Holdings delivered a reaffirmation of its performance guaranty. The obligations of Holdings under the performance guaranty and subsequent reaffirmation do not extend to the principal and interest owed by DLP II and DLP III as the borrower under the credit facility. |
Series I Secured Notes
Series I Secured Notes | 6 Months Ended |
Jun. 30, 2015 | |
Credit Facilities / Series I Secured Notes / L Bonds (formerly Renewable Secured Debentures) [Abstract] | |
Series I Secured notes payable | (6) Series I Secured notes Series I Secured Notes are secured by assets of GWG Life and are subordinate to our revolving credit facility (see note 5). On June 14, 2011, the Company closed the offering to additional investors; however, existing investors may elect to continue advancing amounts outstanding upon maturity subject to the Company’s option to repay such notes. Series I Secured Notes have maturity dates ranging from six months to seven years with fixed interest rates varying from 5.65% to 9.55% depending on the term of the note. Interest is payable monthly, quarterly, annually or at maturity depending on the terms of the note. At June 30, 2015 and December 31, 2014, the weighted-average interest rate of Series I Secured Notes was 8.49% and 8.37%, respectively. The notes are secured by assets of GWG Life. The principal amount outstanding under these Series I Secured Notes was $24,728,000 and $28,047,000 at June 30, 2015 and December 31, 2014, respectively. The difference between the amount outstanding on the Series I Secured Notes and the carrying amount on the consolidated balance sheet is due to netting of unamortized deferred issuance costs. Overall, interest expense includes amortization of deferred financing and issuance costs of $81,000 and $211,000 for the three and six months ended June 30, 2015, respectively, and $134,000 and $301,000 for the three and six months ended June 30, 2014, respectively. Future expected amortization of deferred financing costs is $390,000 over the next six years. The use of proceeds from the issuances of L Bonds is limited to the following: (1) payment of commissions on sales of L Bonds, (2) payment of offering expenses, (3) purchase of life insurance policies, (4) payment of premiums on life insurance policies, (5) payment of principal and interest on L Bonds, (6) payment of portfolio operations expenses, and (7) general working capital. Future contractual maturities of Series I Secured notes at June 30, 2015 are as follows: Years Ending December 31, Contractual Maturities Amortization of Deferred Financing Costs Six months ending December 31, 2015 $ 5,085,000 $ 20,000 2016 10,964,000 144,000 2017 6,164,000 149,000 2018 1,127,000 36,000 2019 347,000 7,000 Thereafter 1,041,000 34,000 $ 24,728,000 $ 390,000 |
L Bonds (Formerly Renewable Sec
L Bonds (Formerly Renewable Secured Debentures) | 6 Months Ended |
Jun. 30, 2015 | |
Credit Facilities / Series I Secured Notes / L Bonds (formerly Renewable Secured Debentures) [Abstract] | |
L Bonds (formerly Renewable Secured Debentures) | (7) L Bonds (formerly Renewable Secured Debentures) The Company registered with the SEC, effective January of 2012, the offer and sale of $250,000,000 of Renewable Secured Debentures (subsequently renamed “L Bonds”). The debentures are secured by assets of GWG Holdings and GWG Life and are subordinate to our revolving credit facility (see note 5). L Bonds have maturity dates ranging from six months to seven years with fixed interest rates varying from 4.25% to 9.50% depending on the term of the note. Interest is payable monthly, annually or at maturity depending on the terms of the debenture. Effective January 9, 2015, The Company launched a $1 billion follow-on to our publicly registered L Bond offering. The Company is offering L Bonds on a continuous basis and there is no minimum amount of L Bonds that must be sold before The Company can use proceeds from the sale of L Bonds. The Company plans to use the net proceeds from the offering of the L Bonds primarily to purchase and finance additional life insurance assets, and to service and retire other outstanding debt obligations. Emerson Equity LLC is serving as the managing broker-dealer for the offering, which is being sold through a network of participating dealers and licensed financial advisors and representatives in minimum increments of $25,000. At June 30, 2015 and December 31, 2014, the weighted-average interest rate of L Bonds was 7.27% and 7.45%, respectively. The amount outstanding under these L Bonds was $226,310,000 and $186,377,000 at June 30, 2015 and December 31, 2014, respectively. The difference between the amount outstanding on the L Bonds and the carrying amount on the consolidated balance sheets is due to netting of unamortized deferred issuance costs and cash receipts for new issuances in process. Amortization of deferred issuance costs was $1,366,000 and $2,340,000 for the three and six months ended June 30, 2015, respectively, and $908,000 and $1,755,000 for the three and six months ended June 30, 2014, respectively. Future expected amortization of deferred financing costs as of June 30, 2015 is $6,312,000 in total over the next seven years. The use of proceeds from the issuances of L Bonds is limited to the following: (1) payment of commissions on sales of L Bonds, (2) payment of offering expenses, (3) purchase of life insurance policies, (4) payment of premiums on life insurance policies, (5) payment of principal and interest on L Bonds, (6) payment of portfolio operations expenses, and (7) general working capital. Future contractual maturities of L Bonds and future amortization of their deferred financing costs at June 30, 2015 are as follows: Years Ending December 31, Contractual Maturities Amortization of Deferred Financing Costs Six months ending December 31 ,2015 $ 48,082,000 $ 243,000 2016 67,120,000 1,229,000 2017 43,051,000 1,520,000 2018 31,012,000 1,450,000 2019 14,342,000 612,000 Thereafter 22,703,000 1,258,000 $ 226,310,000 $ 6,312,000 The Company entered into an Indenture effective October 19, 2011 with Holdings as obligor, GWG Life as guarantor, and Bank of Utah as trustee for the benefit of the debenture holders. The Indenture has certain financial and nonfinancial covenants. The Company was in compliance with these covenants at June 30, 2015 and December 31, 2014. |
Convertible, Redeemable Preferr
Convertible, Redeemable Preferred Stock | 6 Months Ended |
Jun. 30, 2015 | |
Convertible Redeemable Preferred Stock [Abstract] | |
Convertible, redeemable preferred stock | (8) Convertible, redeemable preferred stock The Company offered 3,333,333 shares of convertible redeemable preferred stock (Series A Preferred Stock) for sale to accredited investors in a private placement on July 31, 2011. The offering of Series A Preferred Stock concluded on September 2, 2012 and resulted in 3,278,000 shares being issued for gross consideration of $24,582,000. As of June 30, 2015, 324,000 shares have been issued as a result of the payment of $2,271,000 in dividends in the form of shares of Series A Preferred Stock and 678,000 shares have been converted to 508,000 shares of the Company’s common stock. The Series A Preferred Stock was sold at an offering price of $7.50 per share. Series A Preferred Stock has a preferred yield of 10% per annum, and each share has the right to convert into 0.75 shares of the Company’s common stock. Series A preferred shareholders also received three-year warrants to purchase, at an exercise price per share of $12.50, one share of common stock for every 40 shares of Series A Preferred Stock purchased. The warrants are exercisable immediately. Upon their original issuance, these warrants had a three-year exercise period. Effective August 1, 2014, the Board of Directors authorized the extension of the warrant exercise period for an additional two years. In the Certificate of Designations for the Series A Preferred Stock dated July 31, 2011, the Company agreed to permit preferred shareholders to sell their shares back to the Company for the stated value of $7.50 per share, plus accrued dividends, according to the following schedule: ● Up to 33% of the holder’s unredeemed shares one year after issuance: ● Up to 66% of the holder’s unredeemed shares two years after issuance; and ● Up to 100% of the holder’s unredeemed shares three years after issuance. The Company’s obligation to redeem its Series A Preferred Stock terminated upon the Company completing a registration of its common stock with the SEC which occurred on September 24, 2014 (See Note 10). As such, the convertible redeemable preferred stock was reclassified from temporary equity to permanent equity. The Company may redeem the Series A preferred shares at a price equal to 110% of their liquidation preference ($7.50 per share) at any time. As of June 30, 2015, the Company had redeemed an aggregate of 182,000 shares of Series A Preferred Stock. The Series A Preferred Stock shares (i) were convertible, at the election of the Company, into common stock of the Company in the event of either a registered offering of the Company’s common stock with the SEC aggregating gross proceeds of at least $5.0 million and at a price equal to or greater than $11.00 per share; (ii) remain convertible at the option of each holder; and (iii) are required to be converted upon the consent of shareholders holding at least a majority of the then-outstanding Series A Preferred Stock. In connection with the Company’s initial public offering, the Company elected to cause the conversion of 678,000 shares of preferred stock into 508,000 shares of common stock. As of June 30, 2015, the Company had 2,746,000 shares of Series A Preferred Stock outstanding with gross consideration of $20,560,000 (including cash proceeds, conversion of Series I Secured Notes and accrued interest on Series I, and conversion of preferred dividends payable). The Company incurred Series A Preferred Stock issuance costs of $2,838,000, all of which was included as a component of additional paid in capital as of December 31, 2014. The Company determined that the grant date fair value of the outstanding warrants attached to the Series A Preferred Stock was $428,000 for warrants outstanding as of June 30, 2015. The Company may redeem outstanding warrants prior to their expiration, at a price of $0.01 per share upon 30 days written notice to the investors at any time after (i) the Company has completed a registration of its common stock with the SEC and (ii) the volume of weighted-average sale price per share of common stock equals or exceeds $14.00 per share for ten consecutive trading days ending on the third business day prior to proper notice of such redemption. Total warrants outstanding as of both June 30, 2015 and December 31, 2014, were 431,954 with a weighted-average remaining life of 1.93 and 2.43 years, respectively. As of June 30, 2015, none of these warrants have been exercised. Dividends on the Series A preferred stock may be paid in either cash or additional shares of Series A preferred stock at the election of the holder and approval of the Company. The dividends are reported as an expense and included in the caption interest expense in the consolidated statements of operations. The Company declared and accrued dividends of $495,000 and $638,000 during the three months ended June 30, 2015 and 2014, respectively, and $1,032,000 and $1,276,000 during the six months ended June 30, 2015 and 2014, respectively, pursuant to a board resolution declaring the dividend. 21,000 and 28,000 shares of Series A preferred stock were issued in lieu of cash dividends in the three month periods ended June 30, 2015 and 2014, and 48,000 and 54,000 shares of Series A preferred stock were issued in lieu of cash dividends in the six month periods ended June 30, 2015 and 2014, respectively. The shares issued in lieu of cash dividends were issued at $7.00 per share. As of June 30, 2015, Holdings has $514,000 of accrued preferred dividends which were paid or converted to shares of Series A preferred stock on July 15, 2015. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2015 | |
Income Taxes [Abstract] | |
Income taxes | (9) Income taxes The Company has a $181,000 and $0 of current income tax liability as of June 30, 2015 and December 31, 2014. The components of current and deferred income tax expense (benefit) for the three and six months ended June 30, 2015 and income tax benefit for the three month ended June 30, 2014, consisted of the following: Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2015 2014 2015 2014 Income tax provision (benefit): Current: Federal $ (182,000 ) $ - $ 141,000 $ - State $ (64,000 ) $ - $ 40,000 $ - Total current tax expense (246,000 ) - 181,000 - Deferred: Federal $ (670,000 ) $ (1,106,000 ) $ 984,000 $ (1,909,000 ) State $ (261,000 ) $ (211,000 ) $ 268,000 $ (363,000 ) Total deferred tax expense (benefit) (931,000 ) (1,317,000 ) 1,252,000 (2,272,000 ) Total income tax expense (benefit) (1,177,000 ) (1,317,000 ) 1,433,000 (2,272,000 ) The primary differences between the Company’s June 30, 2015 effective tax rate and the statutory federal rate are the accrual of nondeductible preferred stock dividend expense of $514,000 state taxes, and other non-deductible expenses. The most significant temporary differences between GAAP net income and taxable net income are the treatment of interest costs with respect to the acquisition of the life insurance policies and revenue recognition with respect to the mark-to-market of life insurance portfolio. |
Common Stock
Common Stock | 6 Months Ended |
Jun. 30, 2015 | |
Common Stock [Abstract] | |
Common Stock | (10) Common Stock On September 24, 2014, GWG consummated an initial public offering of its common stock which resulted in the sale of 800,000 shares of common stock at $12.50 per share. The sale resulted in net proceeds of approximately $8.6 million after the deduction of underwriting commissions, discounts and expense reimbursements. In connection with this offering, the Company listed its common stock on The NASDAQ Capital Market under the ticker symbol “GWGH” effective September 25, 2014. The Company used the net proceeds from the offering to promote and advertise the opportunities for consumers owning life insurance and investors to profit from participating in the secondary market for life insurance policies, purchase additional life insurance policies in the secondary market, pay premiums on the Company’s life insurance policy assets, fund its portfolio operations, and for working capital purposes. Stock split On June 23, 2015 GWG issued 60,000 shares of restricted common stock at $9.70 per share determined by closing market price, to a vendor as a form of payment for the services the vendor will provide to the Company in the next three years. The cost of the issued shares will be amortized over the next 12 months. |
Stock Incentive Plan
Stock Incentive Plan | 6 Months Ended |
Jun. 30, 2015 | |
Stock Incentive Plan [Abstract] | |
Stock Incentive Plan | (11) Stock Incentive Plan The Company adopted the GWG Holdings, Inc. 2013 Stock Incentive Plan on March 27, 2013. On April 23, 2015 the Board of Directors approved amendments to the plan which were subsequently approved by a majority of the Company’s stockholders at the annual meeting of stockholders on June 1, 2015. The plan is administered by Compensation Committee of the Board of Directors of the Company. The Company’s Chief Executive Officer may, on a discretionary basis and without committee review or approval, grant incentives to new employees of the Company who are not officers of the Company. Incentives under the plan may be granted in one or a combination of the following forms: (a) incentive stock options and non-statutory stock options; (b) stock appreciation rights; (c) stock awards; (d) restricted stock; (e) restricted stock units; and (f) performance shares. Eligible participants include officers and employees of the company, members of the Board of Directors, and consultants or other independent contractors. 2,000,000 shares are issuable under the plan. No person shall receive grants of stock options and SARs under the plan that exceed, in the aggregate 400,000 shares of common stock in any one year. The term of each stock option shall be determined by the committee but shall not exceed ten years. Vested stock options may be exercised in whole or part by the holder giving notice to the Company. The holder of the option may provide payment for the exercise price or surrender shares equal to the exercise price. The Company issued stock options for 991,401 shares of common stock to employees, officers, and directors of the Company through June 30, 2015. Options for 443,381 shares have vested, and the remaining options will vest over three years. The options were issued with an exercise price between $8.20 and $10.18 for those owning more than 10% of the Company’s stock and between $6.73 and $10.25 for others, which is equal to the estimated market price of the shares on the date of grant valued using Black-Scholes binomial option pricing model. The expected volatility used in the Black-Scholes model valuation of options issued during the year was 17.03% annualized. The annual volatility rate is based on the standard deviation of the average continuously compounded rate of return of five selected comparable companies over the previous 52 weeks. Forfeiture rate of 15% is based on historical Company information and expected future trend. As of June 30, 2015, stock options for 113,499 shares were forfeited and stock options for 28,001 shares were exercised. In September 2014, we entered into a stock option agreement (the Agreement) with a new management employee (the Employee) granting the Employee the right to purchase up to 318,000 of the Company’s common stock at an exercise price of $12.50. The grant of such rights to purchase the Company’s common stock was treated as an inducement grant and was issued outside the GWG Holdings Inc. 2013 Stock Incentive Plan. The Agreement specifies that, among other things, options to purchase 159,000 shares of the Company’s common stock will vest with the Employee ratably on the first, second and third anniversary of the date of the Agreement. The remaining 159,000 options will vest quarterly using a formula based upon the closing price of the Company’s common stock on the last business day of such quarter. The maximum number of these remaining options that will vest with the Employee is 53,000 in each successive one-year period beginning on the date of the Agreement. Outstanding stock options: Vested Un-vested Total Balance as of December 31, 2014 314,288 685,813 1,000,101 Granted during the year 53,500 192,300 245,800 Vested during the year 44,592 (44,592 ) - Exercised during the year (27,667 ) - (27,667 ) Forfeited during the year (2,250 ) (48,083 ) (50,333 ) Balance as of June 30, 2015 382,463 785,438 1,167,901 Compensation expense related to un-vested options not yet recognized is $642,000. We expect to recognize this compensation expense over the next three years ($185,000 in 2015, $229,000 in 2016, $189,000 in 2017, and 39,000 in 2018). The Company issues new common stock for options exercised. |
Net Loss Per Common Share
Net Loss Per Common Share | 6 Months Ended |
Jun. 30, 2015 | |
Net loss per common share [Abstract] | |
Net loss per common share | (12) Net loss per common share |
Commitments
Commitments | 6 Months Ended |
Jun. 30, 2015 | |
Commitments and Contingencies [Abstract] | |
Commitments | (13) Commitments The Company entered into an office lease with U.S. Bank National Association as the landlord. The lease was effective April 22, 2012 with a term through August 31, 2015. The lease is for 11,695 square feet of office space located at 220 South Sixth Street, Minneapolis, Minnesota. The Company is obligated to pay base rent plus common area maintenance and a share of the building operating costs. Rent expenses under this agreement were $122,000 and $101,000 during the six-month periods ended June 30, 2015 and 2014, respectively, and $55,000 and $49,000 during the three-month periods ended June 30, 2015 and 2014, respectively. The minimum lease payments for 2015 under the lease agreement are $70,000. |
Contingencies
Contingencies | 6 Months Ended |
Jun. 30, 2015 | |
Commitments and Contingencies [Abstract] | |
Contingencies | (14) Contingencies Litigation - In the normal course of business, the Company is involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings would not have a material adverse effect on the Company’s financial position, results of operations or cash flows. Opportunity Finance, LLC, owned by Jon Sabes and Steven Sabes, is subject to litigation clawback claims by the bankruptcy trustee for third-party matters for payments that may have been deemed preference payments. In addition, Jon Sabes and Steven Sabes are subject to litigation clawback claims by the bankruptcy trustee for third-party matters for payments received from Opportunity Finance that may have been deemed preference payments. If the parties are unsuccessful in defending against these claims, their equity ownership in the Company may be sold or transferred to other parties to satisfy such claims. In addition, the Company loaned $1,000,000 to Opportunity Finance, LLC, and was repaid in full plus interest of $177,000. This investment amount may also be subject to clawback claims by the bankruptcy court. |
Guarantees of Secured Debt
Guarantees of Secured Debt | 6 Months Ended |
Jun. 30, 2015 | |
Guarantees of Secured Debt [Abstract] | |
Guarantees of secured debt | (15) Guarantees of secured debt GWG Holdings has registered with the SEC the offer and sale $250,000,000 of L Bonds, and effective January 9, 2015, launched a $1 billion follow-on to its publicly registered L Bond offering as described in note 7. The L Bonds are secured by the assets of Holdings as described in note 7 and a pledge of all the common stock held by the largest individual shareholders. Obligations under the L Bonds are guaranteed by GWG Life. This guarantee involves the grant of a security interest in all the assets of GWG Life. The payment of principal and interest on the L Bonds is fully and unconditional guaranteed by GWG Life. Substantially all of the Company’s life insurance policies are held by DLP II, DLP III and the Trust. The policies held by DLP II are not collateral for the L Bond obligations as such policies serve as collateral for the credit facility. The consolidating financial statements are presented in lieu of separate financial statements and other related disclosures of the subsidiary guarantors and issuer because management does not believe that separate financial statements and related disclosures would be material to investors. There are currently no significant restrictions on the ability of Holdings or GWG Life, the guarantor subsidiary, to obtain funds from its subsidiaries by dividend or loan, except as follows. DLP II and DLP III are borrowers under a credit agreement with Autobahn, with DZ Bank AG as agent, as described in note 5. The significant majority of insurance policies owned by the Company are subject to a collateral arrangement with DZ Bank AG described in notes 2 and 5. Under this arrangement, collection and escrow accounts are used to fund premiums of the insurance policies and to pay interest and other charges under the revolving credit facility. DZ Bank AG and Autobahn must authorize all disbursements from these accounts, including any distributions to GWG Life. Distributions are limited to an amount that would result in the borrowers (DLP II, DLP III, GWG Life and Holdings) realizing an annualized rate of return on the equity funded amount for such assets of not more than 18%, as determined by DZ Bank AG. After such amount is reached, the credit agreement requires that excess funds be used for repayments of borrowings before any additional distributions may be made. The following represents consolidating financial information as of June 30, 2015 and December 31, 2014, with respect to the financial position, and for the three and six months ended June 30, 2015 and 2014 with respect to results of operations and cash flows of Holdings and its subsidiaries. The parent column presents the financial information of Holdings, the primary obligor of the L Bonds. The guarantor subsidiary column presents the financial information of GWG Life, the guarantor subsidiary of the L Bonds, presenting its investment in DLP II, DLP III and Trust under the equity method. The non-guarantor subsidiaries column presents the financial information of all non-guarantor subsidiaries including DLP II, DLP III and Trust. Condensed Consolidating Balance Sheets June 30, 2015 Parent Guarantor Sub Non-Guarantor Sub Eliminations Consolidated ASSETS Cash and cash equivalents $ 37,814,528 $ 233,553 $ 150,108 $ - $ 38,198,189 Restricted cash - 185,000 7,738,190 - 7,923,190 Policy benefits receivable - - 2,500,000 - 2,500,000 Investment in life settlements, at fair value - - 301,498,527 - 301,498,527 Other assets 2,688,215 1,730,651 2,204,695 - 6,623,561 Investment in subsidiaries 222,479,390 248,566,916 - (471,046,306 ) - TOTAL ASSETS $ 262,982,133 $ 250,716,120 $ 314,091,520 $ (471,046,306 ) $ 356,743,467 LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) LIABILITIES Revolving credit facility $ - $ - $ 65,011,048 $ - $ 65,011,048 Series I Secured notes - 24,347,531 - - 24,347,531 L Bonds 223,118,514 - - - 223,118,514 Interest payable 7,967,900 3,374,563 250,757 - 11,593,220 Accounts payable and other accrued expenses 1,294,444 664,744 112,691 - 2,071,879 Deferred taxes, net 6,525,336 - - - 6,525,336 TOTAL LIABILITIES 238,906,194 28,386,838 65,374,496 - 332,667,528 STOCKHOLDERS’ EQUITY (DEFICIT) Member capital - 222,329,282 248,717,024 (471,046,306 ) - Convertible preferred stock 20,559,823 20,559,823 Common stock 5,933 - - - 5,933 Additional paid-in capital 16,900,193 - - - 16,900,193 Accumulated deficit (13,390,010 ) - - - (13,390,010 ) TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) 24,075,939 222,329,282 248,717,024 (471,046,306 ) 24,075,939 TOTAL LIABILITIES AND EQUITY (DEFICIT) $ 262,982,133 $ 250,716,120 $ 314,091,520 $ (471,046,306 ) $ 356,743,467 December 31, 2014 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated ASSETS Cash and cash equivalents $ 30,446,473 $ 216,231 $ - $ - $ 30,662,704 Restricted cash - 82,500 4,213,553 - 4,296,053 Policy benefits receivable - - 1,750,000 - 1,750,000 Investment in life settlements, at fair value - - 282,883,010 - 282,883,010 Other assets 1,673,728 1,777,534 27,500 - 3,478,762 Investment in subsidiaries 185,636,417 215,124,779 - (400,761,196 ) - TOTAL ASSETS $ 217,756,618 $ 217,201,044 $ 288,874,063 $ (400,761,196 ) $ 323,070,529 LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) LIABILITIES Revolving credit facility $ - $ - $ 72,161,048 $ - $ 72,161,048 Series I Secured notes - 27,616,578 - - 27,616,578 L Bonds 182,782,884 - - - 182,782,884 Interest payable 6,598,250 3,513,615 1,016,654 - 11,128,519 Accounts payable and other accrued expenses 711,993 434,433 571,583 - 1,718,009 Deferred taxes, net 5,273,555 - - - 5,273,555 TOTAL LIABILITIES 195,366,682 31,564,626 73,749,285 - 300,680,593 STOCKHOLDERS’ EQUITY (DEFICIT) Member capital - 185,636,418 215,124,778 (400,761,196 ) - Convertible preferred stock 20,527,866 - - - 20,527,866 Common stock 5,870 - - - 5,870 Additional paid-in capital 16,257,686 - - - 16,257,686 Accumulated deficit (14,401,486 ) - - - (14,401,486 ) TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) 22,389,936 185,636,418 215,124,778 (400,761,196 ) 22,389,936 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) $ 217,756,618 $ 217,201,044 $ 288,874,063 $ (400,761,196 ) $ 323,070,529 Condensed Consolidating Statements of Operations For the six months ended June 30, 2015 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated REVENUE Origination and servicing income $ - $ 1,018,750 $ - $ (1,018,750 ) $ - Gain on life settlements, net - - 25,257,295 - 25,257,295 Interest and other income 25,023 6,880 107,773 - 139,676 TOTAL REVENUE 25,023 1,025,630 25,365,068 (1,018,750 ) 25,396,971 EXPENSES Origination and servicing fees - - 1,018,750 (1,018,750 ) - Employee compensation and benefits 2,911,596 961,046 - - 3,872,642 Legal and professional fees 828,858 337,326 - - 1,166,184 Interest expense 11,031,758 1,458,965 2,008,158 - 14,498,881 Other expenses 2,056,188 1,302,036 56,836 - 3,415,060 TOTAL EXPENSES 16,828,400 4,059,373 3,083,744 (1,018,750 ) 22,952,767 INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES (16,803,377 ) (3,033,743 ) 22,281,324 - 2,444,204 EQUITY IN INCOME OF SUBSIDIARY 19,247,581 22,281,217 - (41,528,798 ) - NET INCOME BEFORE INCOME TAXES 2,444,204 19,247,474 22,281,324 (41,528,798 ) 2,444,204 INCOME TAX EXPENSE 1,432,728 - - - 1,432,728 NET LOSS $ 1,011,476 $ 19,247,474 $ 22,281,324 $ (41,528,798 ) $ 1,011,476 For the six months ended June 30, 2014 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated REVENUE Origination and servicing income $ - $ 1,308,906 $ - $ (1,308,906 ) $ - Gain on life settlements, net - - 11,001,094 - 11,001,094 Interest and other income 12,929 169,976 63 (169,221 ) 13,747 TOTAL REVENUE 12,929 1,478,882 11,001,157 (1,478,127 ) 11,014,841 EXPENSES Origination and servicing fees - - 1,308,906 (1,308,906 ) - Employee compensation and benefits 1,255,079 892,485 - - 2,147,564 Legal and professional fees 723,106 103,233 - - 826,339 Interest expense 8,691,989 1,572,269 2,670,333 - 12,934,591 Other expenses 1,106,635 734,138 194,232 (169,221 ) 1,865,784 TOTAL EXPENSES 11,776,809 3,302,125 4,173,471 (1,478,127 ) 17,774,278 INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES (11,763,880 ) (1,823,243 ) 6,827,686 - (6,759,437 ) EQUITY IN INCOME OF SUBSIDIARY 5,004,443 6,827,686 - (11,832,129 ) - NET INCOME BEFORE INCOME TAXES (6,759,437 ) 5,004,443 6,827,686 (11,832,129 ) (6,759,437 ) INCOME TAX BENEFIT (2,271,570 ) - - - (2,271,570 ) NET LOSS $ (4,487,867 ) $ 5,004,443 $ 6,827,686 $ (11,832,129 ) $ (4,487,867 ) For the three months ended June 30, 2015 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated REVENUE Origination and servicing income $ - $ 661,264 $ - $ (661,264 ) $ - Gain on life settlements, net - - 8,473,886 - 8,473,886 Interest and other income 17,480 430 72,470 - 90,380 TOTAL REVENUE 17,480 661,694 8,546,356 (661,264 ) 8,564,266 EXPENSES Origination and servicing fees - - 661,264 (661,264 ) - Employee compensation and benefits 1,605,795 538,930 - - 2,144,725 Legal and professional fees 351,507 291,424 - - 642,931 Interest expense 5,781,796 684,879 855,672 - 7,322,347 Other expenses 1,104,826 732,243 44,252 - 1,881,321 TOTAL EXPENSES 8,843,924 2,247,476 1,561,188 (661,264 ) 11,991,324 INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES (8,826,444 ) (1,585,782 ) 6,985,168 - (3,427,058 ) EQUITY IN INCOME OF SUBSIDIARY 5,399,386 6,985,112 - (12,384,498 ) - NET INCOME BEFORE INCOME TAXES (3,427,058 ) 5,399,330 6,985,168 (12,384,498 ) (3,427,058 ) INCOME TAX BENEFIT (1,176,643 ) - - - (1,176,643 ) NET LOSS $ (2,250,415 ) $ 5,399,330 $ 6,985,168 $ (12,384,498 ) $ (2,250,415 ) For the three months ended June 30, 2014 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated REVENUE Origination and servicing income $ - $ 342,850 $ - $ (342,850 ) $ - Gain on life settlements, net - - 5,484,889 - 5,484,889 Interest and other income 6,000 362 18 - 6,380 TOTAL REVENUE 6,000 343,212 5,484,907 (342,850 ) 5,491,269 EXPENSES Origination and servicing fees - - 342,850 (342,850 ) - Employee compensation and benefits 664,495 514,324 - - 1,178,819 Legal and professional fees 375,243 44,094 - - 419,337 Interest expense 4,475,461 793,702 1,338,880 - 6,608,043 Other expenses 767,096 408,883 12,500 - 1,188,479 TOTAL EXPENSES 6,282,295 1,761,003 1,694,230 (342,850 ) 9,394,678 INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES (6,276,295 ) (1,417,791 ) 3,790,667 - (3,903,409 ) EQUITY IN INCOME OF SUBSIDIARY 2,372,886 3,790,667 - (6,163,563 ) - NET INCOME BEFORE INCOME TAXES (3,903,409 ) 2,372,886 3,790,667 (6,163,563 ) (3,903,409 ) INCOME TAX BENEFIT (1,316,712 ) - - - (1,316,712 ) NET LOSS $ (2,586,697 ) $ 2,372,886 $ 3,790,667 $ (6,163,563 ) $ (2,586,697 ) Condensed Consolidating Statements of Cash Flows For the six months ended June 30, 2015 Parent Guarantor Sub Non-Guarantor Sub Eliminations Consolidated CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 1,011,476 $ 19,247,474 $ 22,281,324 $ (41,528,798 ) $ 1,011,476 Adjustments to reconcile net income to net cash flows from operating activities: (Equity) of subsidiaries (19,247,582 ) (22,281,216 ) - 41,528,798 - Gain on life settlements - - (12,134,482 ) - (12,134,482 ) Amortization of deferred financing and issuance costs 1,729,175 211,116 (1,982,295 ) - (42,004 ) Deferred income taxes 1,251,781 - - - 1,251,781 Convertible, redeemable preferred stock issued for dividends 335,232 - - - 335,232 (Increase) in operating assets: Policy benefits receivable - - (750,000 ) (750,000 ) Other assets (17,998,823 ) (11,114,039 ) - 28,756,313 (356,549 ) Increase in operating liabilities: Accounts payable and accrued expenses 2,493,495 228,640 (1,419,689 ) - 1,302,446 NET CASH FLOWS USED IN OPERATING ACTIVITIES (30,425,246 ) (13,708,025 ) (5,994,858 ) 28,756,313 (9,382,100 ) CASH FLOWS FROM INVESTING ACTIVITIES Investment in life settlements - - (10,224,018 ) - (10,224,018 ) Proceeds from settlement of life settlements - - 3,742,983 - 3,742,983 NET CASH FLOWS USED IN INVESTING ACTIVITIES - - (6,481,035 ) - (6,481,035 ) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of revolving credit facility - - (7,150,000 ) - (7,150,000 ) Payments for redemption of Series I Secured notes - (3,617,544 ) - - (3,617,544 ) Proceeds from issuance of L Bonds 50,498,356 - - - 50,498,356 Payments for redemption and issuance of L Bonds (13,013,057 ) - - - (13,013,057 ) Proceeds from restricted cash - (102,500 ) (3,524,637 ) - (3,627,137 ) Issuance of common stock 582,000 - - - 582,000 Redemptions of convertible, redeemable preferred stock (273,998 ) - - - (273,998 ) Issuance of member capital - 17,445,391 11,310,922 (28,756,313 ) - NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 37,793,301 13,725,347 636,285 (28,756,313 ) 23,398,620 NET INCREASE IN CASH AND CASH EQUIVALENTS 7,368,055 17,322 150,108 - 7,535,485 CASH AND CASH EQUIVALENTS BEGINNING OF THE PERIOD 30,446,473 216,231 - - 30,662,704 END OF THE PERIOD $ 37,814,528 $ 233,553 $ 150,108 $ - $ 38,198,189 For the six months ended June 30, 2014 Parent Guarantor Sub Non-Guarantor Sub Eliminations Consolidated CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (4,487,867 ) $ 5,004,443 $ 6,827,686 $ (11,832,129 ) $ (4,487,867 ) Adjustments to reconcile net income (loss) to net cash flows from operating activities: (Equity) of subsidiaries (5,004,443 ) (6,827,686 ) - 11,832,129 - Life settlements – change in fair value - - (22,211,338 ) - (22,211,338 ) Amortization of deferred financing and issuance costs 1,727,610 301,104 (321,050 ) 1,707,664 Deferred income taxes (2,271,570 ) - - (2,271,570 ) Convertible, redeemable preferred stock dividends payable 389,331 - - - 389,331 (Increase) in operating assets: Policy benefits receivable - - (300,000 ) - (300,000 ) Other assets (26,622,350 ) (24,654,818 ) - 50,328,249 (948,919 ) Increase in operating liabilities: Accounts payable and accrued expenses 1,971,543 302,402 894,218 - 3,168,163 NET CASH FLOWS USED IN OPERATING ACTIVITIES (34,297,746 ) (25,874,555 ) (15,110,484 ) 50,328,249 (24,954,536 ) CASH FLOWS FROM INVESTING ACTIVITIES Investment in life settlements - - (10,879,435 ) - (10,879,435 ) Proceeds from settlement of life settlements - - 68,500 - 68,500 NET CASH FLOWS USED IN INVESTING ACTIVITIES - - (10,810,935 ) - (10,810,935 ) CASH FLOWS FROM FINANCING ACTIVITIES Payments for redemption of Series I Secured notes - (1,538,924 ) - - (1,538,924 ) Proceeds from issuance of L Bonds 33,234,487 - - - 33,234,487 Payments for redemption and issuance of L Bonds (9,322,411 ) - - - (9,322,411 ) Proceeds from restricted cash - 855,000 2,167,537 - 3,022,537 Redemptions of convertible, redeemable preferred stock (20,056 ) - - - (20,056 ) Issuance of member capital - 26,574,367 23,753,882 (50,328,249 ) - NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 23,892,020 25,890,443 25,921,419 (50,328,249 ) 25,375,633 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (10,405,723 ) 15,888 - - (10,389,838 ) CASH AND CASH EQUIVALENTS BEGINNING OF THE PERIOD 32,711,636 738,157 - - 33,449,793 END OF THE PERIOD $ 22,305,910 $ 754,045 $ - $ - $ 23,059,955 For the three months ended June 30, 2015 Parent Guarantor Sub Non-Guarantor Sub Eliminations Consolidated CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (2,250,415 ) $ 5,399,330 $ 6,985,168 $ (12,384,498 ) $ (2,250,415 ) Adjustments to reconcile net loss to net cash flows from operating activities: (Equity) of subsidiaries (5,399,386 ) (6,985,112 ) - 12,384,498 - Gain on life settlements - - (14,028,327 ) - (14,028,327 ) Amortization of deferred financing and issuance costs 1,685,700 80,928 (1,259,602 ) - 507,026 Deferred income taxes (930,470 ) - - - (930,470 ) Convertible, redeemable preferred stock dividends payable 146,420 - - - 146,420 (Increase) in operating assets: Policy benefits receivable - - 17,140,000 - 17,140,000 Other assets (7,124,387 ) (5,236,604 ) - 12,135,615 (225,376 ) Increase (decrease) in operating liabilities: Accounts payable and other accrued expenses 213,843 (509,444 ) (1,037,640 ) - (1,333,241 ) NET CASH FLOWS USED IN OPERATING ACTIVITIES (13,658,695 ) (7,250,902 ) 7,799,599 12,135,615 (974,383 ) CASH FLOWS FROM INVESTING ACTIVITIES Investment in life settlements - - (7,777,541 ) - (7,777,541 ) Proceeds from settlement of life settlements - - 132,388 - 132,388 NET CASH FLOWS USED IN INVESTING ACTIVITIES - - (7,645,153 ) - (7,645,153 ) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of revolving credit facility - - (7,150,000 ) (7,150,000 ) Payments for redemption of Series I Secured notes - (2,344,355 ) - - (2,344,355 ) Proceeds from issuance of L Bonds 22,538,059 - - - 22,538,059 Payments for redemption and issuance of L Bonds (6,134,935 ) - - - (6,134,935 ) Proceeds from restricted cash - 1,677,500 1,732,927 - 3,410,427 Issuance of member capital - 6,872,932 5,262,683 (12,135,615 ) - Issuance of common stock 582,000 - - - 582,000 Redemptions of convertible, redeemable preferred stock (273,998 ) - - - (273,998 ) NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 16,711,126 6,206,077 (154,390 ) (12,135,615 ) 10,627,198 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,052,431 (1,044,825 ) 56 - 2,007,662 CASH AND CASH EQUIVALENTS BEGINNING OF THE PERIOD 34,762,097 1,278,378 150,052 - 36,190,527 END OF THE PERIOD $ 37,814,528 $ 233,553 $ 150,108 $ - $ 38,198,189 For the three months ended June 30, 2014 Parent Guarantor Sub Non-Guarantor Sub Eliminations Consolidated CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (2,586,697 ) $ 2,372,886 $ 3,790,677 $ (6,163,563 ) $ (2,586,697 ) Adjustments to reconcile net loss to cash: (Equity) of subsidiaries (2,372,886 ) (3,790,677 ) - 6,163,563 - Gain on life settlements - - (10,852,425 ) - (10,852,425 ) Amortization of deferred financing and issuance costs 880,374 134,158 339,475 - 1,354,007 Deferred income taxes (1,316,712 ) - - - (1,316,712 ) Convertible, redeemable preferred stock dividends payable 196,991 - - - 196,991 (Increase) in operating assets: Policy benefits receivable - - (300,000 ) - (300,000 ) Other assets (10,674,637 ) (9,406,461 ) - 19,384,025 (697,073 ) Increase in operating liabilities: Accounts payable and accrued expenses 1,257,758 72,959 559,620 - 1,890,337 NET CASH FLOWS USED IN OPERATING ACTIVITIES (14,615,809 ) (10,617,135 ) (6,462,653 ) 19,384,025 (12,311,572 ) CASH FLOWS FROM INVESTING ACTIVITIES Investment in life settlements - - (2,608,232 ) - (2,608,232 ) Proceeds from settlement of life settlements - - 68,500 - 68,500 NET CASH FLOWS USED IN INVESTING ACTIVITIES - - (2,539,732 ) - (2,539,732 ) CASH FLOWS FROM FINANCING ACTIVITIES Payments for redemption of Series I Secured notes - (670,621 ) - - (670,621 ) Proceeds from issuance of L Bonds 14,868,830 - - - 14,868,830 Payments for redemption and issuance of L Bonds (4,393,523 ) - - - (4,393,523 ) Proceeds from restricted cash - (215,000 ) 258,330 - 43,330 Issuance of member capital - 10,639,970 8,744,055 (19,384,025 ) - Redemptions of convertible, redeemable preferred stock (20,056 ) - - - (20,056 ) NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 10,455,251 9,754,349 9,002,385 (19,384,025 ) 9,827,960 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,160,558 ) (862,786 ) - - (5,023,344 ) CASH AND CASH EQUIVALENTS BEGINNING OF THE PERIOD 26,466,468 1,616,831 - - 28,083,299 END OF THE PERIOD $ 22,305,910 $ 754,045 $ - $ - $ 23,059,955 |
Concentrations
Concentrations | 6 Months Ended |
Jun. 30, 2015 | |
Concentrations [Abstract] | |
Concentrations | (16) Concentrations GWG purchases life insurance policies written by life insurance companies having investment grade ratings by independent rating agencies. As a result there may be certain concentrations of contracts with life insurance companies. The following summarizes the face value of insurance contracts with specific life insurance companies exceeding 10% of the total face value held by the Company. June 30, December 31, 2015 2014 Life insurance company % % AXA Equitable 14.06 14.55 John Hancock 11.90 11.48 The following summarizes the number of insurance contracts held in specific states exceeding 10% of the total face value held by the Company: June 30, December 31, 2015 2014 State of residence % % California 27.07 28.87 Florida 19.43 18.56 |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2015 | |
Subsequent Events [Abstract] | |
Subsequent events | (17) Subsequent events Subsequent to June 30, 2015, the Company has issued approximately an additional $11.1 million in principal amount of L Bonds. |
Nature of Business and Summar24
Nature of Business and Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2015 | |
Nature of Business and Summary of Significant Accounting Policies [Abstract] | |
Use of estimates | Use of estimates |
Cash and cash equivalents | Cash and cash equivalents |
Life settlements | Life settlements Investments in Insurance Contracts The Company recognizes realized gains (revenue) from life settlement contracts upon one of the two following events: 1) Receipt of death notice or verified obituary of insured 2) Sale of policy and filing of change of ownership forms and receipt of payment The Company recognizes the difference between the death benefits and carrying values of the policy when an insured event has occurred and the Company determines that settlement and ultimate collection of the death benefits is realizable and reasonably assured. Revenue from a transaction must meet both criteria in order to be recognized. In an event of a sale of a policy, the Company recognizes gain or loss as the difference between the sale price and the carrying value of the policy on the date of the receipt of payment on such sale. Deposits and initial direct costs advanced on unsettled policy acquisitions are recorded as other assets until policy ownership has been transferred to the Company. Such deposits and direct cost advances were $222,000 and $27,000 at June 30, 2015 and December 31, 2014, respectively. |
Deferred financing and issuance costs | Deferred financing and issuance costs |
Earnings (loss) per share | Earnings (loss) per share |
Subsequent events | Subsequent events |
Recently adopted pronouncements | Recently adopted pronouncements - On April 7, 2015 the FASB issued Accounting Standards Update (ASU) No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” as part of its simplification initiative. The ASU changes the presentation of debt issuance costs in financial statements. Under the ASU, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. For public business entities, the guidance in the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. For entities other than public business entities, the guidance is effective for fiscal years beginning after December 15, 2015, and interim periods beginning after December 15, 2016. Early adoption is allowed for all entities for financial statements that have not been previously issued. Entities would apply the new guidance retrospectively to all prior periods (i.e., the balance sheet for each period is adjusted). The impact of the new ASU on the Company’s balance sheet would be a reduction of approximately $4,532,000 to assets and the corresponding reduction to liabilities. There would be no impact on the Company’s statements of operations. |
Investment in Life Insurance 25
Investment in Life Insurance Policies (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Investment in Life Insurance Policies [Abstract] | |
Summary of life insurance policies, under the fair value method and estimated maturity dates, based on remaining life expectancy | As of June 30, 2015 As of December 31, 2014 Years Ending December 31, Number of Contracts Estimated Fair Value Face Value Number of Contracts Estimated Fair Value Face Value 2015 - $ - $ - 3 $ 5,063,000 $ 6,000,000 2016 5 7,198,000 8,500,000 7 8,144,000 11,550,000 2017 16 17,063,000 23,857,000 17 21,916,000 35,542,000 2018 30 42,478,000 72,171,000 30 41,994,000 76,206,000 2019 48 53,052,000 109,810,000 45 47,303,000 106,973,000 2020 43 46,597,000 101,574,000 41 43,429,000 102,614,000 2021 42 34,486,000 96,956,000 36 29,789,000 90,921,000 Thereafter 130 100,625,000 393,406,000 112 85,245,000 349,293,000 Totals 314 301,499,000 806,274,000 291 $ 282,883,000 $ 779,099,000 |
Reconciliation of gain on life settlements | Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2012 Change in fair value $ 14,028,000 $ 10,852,000 $ 12,134,000 $ 22,211,000 Premiums and other annual fees (6,172,000 ) (5,599,000 ) (12,509,000 ) (11,442,000 ) Policy maturities 618,000 232,000 25,632,000 232,000 Gain on life settlements, net $ 8,474,000 $ 5,485,000 $ 25,257,000 $ 11,001,000 |
Estimated expected premium payments to maintain the above life insurance policies assuming no mortalities | Years Ending December 31, Premiums Servicing Premiums and Servicing Fees Six months ending December 31 ,2015 $ 13,292,000 $ 377,000 $ 13,669,000 2016 27,985,000 377,000 28,362,000 2017 31,333,000 377,000 31,710,000 2018 34,191,000 377,000 34,568,000 2019 38,001,000 377,000 38,378,000 2020 42,158,000 377,000 42,535,000 $ 186,960,000 $ 2,262,000 $ 189,222,000 |
Fair Value Definition and Hie26
Fair Value Definition and Hierarchy (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Fair Value Definition and Hierarchy [Abstract] | |
Reconciliation of investments in life insurance policies | Three month ended June 30, Six months ended June 30, 2015 2014 2015 2014 Beginning balance $ 278,395,000 $ 254,504,000 $ 282,883,000 $ 234,673,000 Purchases 9,208,000 2,608,000 10,225,000 11,080,000 Maturities (cash in excess of carrying value) (132,000 ) (68,000 ) (3,743,000 ) (68,000 ) Net change in fair value 14,028,000 10,852,000 12,134,000 22,211,000 Ending balance (June 30) $ 301,499,000 $ 267,896,000 $ 301,499,000 $ 267,896,000 |
Summary of inputs utilized in estimating the fair value | As of June 30, 2015 As of December 31, 2014 Weighted average age of insured 82.9 82.8 Weighted average life expectancy, months* 78.7 78.4 Average face amount per policy $ 2,568,000 $ 2,677,000 Discount rate 11.19 % 11.43 % * Standard life expectancy as adjusted for insured’s specific circumstances. |
Fair value sensitivity analysis on the investment in life insurance policies | Change in life expectancy estimates minus 8 months minus months plus 4 months plus 8 months June 30, 2015 $ 41,402,000 $ 20,590,000 $ (20,105,000 ) $ (39,752,000 ) December 31, 2014 $ 40,634,000 $ 20,130,000 $ (19,664,000 ) $ (38,864,000 ) Change in discount rate minus 2% minus 1% plus 1% plus 2% June 30, 2015 $ 29,494,000 $ 14,144,000 $ (13,061,000 ) $ (25,148,000 ) December 31, 2014 $ 28,179,000 $ 13,522,000 $ (12,502,000 ) $ (24,085,000 ) |
Warrants Level 3 instruments and measured at fair value upon issuance | Month issued Warrants issued Fair value per share Risk free Volatility Term December 2011 68,937 $ 0.22 0.42 % 25.25 % 5 years March 2012 38,130 $ 0.52 0.38 % 36.20 % 5 years June 2012 161,840 $ 1.16 0.41 % 47.36 % 5 years July 2012 144,547 $ 1.16 0.41 % 47.36 % 5 years September 2012 2,500 $ 0.72 0.31 % 40.49 % 5 years September 2014 16,000 $ 1.26 1.85 % 17.03 % 5 years 431,954 |
Series I Secured Notes (Tables)
Series I Secured Notes (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Credit Facilities / Series I Secured Notes / L Bonds (formerly Renewable Secured Debentures) [Abstract] | |
Future contractual maturities of series I secured notes payable | Years Ending December 31, Contractual Maturities Amortization of Deferred Financing Costs Six months ending December 31 ,2015 $ 5,085,000 $ 20,000 2016 10,964,000 144,000 2017 6,164,000 149,000 2018 1,127,000 36,000 2019 347,000 7,000 Thereafter 1,041,000 34,000 $ 24,728,000 $ 390,000 |
L Bonds (Formerly Renewable S28
L Bonds (Formerly Renewable Secured Debentures) (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Credit Facilities / Series I Secured Notes / L Bonds (formerly Renewable Secured Debentures) [Abstract] | |
Schedule of future contractual maturities of L Bonds | Years Ending December 31, Contractual Maturities Amortization of Deferred Financing Costs Six months ending December 31 ,2015 $ 48,082,000 $ 243,000 2016 67,120,000 1,229,000 2017 43,051,000 1,520,000 2018 31,012,000 1,450,000 2019 14,342,000 612,000 Thereafter 22,703,000 1,258,000 $ 226,310,000 $ 6,312,000 |
Income Taxes (Tables)
Income Taxes (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Income Taxes [Abstract] | |
Components of deferred income tax expense | Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2015 2014 2015 2014 Income tax provision (benefit): Current: Federal $ (182,000 ) $ - $ 141,000 $ - State $ (64,000 ) $ - $ 40,000 $ - Total current tax expense (246,000 ) - 181,000 - Deferred: Federal $ (670,000 ) $ (1,106,000 ) $ 984,000 $ (1,909,000 ) State $ (261,000 ) $ (211,000 ) $ 268,000 $ (363,000 ) Total deferred tax expense (benefit) (931,000 ) (1,317,000 ) 1,252,000 (2,272,000 ) Total income tax expense (benefit) (1,177,000 ) (1,317,000 ) 1,433,000 (2,272,000 ) |
Stock Incentive Plan (Tables)
Stock Incentive Plan (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Stock Incentive Plan [Abstract] | |
Schedule of outstanding stock options | Vested Un-vested Total Balance as of December 31, 2014 314,288 685,813 1,000,101 Granted during the year 53,500 192,300 245,800 Vested during the year 44,592 (44,592 ) - Exercised during the year (27,667 ) - (27,667 ) Forfeited during the year (2,250 ) (48,083 ) (50,333 ) Balance as of June 30, 2015 382,463 785,438 1,167,901 |
Guarantees of Secured Debt (Tab
Guarantees of Secured Debt (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Guarantees of Secured Debt [Abstract] | |
Condensed consolidating balance sheets | June 30, 2015 Parent Guarantor Sub Non-Guarantor Sub Eliminations Consolidated ASSETS Cash and cash equivalents $ 37,814,528 $ 233,553 $ 150,108 $ - $ 38,198,189 Restricted cash - 185,000 7,738,190 - 7,923,190 Policy benefits receivable - - 2,500,000 - 2,500,000 Investment in life settlements, at fair value - - 301,498,527 - 301,498,527 Other assets 2,688,215 1,730,651 2,204,695 - 6,623,561 Investment in subsidiaries 222,479,390 248,566,916 - (471,046,306 ) - TOTAL ASSETS $ 262,982,133 $ 250,716,120 $ 314,091,520 $ (471,046,306 ) $ 356,743,467 LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) LIABILITIES Revolving credit facility $ - $ - $ 65,011,048 $ - $ 65,011,048 Series I Secured notes - 24,347,531 - - 24,347,531 L Bonds 223,118,514 - - - 223,118,514 Interest payable 7,967,900 3,374,563 250,757 - 11,593,220 Accounts payable and other accrued expenses 1,294,444 664,744 112,691 - 2,071,879 Deferred taxes, net 6,525,336 - - - 6,525,336 TOTAL LIABILITIES 238,906,194 28,386,838 65,374,496 - 332,667,528 STOCKHOLDERS’ EQUITY (DEFICIT) Member capital - 222,329,282 248,717,024 (471,046,306 ) - Convertible preferred stock 20,559,823 20,559,823 Common stock 5,933 - - - 5,933 Additional paid-in capital 16,900,193 - - - 16,900,193 Accumulated deficit (13,390,010 ) - - - (13,390,010 ) TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) 24,075,939 222,329,282 248,717,024 (471,046,306 ) 24,075,939 TOTAL LIABILITIES AND EQUITY (DEFICIT) $ 262,982,133 $ 250,716,120 $ 314,091,520 $ (471,046,306 ) $ 356,743,467 December 31, 2014 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated ASSETS Cash and cash equivalents $ 30,446,473 $ 216,231 $ - $ - $ 30,662,704 Restricted cash - 82,500 4,213,553 - 4,296,053 Policy benefits receivable - - 1,750,000 - 1,750,000 Investment in life settlements, at fair value - - 282,883,010 - 282,883,010 Other assets 1,673,728 1,777,534 27,500 - 3,478,762 Investment in subsidiaries 185,636,417 215,124,779 - (400,761,196 ) - TOTAL ASSETS $ 217,756,618 $ 217,201,044 $ 288,874,063 $ (400,761,196 ) $ 323,070,529 LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) LIABILITIES Revolving credit facility $ - $ - $ 72,161,048 $ - $ 72,161,048 Series I Secured notes - 27,616,578 - - 27,616,578 L Bonds 182,782,884 - - - 182,782,884 Interest payable 6,598,250 3,513,615 1,016,654 - 11,128,519 Accounts payable and other accrued expenses 711,993 434,433 571,583 - 1,718,009 Deferred taxes, net 5,273,555 - - - 5,273,555 TOTAL LIABILITIES 195,366,682 31,564,626 73,749,285 - 300,680,593 STOCKHOLDERS’ EQUITY (DEFICIT) Member capital - 185,636,418 215,124,778 (400,761,196 ) - Convertible preferred stock 20,527,866 - - - 20,527,866 Common stock 5,870 - - - 5,870 Additional paid-in capital 16,257,686 - - - 16,257,686 Accumulated deficit (14,401,486 ) - - - (14,401,486 ) TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) 22,389,936 185,636,418 215,124,778 (400,761,196 ) 22,389,936 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) $ 217,756,618 $ 217,201,044 $ 288,874,063 $ (400,761,196 ) $ 323,070,529 |
Condensed consolidating statements of operations | For the six months ended June 30, 2015 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated REVENUE Origination and servicing income $ - $ 1,018,750 $ - $ (1,018,750 ) $ - Gain on life settlements, net - - 25,257,295 - 25,257,295 Interest and other income 25,023 6,880 107,773 - 139,676 TOTAL REVENUE 25,023 1,025,630 25,365,068 (1,018,750 ) 25,396,971 EXPENSES Origination and servicing fees - - 1,018,750 (1,018,750 ) - Employee compensation and benefits 2,911,596 961,046 - - 3,872,642 Legal and professional fees 828,858 337,326 - - 1,166,184 Interest expense 11,031,758 1,458,965 2,008,158 - 14,498,881 Other expenses 2,056,188 1,302,036 56,836 - 3,415,060 TOTAL EXPENSES 16,828,400 4,059,373 3,083,744 (1,018,750 ) 22,952,767 INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES (16,803,377 ) (3,033,743 ) 22,281,324 - 2,444,204 EQUITY IN INCOME OF SUBSIDIARY 19,247,581 22,281,217 - (41,528,798 ) - NET INCOME BEFORE INCOME TAXES 2,444,204 19,247,474 22,281,324 (41,528,798 ) 2,444,204 INCOME TAX EXPENSE 1,432,728 - - - 1,432,728 NET LOSS $ 1,011,476 $ 19,247,474 $ 22,281,324 $ (41,528,798 ) $ 1,011,476 For the six months ended June 30, 2014 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated REVENUE Origination and servicing income $ - $ 1,308,906 $ - $ (1,308,906 ) $ - Gain on life settlements, net - - 11,001,094 - 11,001,094 Interest and other income 12,929 169,976 63 (169,221 ) 13,747 TOTAL REVENUE 12,929 1,478,882 11,001,157 (1,478,127 ) 11,014,841 EXPENSES Origination and servicing fees - - 1,308,906 (1,308,906 ) - Employee compensation and benefits 1,255,079 892,485 - - 2,147,564 Legal and professional fees 723,106 103,233 - - 826,339 Interest expense 8,691,989 1,572,269 2,670,333 - 12,934,591 Other expenses 1,106,635 734,138 194,232 (169,221 ) 1,865,784 TOTAL EXPENSES 11,776,809 3,302,125 4,173,471 (1,478,127 ) 17,774,278 INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES (11,763,880 ) (1,823,243 ) 6,827,686 - (6,759,437 ) EQUITY IN INCOME OF SUBSIDIARY 5,004,443 6,827,686 - (11,832,129 ) - NET INCOME BEFORE INCOME TAXES (6,759,437 ) 5,004,443 6,827,686 (11,832,129 ) (6,759,437 ) INCOME TAX BENEFIT (2,271,570 ) - - - (2,271,570 ) NET LOSS $ (4,487,867 ) $ 5,004,443 $ 6,827,686 $ (11,832,129 ) $ (4,487,867 ) For the three months ended June 30, 2015 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated REVENUE Origination and servicing income $ - $ 661,264 $ - $ (661,264 ) $ - Gain on life settlements, net - - 8,473,886 - 8,473,886 Interest and other income 17,480 430 72,470 - 90,380 TOTAL REVENUE 17,480 661,694 8,546,356 (661,264 ) 8,564,266 EXPENSES Origination and servicing fees - - 661,264 (661,264 ) - Employee compensation and benefits 1,605,795 538,930 - - 2,144,725 Legal and professional fees 351,507 291,424 - - 642,931 Interest expense 5,781,796 684,879 855,672 - 7,322,347 Other expenses 1,104,826 732,243 44,252 - 1,881,321 TOTAL EXPENSES 8,843,924 2,247,476 1,561,188 (661,264 ) 11,991,324 INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES (8,826,444 ) (1,585,782 ) 6,985,168 - (3,427,058 ) EQUITY IN INCOME OF SUBSIDIARY 5,399,386 6,985,112 - (12,384,498 ) - NET INCOME BEFORE INCOME TAXES (3,427,058 ) 5,399,330 6,985,168 (12,384,498 ) (3,427,058 ) INCOME TAX BENEFIT (1,176,643 ) - - - (1,176,643 ) NET LOSS $ (2,250,415 ) $ 5,399,330 $ 6,985,168 $ (12,384,498 ) $ (2,250,415 ) For the three months ended June 30, 2014 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated REVENUE Origination and servicing income $ - $ 342,850 $ - $ (342,850 ) $ - Gain on life settlements, net - - 5,484,889 - 5,484,889 Interest and other income 6,000 362 18 - 6,380 TOTAL REVENUE 6,000 343,212 5,484,907 (342,850 ) 5,491,269 EXPENSES Origination and servicing fees - - 342,850 (342,850 ) - Employee compensation and benefits 664,495 514,324 - - 1,178,819 Legal and professional fees 375,243 44,094 - - 419,337 Interest expense 4,475,461 793,702 1,338,880 - 6,608,043 Other expenses 767,096 408,883 12,500 - 1,188,479 TOTAL EXPENSES 6,282,295 1,761,003 1,694,230 (342,850 ) 9,394,678 INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES (6,276,295 ) (1,417,791 ) 3,790,667 - (3,903,409 ) EQUITY IN INCOME OF SUBSIDIARY 2,372,886 3,790,667 - (6,163,563 ) - NET INCOME BEFORE INCOME TAXES (3,903,409 ) 2,372,886 3,790,667 (6,163,563 ) (3,903,409 ) INCOME TAX BENEFIT (1,316,712 ) - - - (1,316,712 ) NET LOSS $ (2,586,697 ) $ 2,372,886 $ 3,790,667 $ (6,163,563 ) $ (2,586,697 ) |
Condensed consolidating statements of cash flows | Condensed Consolidating Statements of Cash Flows For the six months ended June 30, 2015 Parent Guarantor Sub Non-Guarantor Sub Eliminations Consolidated CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 1,011,476 $ 19,247,474 $ 22,281,324 $ (41,528,798 ) $ 1,011,476 Adjustments to reconcile net income to net cash flows from operating activities: (Equity) of subsidiaries (19,247,582 ) (22,281,216 ) - 41,528,798 - Gain on life settlements - - (12,134,482 ) - (12,134,482 ) Amortization of deferred financing and issuance costs 1,729,175 211,116 (1,982,295 ) - (42,004 ) Deferred income taxes 1,251,781 - - - 1,251,781 Convertible, redeemable preferred stock issued for dividends 335,232 - - - 335,232 (Increase) in operating assets: Policy benefits receivable - - (750,000 ) (750,000 ) Other assets (17,998,823 ) (11,114,039 ) - 28,756,313 (356,549 ) Increase in operating liabilities: Accounts payable and accrued expenses 2,493,495 228,640 (1,419,689 ) - 1,302,446 NET CASH FLOWS USED IN OPERATING ACTIVITIES (30,425,246 ) (13,708,025 ) (5,994,858 ) 28,756,313 (9,382,100 ) CASH FLOWS FROM INVESTING ACTIVITIES Investment in life settlements - - (10,224,018 ) - (10,224,018 ) Proceeds from settlement of life settlements - - 3,742,983 - 3,742,983 NET CASH FLOWS USED IN INVESTING ACTIVITIES - - (6,481,035 ) - (6,481,035 ) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of revolving credit facility - - (7,150,000 ) - (7,150,000 ) Payments for redemption of Series I Secured notes - (3,617,544 ) - - (3,617,544 ) Proceeds from issuance of L Bonds 50,498,356 - - - 50,498,356 Payments for redemption and issuance of L Bonds (13,013,057 ) - - - (13,013,057 ) Proceeds from restricted cash - (102,500 ) (3,524,637 ) - (3,627,137 ) Issuance of common stock 582,000 - - - 582,000 Redemptions of convertible, redeemable preferred stock (273,998 ) - - - (273,998 ) Issuance of member capital - 17,445,391 11,310,922 (28,756,313 ) - NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 37,793,301 13,725,347 636,285 (28,756,313 ) 23,398,620 NET INCREASE IN CASH AND CASH EQUIVALENTS 7,368,055 17,322 150,108 - 7,535,485 CASH AND CASH EQUIVALENTS BEGINNING OF THE PERIOD 30,446,473 216,231 - - 30,662,704 END OF THE PERIOD $ 37,814,528 $ 233,553 $ 150,108 $ - $ 38,198,189 Consolidating Statements of Cash Flows (continued) For the six months ended June 30, 2014 Parent Guarantor Sub Non-Guarantor Sub Eliminations Consolidated CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (4,487,867 ) $ 5,004,443 $ 6,827,686 $ (11,832,129 ) $ (4,487,867 ) Adjustments to reconcile net income (loss) to net cash flows from operating activities: (Equity) of subsidiaries (5,004,443 ) (6,827,686 ) - 11,832,129 - Life settlements – change in fair value - - (22,211,338 ) - (22,211,338 ) Amortization of deferred financing and issuance costs 1,727,610 301,104 (321,050 ) 1,707,664 Deferred income taxes (2,271,570 ) - - (2,271,570 ) Convertible, redeemable preferred stock dividends payable 389,331 - - - 389,331 (Increase) in operating assets: Policy benefits receivable - - (300,000 ) - (300,000 ) Other assets (26,622,350 ) (24,654,818 ) - 50,328,249 (948,919 ) Increase in operating liabilities: Accounts payable and accrued expenses 1,971,543 302,402 894,218 - 3,168,163 NET CASH FLOWS USED IN OPERATING ACTIVITIES (34,297,746 ) (25,874,555 ) (15,110,484 ) 50,328,249 (24,954,536 ) CASH FLOWS FROM INVESTING ACTIVITIES Investment in life settlements - - (10,879,435 ) - (10,879,435 ) Proceeds from settlement of life settlements - - 68,500 - 68,500 NET CASH FLOWS USED IN INVESTING ACTIVITIES - - (10,810,935 ) - (10,810,935 ) CASH FLOWS FROM FINANCING ACTIVITIES Payments for redemption of Series I Secured notes - (1,538,924 ) - - (1,538,924 ) Proceeds from issuance of L Bonds 33,234,487 - - - 33,234,487 Payments for redemption and issuance of L Bonds (9,322,411 ) - - - (9,322,411 ) Proceeds from restricted cash - 855,000 2,167,537 - 3,022,537 Redemptions of convertible, redeemable preferred stock (20,056 ) - - - (20,056 ) Issuance of member capital - 26,574,367 23,753,882 (50,328,249 ) - NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 23,892,020 25,890,443 25,921,419 (50,328,249 ) 25,375,633 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (10,405,723 ) 15,888 - - (10,389,838 ) CASH AND CASH EQUIVALENTS BEGINNING OF THE PERIOD 32,711,636 738,157 - - 33,449,793 END OF THE PERIOD $ 22,305,910 $ 754,045 $ - $ - $ 23,059,955 For the three months ended June 30, 2015 Parent Guarantor Sub Non-Guarantor Sub Eliminations Consolidated CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (2,250,415 ) $ 5,399,330 $ 6,985,168 $ (12,384,498 ) $ (2,250,415 ) Adjustments to reconcile net loss to net cash flows from operating activities: (Equity) of subsidiaries (5,399,386 ) (6,985,112 ) - 12,384,498 - Gain on life settlements - - (14,028,327 ) - (14,028,327 ) Amortization of deferred financing and issuance costs 1,685,700 80,928 (1,259,602 ) - 507,026 Deferred income taxes (930,470 ) - - - (930,470 ) Convertible, redeemable preferred stock dividends payable 146,420 - - - 146,420 (Increase) in operating assets: Policy benefits receivable - - 17,140,000 - 17,140,000 Other assets (7,124,387 ) (5,236,604 ) - 12,135,615 (225,376 ) Increase (decrease) in operating liabilities: Accounts payable and other accrued expenses 213,843 (509,444 ) (1,037,640 ) - (1,333,241 ) NET CASH FLOWS USED IN OPERATING ACTIVITIES (13,658,695 ) (7,250,902 ) 7,799,599 12,135,615 (974,383 ) CASH FLOWS FROM INVESTING ACTIVITIES Investment in life settlements - - (7,777,541 ) - (7,777,541 ) Proceeds from settlement of life settlements - - 132,388 - 132,388 NET CASH FLOWS USED IN INVESTING ACTIVITIES - - (7,645,153 ) - (7,645,153 ) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of revolving credit facility - - (7,150,000 ) (7,150,000 ) Payments for redemption of Series I Secured notes - (2,344,355 ) - - (2,344,355 ) Proceeds from issuance of L Bonds 22,538,059 - - - 22,538,059 Payments for redemption and issuance of L Bonds (6,134,935 ) - - - (6,134,935 ) Proceeds from restricted cash - 1,677,500 1,732,927 - 3,410,427 Issuance of member capital - 6,872,932 5,262,683 (12,135,615 ) - Issuance of common stock 582,000 - - - 582,000 Redemptions of convertible, redeemable preferred stock (273,998 ) - - - (273,998 ) NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 16,711,126 6,206,077 (154,390 ) (12,135,615 ) 10,627,198 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,052,431 (1,044,825 ) 56 - 2,007,662 CASH AND CASH EQUIVALENTS BEGINNING OF THE PERIOD 34,762,097 1,278,378 150,052 - 36,190,527 END OF THE PERIOD $ 37,814,528 $ 233,553 $ 150,108 $ - $ 38,198,189 For the three months ended June 30, 2014 Parent Guarantor Sub Non-Guarantor Sub Eliminations Consolidated CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (2,586,697 ) $ 2,372,886 $ 3,790,677 $ (6,163,563 ) $ (2,586,697 ) Adjustments to reconcile net loss to cash: (Equity) of subsidiaries (2,372,886 ) (3,790,677 ) - 6,163,563 - Gain on life settlements - - (10,852,425 ) - (10,852,425 ) Amortization of deferred financing and issuance costs 880,374 134,158 339,475 - 1,354,007 Deferred income taxes (1,316,712 ) - - - (1,316,712 ) Convertible, redeemable preferred stock dividends payable 196,991 - - - 196,991 (Increase) in operating assets: Policy benefits receivable - - (300,000 ) - (300,000 ) Other assets (10,674,637 ) (9,406,461 ) - 19,384,025 (697,073 ) Increase in operating liabilities: Accounts payable and accrued expenses 1,257,758 72,959 559,620 - 1,890,337 NET CASH FLOWS USED IN OPERATING ACTIVITIES (14,615,809 ) (10,617,135 ) (6,462,653 ) 19,384,025 (12,311,572 ) CASH FLOWS FROM INVESTING ACTIVITIES Investment in life settlements - - (2,608,232 ) - (2,608,232 ) Proceeds from settlement of life settlements - - 68,500 - 68,500 NET CASH FLOWS USED IN INVESTING ACTIVITIES - - (2,539,732 ) - (2,539,732 ) CASH FLOWS FROM FINANCING ACTIVITIES Payments for redemption of Series I Secured notes - (670,621 ) - - (670,621 ) Proceeds from issuance of L Bonds 14,868,830 - - - 14,868,830 Payments for redemption and issuance of L Bonds (4,393,523 ) - - - (4,393,523 ) Proceeds from restricted cash - (215,000 ) 258,330 - 43,330 Issuance of member capital - 10,639,970 8,744,055 (19,384,025 ) - Redemptions of convertible, redeemable preferred stock (20,056 ) - - - (20,056 ) NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 10,455,251 9,754,349 9,002,385 (19,384,025 ) 9,827,960 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,160,558 ) (862,786 ) - - (5,023,344 ) CASH AND CASH EQUIVALENTS BEGINNING OF THE PERIOD 26,466,468 1,616,831 - - 28,083,299 END OF THE PERIOD $ 22,305,910 $ 754,045 $ - $ - $ 23,059,955 |
Concentrations (Tables)
Concentrations (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Concentrations [Abstract] | |
Summary of the face value of insurance contracts | June 30, December 31, 2015 2014 Life insurance company % % AXA Equitable 14.06 14.55 John Hancock 11.90 11.48 |
Summary of the number of insurance contracts | June 30, December 31, 2015 2014 State of residence % % California 27.07 28.87 Florida 19.43 18.56 |
Nature of Business and Summar33
Nature of Business and Summary of Significant Accounting Policies (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Dec. 31, 2014 | |
Nature Of Business And Summary Of Significant Accounting Policies | |||||
Deposits and direct cost advances | $ 222,000 | $ 222,000 | $ 27,000 | ||
Amortization of deferred financing costs | 300,000 | $ 89,000 | 300,000 | $ 179,000 | |
Future amortization expected | 1,500,000 | $ 1,500,000 | |||
Redemption period for amortization of discount related to financing cost | 3 years | ||||
Debt issuance costs in financial statement | $ 3,629,000 | $ 3,629,000 |
Restrictions on Cash (Details)
Restrictions on Cash (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Restrictions on Cash (Textual) | ||
Restricted cash | $ 7,923,000 | $ 4,296,000 |
Investment in Life Insurance 35
Investment in Life Insurance Policies (Details) | Jun. 30, 2015USD ($)Contract | Dec. 31, 2014USD ($)Contract |
Summary of Company's life insurance policies accounted for under fair value method and their estimated maturity dates, based on remaining life expectancy | ||
Number of Contracts, 2015 | Contract | 3 | |
Number of Contracts, 2016 | Contract | 5 | 7 |
Number of Contracts, 2017 | Contract | 16 | 17 |
Number of Contracts, 2018 | Contract | 30 | 30 |
Number of Contracts, 2019 | Contract | 48 | 45 |
Number of Contracts, 2020 | Contract | 43 | 41 |
Number of Contracts, 2021 | Contract | 42 | 36 |
Number of Contracts, Thereafter | Contract | 130 | 112 |
Life Settlement Contracts, Number of Contracts, Total | Contract | 314 | 291 |
Estimated Fair Value, 2015 | $ 5,063,000 | |
Estimated Fair Value, 2016 | $ 7,198,000 | 8,144,000 |
Estimated Fair Value, 2017 | 17,063,000 | 21,916,000 |
Estimated Fair Value, 2018 | 42,478,000 | 41,994,000 |
Estimated Fair Value, 2019 | 53,052,000 | 47,303,000 |
Estimated Fair Value, 2020 | 46,597,000 | 43,429,000 |
Estimated Fair Value, 2021 | 34,486,000 | 29,789,000 |
Estimated Fair Value, Thereafter | 100,625,000 | 85,245,000 |
Life Settlement Contracts, Estimated Fair Value, Total | $ 301,499,000 | 282,883,000 |
Face Value, 2015 | 6,000,000 | |
Face Value, 2016 | $ 8,500,000 | 11,550,000 |
Face Value, 2017 | 23,857,000 | 35,542,000 |
Face Value, 2018 | 72,171,000 | 76,206,000 |
Face Value, 2019 | 109,810,000 | 106,973,000 |
Face Value, 2020 | 101,574,000 | 102,614,000 |
Face Value, 2021 | 96,956,000 | 90,921,000 |
Face Value, Thereafter | 393,406,000 | 349,293,000 |
Life Settlement Contracts, Face Value, Total | $ 806,274,000 | $ 779,099,000 |
Investment in Life Insurance 36
Investment in Life Insurance Policies (Details 1) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Summary of reconciliation of gain on life settlements | ||||
Change in fair value | $ 14,028,000 | $ 10,852,000 | $ 12,134,000 | $ 22,211,000 |
Premiums and other annual fees | (6,172,000) | (5,599,000) | (12,509,000) | (11,442,000) |
Policy maturities | 618,000 | 232,000 | 25,632,000 | 232,000 |
Gain on life settlements, net | $ 8,474,000 | $ 5,485,000 | $ 25,257,000 | $ 11,001,000 |
Investment in Life Insurance 37
Investment in Life Insurance Policies(Details 2) | Jun. 30, 2015USD ($) |
Summary of estimated expected premium payments to maintain the above life insurance policies assuming no mortalities | |
Six months ending December 31 ,2015 | $ 13,669,000 |
2,016 | 28,362,000 |
2,017 | 31,710,000 |
2,018 | 34,568,000 |
2,019 | 38,378,000 |
2,020 | 42,535,000 |
Estimated expected premium payments | 189,222,000 |
Premiums [Member] | |
Summary of estimated expected premium payments to maintain the above life insurance policies assuming no mortalities | |
Six months ending December 31 ,2015 | 13,292,000 |
2,016 | 27,985,000 |
2,017 | 31,333,000 |
2,018 | 34,191,000 |
2,019 | 38,001,000 |
2,020 | 42,158,000 |
Estimated expected premium payments | 186,960,000 |
Servicing [Member] | |
Summary of estimated expected premium payments to maintain the above life insurance policies assuming no mortalities | |
Six months ending December 31 ,2015 | 377,000 |
2,016 | 377,000 |
2,017 | 377,000 |
2,018 | 377,000 |
2,019 | 377,000 |
2,020 | 377,000 |
Estimated expected premium payments | $ 2,262,000 |
Investment in Life Insurance 38
Investment in Life Insurance Policies (Details Textual) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Dec. 31, 2014 | |
Investment in Life Insurance Policies (Textual) | |||||
Realized gains from life insurance policy | $ 618,000 | $ 232,000 | $ 25,632,000 | $ 232,000 | |
Benefit recognized from insurance policy | 750,000 | 300,000 | 29,375,000 | 300,000 | |
Carrying value of life insurance policy | $ 132,000 | $ 68,000 | $ 3,743,000 | $ 68,000 | |
Life insurance policies [Member] | |||||
Investment in Life Insurance Policies (Textual) | |||||
Discount rate applied to portfolio | 11.19% | 11.43% |
Fair Value Definition and Hie39
Fair Value Definition and Hierarchy (Details) - Life insurance policies [Member] - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Summary of reconciliation of investments in life insurance policies | ||||
Beginning balance | $ 278,395,000 | $ 254,504,000 | $ 282,883,000 | $ 234,673,000 |
Purchases | 9,208,000 | 2,608,000 | 10,225,000 | 11,080,000 |
Maturities (cash in excess of carrying value) | (132,000) | (68,000) | (3,743,000) | (68,000) |
Net change in fair value | 14,028,000 | 10,852,000 | 12,134,000 | 22,211,000 |
Ending balance (June 30) | $ 301,499,000 | $ 267,896,000 | $ 301,499,000 | $ 267,896,000 |
Fair Value Definition and Hie40
Fair Value Definition and Hierarchy (Details 1) - Life insurance policies [Member] - USD ($) | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2015 | Dec. 31, 2014 | ||
Summary of inputs utilized in estimating the fair value | |||
Weighted average age of insured | 82 years 10 months 24 days | 82 years 9 months 18 days | |
Weighted average life expectancy, months* | [1] | 78 years 8 months 12 days | 78 years 4 months 24 days |
Average face amount per policy | $ 2,568,000 | $ 2,677,000 | |
Discount rate | 11.19% | 11.43% | |
[1] | * Standard life expectancy as adjusted for insured's specific circumstances. |
Fair Value Definition and Hie41
Fair Value Definition and Hierarchy (Details 2) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Plus 8 months [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life policies | $ (20,105,000) | $ (19,664,000) |
Minus 8 months [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life policies | 41,402,000 | 40,634,000 |
Plus 4 Months [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life policies | (39,752,000) | (38,864,000) |
Minus 4 Months [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life policies | 20,590,000 | 20,130,000 |
Plus 2% [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life policies | (25,148,000) | (24,085,000) |
Minus 2% [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life policies | 29,494,000 | 28,179,000 |
Plus 1% [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life policies | (13,061,000) | (12,502,000) |
Minus 1% [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life policies | $ 14,144,000 | $ 13,522,000 |
Fair value definition and hie42
Fair value definition and hierarchy (Details 3) - 6 months ended Jun. 30, 2015 - Level 3 [Member] - $ / shares | Total |
Warrants Level 3 instruments and measured at fair value upon issuance | |
Warrants issued | 431,954 |
December 2011 [Member] | |
Warrants Level 3 instruments and measured at fair value upon issuance | |
Month issued | Dec. 31, 2011 |
Warrants issued | 68,937 |
Fair value per share | $ 0.22 |
Risk free rate | 0.42% |
Volatility | 25.25% |
Term | 5 years |
March 2012 [Member] | |
Warrants Level 3 instruments and measured at fair value upon issuance | |
Month issued | Mar. 31, 2012 |
Warrants issued | 38,130 |
Fair value per share | $ 0.52 |
Risk free rate | 0.38% |
Volatility | 36.20% |
Term | 5 years |
June 2012 [Member] | |
Warrants Level 3 instruments and measured at fair value upon issuance | |
Month issued | Jun. 30, 2012 |
Warrants issued | 161,840 |
Fair value per share | $ 1.16 |
Risk free rate | 0.41% |
Volatility | 47.36% |
Term | 5 years |
July 2012 [Member] | |
Warrants Level 3 instruments and measured at fair value upon issuance | |
Month issued | Jul. 31, 2012 |
Warrants issued | 144,547 |
Fair value per share | $ 1.16 |
Risk free rate | 0.41% |
Volatility | 47.36% |
Term | 5 years |
September 2012 [Member] | |
Warrants Level 3 instruments and measured at fair value upon issuance | |
Month issued | Sep. 30, 2012 |
Warrants issued | 2,500 |
Fair value per share | $ 0.72 |
Risk free rate | 0.31% |
Volatility | 40.49% |
Term | 5 years |
September 2014 [Member] | |
Warrants Level 3 instruments and measured at fair value upon issuance | |
Month issued | Sep. 30, 2014 |
Warrants issued | 16,000 |
Fair value per share | $ 1.26 |
Risk free rate | 1.85% |
Volatility | 17.03% |
Term | 5 years |
Fair Value Definition and Hie43
Fair Value Definition and Hierarchy (Details Textual) - Jun. 30, 2015 - USD ($) | Total |
Fair Value Definition and Hierarchy (Textual) | |
Estimated fair value of series I secured notes payable | $ 253,263,000 |
Weighted average market interest rate of secured notes payable | 7.08% |
Face value of notes | $ 251,038,000 |
Description for change in discount factor | If the life expectancy estimates were increased or decreased by four and eight months on each outstanding policy and the discount factors were increased or decreased by 1% and 2%, while all other variables are held constant. |
Increase decrease in life expectancy | Four and eight months |
Increase decrease in discount rate | 1% and 2 |
Credit Facilities (Details)
Credit Facilities (Details) - USD ($) | Jan. 29, 2013 | Jul. 15, 2008 | Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Dec. 31, 2014 |
Credit Facilities (Textual) | |||||||
Maximum borrowing amount under line of credit facility | $ 100,000,000 | ||||||
Expiry date of line of credit | Jul. 15, 2013 | ||||||
Amount outstanding under line of credit facility | $ 65,011,000 | $ 65,011,000 | $ 72,161,000 | ||||
Effective rate of interest | 5.41% | 5.41% | 6.24% | ||||
Total funds available for additional borrowings under the borrowing base formula criteria | $ 33,409,000 | $ 33,409,000 | $ 20,585,000 | ||||
Extended date of line of credit facility | Dec. 31, 2014 | ||||||
Weighted average effective interest rate | 5.37% | 6.20% | 6.00% | 6.21% | |||
Minimum tangible net worth to be maintained by company | $ 45,000,000 | ||||||
Minimum cash and eligible investments | 15,000,000 | ||||||
Consolidated net income under credit and security agreement | 44,503,000 | ||||||
Consolidated tangible net worth under credit and security agreement | $ 101,427,000 | ||||||
Credit facility, Description | Lender's cost of borrowing plus 4.25 percent, which is 1.75 percent less than under the previous Credit and Security Agreement executed on January 25, 2013. | ||||||
Credit facility up to limit | $ 105,000,000 |
Series I Secured Notes (Details
Series I Secured Notes (Details) - Series I Secured Notes Payable [Member] | Jun. 30, 2015USD ($) |
Summary of future contractual maturities of notes payable | |
2,015 | $ 5,085,000 |
2,016 | 10,964,000 |
2,017 | 6,164,000 |
2,018 | 1,127,000 |
2,019 | 347,000 |
Thereafter | 1,041,000 |
Total | 24,728,000 |
Summary of amortization of deferred financing costs of notes payable | |
2,015 | 20,000 |
2,016 | 144,000 |
2,017 | 149,000 |
2,018 | 36,000 |
2,019 | 7,000 |
Thereafter | 34,000 |
Total | $ 390,000 |
Series I Secured Notes (Detai46
Series I Secured Notes (Details Textual) - USD ($) | Jun. 14, 2011 | Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Dec. 31, 2014 |
Series I Secured Notes Payable (Textual) | ||||||
Weighted average market interest rate of Secured notes payable | 7.08% | 7.08% | ||||
Amortization of deferred financing and issuance costs | $ 300,000 | $ 89,000 | $ 300,000 | $ 179,000 | ||
Series I Secured Notes Payable [Member] | ||||||
Series I Secured Notes Payable (Textual) | ||||||
Interest rate on secured notes, Minimum | 5.65% | |||||
Interest rate on secured notes, Maximum | 9.55% | |||||
Description of interest payment | Interest is payable monthly, quarterly, annually or at maturity depending on the terms of the note. | |||||
Weighted average market interest rate of Secured notes payable | 8.49% | 8.49% | 8.37% | |||
Principal amount outstanding under Series I Secured notes | $ 24,728,000 | $ 24,728,000 | $ 28,047,000 | |||
Amortization of deferred financing and issuance costs | $ 81,000 | $ 134,000 | 211,000 | $ 301,000 | ||
Future expected amortization of deferred financing costs | $ 390,000 | |||||
Minimum maturity period of secured notes | 6 months | |||||
Maximum maturity period of secured notes | 7 years | |||||
Amortizatoin period of deferred financing cost | 6 years | |||||
Conditions for proceed from issuance of debenture | (1) payment of commissions on sales of L Bonds, (2) payment of offering expenses, (3) purchase of life insurance policies, (4) payment of premiums on life insurance policies, (5) payment of principal and interest on L Bonds, (6) payment of portfolio operations expenses, and (7) general working capital. |
L Bonds (Formerly Renewable S47
L Bonds (Formerly Renewable Secured Debentures)) (Details) - Renewable Secured Debentures [Member] | Jun. 30, 2015USD ($) |
Summary of future contractual maturities of L Bonds | |
2,015 | $ 48,082,000 |
2,016 | 67,120,000 |
2,017 | 43,051,000 |
2,018 | 31,012,000 |
2,019 | 14,342,000 |
Thereafter | 22,703,000 |
Total | 226,310,000 |
Summary of amortization of deferred financing costs of L Bonds | |
2,015 | 243,000 |
2,016 | 1,229,000 |
2,017 | 1,520,000 |
2,018 | 1,450,000 |
2,019 | 612,000 |
Thereafter | 1,258,000 |
Total | $ 6,312,000 |
L Bonds (Formerly Renewable S48
L Bonds (Formerly Renewable Secured Debentures) (Details Textual) - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Jan. 09, 2015 | Dec. 31, 2014 | |
Renewable Secured Debentures (Textual) | ||||||
Debentures offer for sale | $ 251,038,000 | $ 251,038,000 | ||||
Weighted average market interest rate of secured notes payable | 7.08% | 7.08% | ||||
Renewable Secured Debentures [Member] | ||||||
Renewable Secured Debentures (Textual) | ||||||
Debentures offer for sale | $ 250,000,000 | $ 250,000,000 | $ 1,000,000,000 | |||
Interest rates, minimum | 4.25% | |||||
Interest rates, maximum | 9.50% | |||||
Description of interest payment | Interest is payable monthly, annually or at maturity depending on the terms of the debenture. | |||||
Weighted average market interest rate of secured notes payable | 7.27% | 7.27% | 7.45% | |||
Amount outstanding under L Bonds | $ 226,310,000 | $ 226,310,000 | $ 186,377,000 | |||
Amortization of deferred issuance costs | $ 1,366,000 | $ 908,000 | 2,340,000 | $ 1,755,000 | ||
Future expected amortization of deferred financing costs | $ 6,312,000 | |||||
Maturity period of debentures, Minimum | 6 months | |||||
Maturity period of debentures, Maximum | 7 years | |||||
Conditions for proceed from issuance of debenture | (1) payment of commissions on sales of L Bonds, (2) payment of offering expenses, (3) purchase of life insurance policies, (4) payment of premiums on life insurance policies, (5) payment of principal and interest on L Bonds, (6) payment of portfolio operations expenses, and (7) general working capital. | |||||
Publicly registered L Bond offering | $ 1,000,000,000 | |||||
Minimum increments | $ 25,000 |
Convertible, Redeemable Prefe49
Convertible, Redeemable Preferred Stock (Details) - USD ($) | Sep. 02, 2012 | Jul. 31, 2011 | Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Dec. 31, 2014 |
Convertible Preferred Stock (Textual) | |||||||
Exercise price of warrants | $ 12.50 | ||||||
Exercise period | 3 years | ||||||
Maturity period of warrant | 3 years | ||||||
Conversion of Series A preferred stock into common stock, description | One share of common stock for every 40 shares of Series A Preferred Stock purchased. | ||||||
Preferred stock redemption terms | The Company may redeem the Series A preferred shares at a price equal to 110% of their liquidation preference ($7.50 per share) at any time. | ||||||
Preferred stock, liquidation preference per share | $ 7.50 | $ 7.50 | |||||
Redemption price of preferred shares | $ 7.50 | $ 7.50 | |||||
Series A preferred stock outstanding | 2,746,000 | 2,746,000 | |||||
Gross consideration from convertible preferred stock | $ 20,560,000 | ||||||
Series A preferred stock issuance costs | $ 2,838,000 | ||||||
Warrant outstanding | $ 431,954 | $ 431,954 | $ 431,954 | ||||
Weighted average remaining life of warrants outstanding | 1 year 11 months 5 days | 2 years 5 months 5 days | |||||
Accrued preferred dividend | 514,000 | $ 514,000 | |||||
Percentage of unredeemed shares redeemed one year after issuance | 33.00% | ||||||
Percentage of unredeemed shares redeemed two year after issuance | 66.00% | ||||||
Percentage of unredeemed shares redeemed three year after issuance | 100.00% | ||||||
Redeemed shares of Series A preferred stock | 182,000 | ||||||
Minimum gross proceeds from common stock offering | $ 5,000,000 | ||||||
Maximum offering price of common stock | $ 11 | ||||||
Fair value of outstanding warrants attached to Series A preferred stock | $ 428,000 | ||||||
Term of redemption of warrants prior to expiration | The Company may redeem outstanding warrants prior to their expiration, at a price of $0.01 per share upon 30 days written notice to the investors at any time after (i) the Company has completed a registration of its common stock with the SEC and (ii) the volume of weighted-average sale price per share of common stock equals or exceeds $14.00 per share for ten consecutive trading days ending on the third business day prior to proper notice of such redemption. | ||||||
Declared and accrued dividends | $ 495,000 | $ 638,000 | $ 1,032,000 | $ 1,276,000 | |||
Preferred stock issued in lieu of cash dividend | 21,000 | 28,000 | 48,000 | 54,000 | |||
Cash dividend rate, per share | $ 7 | ||||||
Initial public offering [Member] | |||||||
Convertible Preferred Stock (Textual) | |||||||
Convertible preferred stock, shares issued upon conversion | 678,000 | 678,000 | |||||
Conversion of stock, shares converted into common stock | 508,000 | ||||||
Series A 10 % convertible Preferred Stock [Member] | |||||||
Convertible Preferred Stock (Textual) | |||||||
Company offering shares of convertible redeemable preferred stock | 3,333,333 | ||||||
Series A preferred stock shares sold for cash | 3,278,000 | ||||||
Consideration received on sale of Series A preferred stock | $ 24,582,000 | ||||||
Series A preferred stock shares issued in conversion of dividends | 324,000 | ||||||
Series A preferred stock value issued in conversion of dividends | $ 2,271,000 | ||||||
Offering price of series A preferred stock | $ 7.50 | $ 7.50 | |||||
Series A preferred stock, Dividend rate | 10.00% | ||||||
Conversion term for series A preferred stock | Each share has the right to convert into 0.75 shares of the Company's common stock. | ||||||
Convertible preferred stock, shares issued upon conversion | 678,000 | 678,000 | |||||
Conversion of stock, shares converted into common stock | 508,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Current: | ||||
Federal | $ (182,000) | $ 141,000 | ||
State | (64,000) | 40,000 | ||
Total current tax expense (benefit) | (246,000) | 181,000 | ||
Deferred: | ||||
Federal | (670,000) | $ (1,106,000) | 984,000 | $ (1,909,000) |
State | (261,000) | (211,000) | 268,000 | (363,000) |
Total deferred tax expense (benefit) | (931,000) | (1,317,000) | 1,252,000 | (2,272,000) |
Total income tax expense (benefit) | $ (1,176,643) | $ (1,316,712) | $ 1,432,728 | $ (2,271,570) |
Income Taxes (Detail Textual)
Income Taxes (Detail Textual) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Income Taxes (Textual) | ||||
Federal net operating loss carryforwards | $ 537,000 | $ 537,000 | ||
Current income taxes | $ (246,000) | $ 181,000 |
Common Stock (Details)
Common Stock (Details) - USD ($) $ / shares in Units, $ in Millions | Jun. 23, 2015 | Sep. 24, 2014 | Jun. 24, 2014 | Jun. 30, 2015 | Dec. 31, 2014 |
Common Stock (Textual) | |||||
Common stock, par value | $ 0.001 | $ 0.001 | |||
Reverse stock split | The company shall enact a reverse split of the common stock such that for every two (2) shares of common stock issued and outstanding immediately prior to the effective date shall, automatically and without any action on the part of the respective holders thereof, be combined and converted into one (1) share of common stock. | ||||
GWG (Member) | |||||
Common Stock (Textual) | |||||
Restricted Common stock issued | 60,000 | 800,000 | |||
Common stock, par value | $ 9.70 | $ 12.50 | |||
Net proceeds | $ 8.6 |
Stock Incentive Plan (Details)
Stock Incentive Plan (Details) | 6 Months Ended |
Jun. 30, 2015shares | |
Outstanding stock options | |
Beginning Balance | 1,000,101 |
Granted during the year | 245,800 |
Vested during the year | |
Exercised during the year | (27,667) |
Forfeited during the year | (50,333) |
Ending Balance | 1,167,901 |
Vested [Member] | |
Outstanding stock options | |
Beginning Balance | 314,288 |
Granted during the year | 53,500 |
Vested during the year | 44,592 |
Exercised during the year | (27,667) |
Forfeited during the year | (2,250) |
Ending Balance | 382,463 |
Un-vested [Member] | |
Outstanding stock options | |
Beginning Balance | 685,813 |
Granted during the year | 192,300 |
Vested during the year | (44,592) |
Exercised during the year | |
Forfeited during the year | (48,083) |
Ending Balance | 785,438 |
Stock Incentive Plan (Details T
Stock Incentive Plan (Details Textual) - USD ($) | Mar. 27, 2013 | Sep. 30, 2014 | Jun. 30, 2015 |
Stock Incentive Plan (Textual) | |||
Number of shares issued to employees, officers and directors | 245,800 | ||
Options vesting period | 3 years | ||
Forfeited during the year | (50,333) | ||
Compensation expense related to un-vested options not yet recognized | $ 642,000 | ||
Compensation expense related to un-vested options, period of recognition | 3 years | ||
Ownership Percentage | 10.00% | ||
Compensation Expense in 2015 | $ 185,000 | ||
Compensation Expense in 2016 | 229,000 | ||
Compensation Expense in 2017 | 189,000 | ||
Compensation Expense in 2018 | $ 39,000 | ||
Exercised during the year | (27,667) | ||
Maximum [Member] | |||
Stock Incentive Plan (Textual) | |||
Exercise Price | $ 10.18 | ||
Minimum [Member] | |||
Stock Incentive Plan (Textual) | |||
Exercise Price | $ 8.20 | ||
Common Stock [Member] | |||
Stock Incentive Plan (Textual) | |||
Number of shares issued to employees, officers and directors | 991,401 | ||
Number of options vested | 443,381 | ||
Others [Member] | Maximum [Member] | |||
Stock Incentive Plan (Textual) | |||
Exercise Price | $ 10.25 | ||
Others [Member] | Minimum [Member] | |||
Stock Incentive Plan (Textual) | |||
Exercise Price | $ 6.73 | ||
2013 Stock Incentive Plan [Member] | |||
Stock Incentive Plan (Textual) | |||
Number of shares issuable | 2,000,000 | ||
Stock based compensation, Method used | The annual volatility rate is based on the standard deviation of the average continuously compounded rate of return of five selected comparable companies over the previous 52 weeks. | ||
Expected volatility rate | 17.03% | ||
2013 Stock Incentive Plan [Member] | Maximum [Member] | |||
Stock Incentive Plan (Textual) | |||
Stock option period | 10 years | ||
2013 Stock Incentive Plan [Member] | Employee Stock Option [Member] | |||
Stock Incentive Plan (Textual) | |||
Maximum number of shares for an employee | 53,000 | ||
Employee granting right purchase of common stock | 318,000 | ||
Number of options vested | 159,000 | ||
Exercise Price | $ 12.50 | ||
Options vesting period | 1 year | ||
2013 Stock Incentive Plan [Member] | Common Stock [Member] | |||
Stock Incentive Plan (Textual) | |||
Maximum number of shares for an employee | 400,000 | ||
Forfeited during the year | 113,499 | ||
Forfeited during the year, Percent | 15.00% | ||
Exercised during the year | 28,001 |
Commitments (Details)
Commitments (Details) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015USD ($)ft² | Jun. 30, 2014USD ($) | Jun. 30, 2015USD ($)ft² | Jun. 30, 2014USD ($) | |
Commitments (Textual) | ||||
Office space in square feet | ft² | 11,695 | 11,695 | ||
Rent expenses | $ 55,000 | $ 49,000 | $ 122,000 | $ 101,000 |
Minimum lease payments | $ 70,000 |
Contingencies (Details)
Contingencies (Details) - Jun. 30, 2015 - USD ($) | Total |
Contingencies (Textual) | |
Loaned to Opportunity Finance, LLC | $ 1,000,000 |
Repayments of loan | $ 177,000 |
Guarantees of Secured Debt (Det
Guarantees of Secured Debt (Details) - USD ($) | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 |
ASSETS | ||||||
Cash and cash equivalents | $ 38,198,189 | $ 36,190,527 | $ 30,662,704 | $ 23,059,955 | $ 28,083,299 | $ 33,449,793 |
Restricted cash | 7,923,190 | 4,296,053 | ||||
Policy benefits receivable | 2,500,000 | 1,750,000 | ||||
Investment in life settlements, at fair value | 301,498,527 | 282,883,010 | ||||
Other assets | $ 6,623,561 | $ 3,478,762 | ||||
Investment in subsidiaries | ||||||
TOTAL ASSETS | $ 356,743,467 | $ 323,070,529 | ||||
LIABILITIES | ||||||
Revolving credit facility | 65,011,048 | 72,161,048 | ||||
Series I Secured notes | 24,347,531 | 27,616,578 | ||||
L Bonds | 223,118,514 | 182,782,884 | ||||
Interest payable | 11,593,220 | 11,128,519 | ||||
Accounts payable and other accrued expenses | 2,071,879 | 1,718,009 | ||||
Deferred taxes, net | 6,525,336 | 5,273,555 | ||||
TOTAL LIABILITIES | $ 332,667,528 | $ 300,680,593 | ||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||
Member capital | ||||||
Convertible preferred stock | $ 20,559,823 | $ 20,527,866 | ||||
Common stock | 5,933 | 5,870 | ||||
Additional paid-in capital | 16,900,193 | 16,257,686 | ||||
Accumulated deficit | (13,390,010) | (14,401,486) | ||||
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | 24,075,939 | 22,389,936 | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | 356,743,467 | 323,070,529 | ||||
Parent [Member] | ||||||
ASSETS | ||||||
Cash and cash equivalents | $ 37,814,528 | 34,762,097 | $ 30,446,473 | 22,305,910 | 26,466,468 | 32,711,636 |
Restricted cash | ||||||
Policy benefits receivable | ||||||
Investment in life settlements, at fair value | ||||||
Other assets | $ 2,688,215 | $ 1,673,728 | ||||
Investment in subsidiaries | 222,479,390 | 185,636,417 | ||||
TOTAL ASSETS | $ 262,982,133 | $ 217,756,618 | ||||
LIABILITIES | ||||||
Revolving credit facility | ||||||
Series I Secured notes | ||||||
L Bonds | $ 223,118,514 | $ 182,782,884 | ||||
Interest payable | 7,967,900 | 6,598,250 | ||||
Accounts payable and other accrued expenses | 1,294,444 | 711,993 | ||||
Deferred taxes, net | 6,525,336 | 5,273,555 | ||||
TOTAL LIABILITIES | $ 238,906,194 | $ 195,366,682 | ||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||
Member capital | ||||||
Convertible preferred stock | $ 20,559,823 | $ 20,527,866 | ||||
Common stock | 5,933 | 5,870 | ||||
Additional paid-in capital | 16,900,193 | 16,257,686 | ||||
Accumulated deficit | (13,390,010) | (14,401,486) | ||||
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | 24,075,939 | 22,389,936 | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | 262,982,133 | 217,756,618 | ||||
Guarantor Sub [Member] | ||||||
ASSETS | ||||||
Cash and cash equivalents | 233,553 | 1,278,378 | 216,231 | $ 754,045 | $ 1,616,831 | $ 738,157 |
Restricted cash | $ 185,000 | $ 82,500 | ||||
Policy benefits receivable | ||||||
Investment in life settlements, at fair value | $ 0 | |||||
Other assets | $ 1,730,651 | 1,777,534 | ||||
Investment in subsidiaries | 248,566,916 | 215,124,779 | ||||
TOTAL ASSETS | $ 250,716,120 | $ 217,201,044 | ||||
LIABILITIES | ||||||
Revolving credit facility | ||||||
Series I Secured notes | $ 24,347,531 | $ 27,616,578 | ||||
L Bonds | ||||||
Interest payable | $ 3,374,563 | $ 3,513,615 | ||||
Accounts payable and other accrued expenses | $ 664,744 | $ 434,433 | ||||
Deferred taxes, net | ||||||
TOTAL LIABILITIES | $ 28,386,838 | $ 31,564,626 | ||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||
Member capital | $ 222,329,282 | $ 185,636,418 | ||||
Convertible preferred stock | ||||||
Common stock | ||||||
Additional paid-in capital | ||||||
Accumulated deficit | ||||||
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | $ 222,329,282 | $ 185,636,418 | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | 250,716,120 | $ 217,201,044 | ||||
Non-Guarantor Sub [Member] | ||||||
ASSETS | ||||||
Cash and cash equivalents | 150,108 | $ 150,052 | ||||
Restricted cash | 7,738,190 | $ 4,213,553 | ||||
Policy benefits receivable | 2,500,000 | 1,750,000 | ||||
Investment in life settlements, at fair value | 301,498,527 | 282,883,010 | ||||
Other assets | $ 2,204,695 | $ 27,500 | ||||
Investment in subsidiaries | ||||||
TOTAL ASSETS | $ 314,091,520 | $ 288,874,063 | ||||
LIABILITIES | ||||||
Revolving credit facility | $ 65,011,048 | $ 72,161,048 | ||||
Series I Secured notes | ||||||
L Bonds | ||||||
Interest payable | $ 250,757 | $ 1,016,654 | ||||
Accounts payable and other accrued expenses | $ 112,691 | $ 571,583 | ||||
Deferred taxes, net | ||||||
TOTAL LIABILITIES | $ 65,374,496 | $ 73,749,285 | ||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||
Member capital | $ 248,717,024 | $ 215,124,778 | ||||
Convertible preferred stock | ||||||
Common stock | ||||||
Additional paid-in capital | ||||||
Accumulated deficit | ||||||
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | $ 248,717,024 | $ 215,124,778 | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ 314,091,520 | $ 288,874,063 | ||||
Eliminations [Member] | ||||||
ASSETS | ||||||
Cash and cash equivalents | ||||||
Restricted cash | ||||||
Policy benefits receivable | ||||||
Investment in life settlements, at fair value | ||||||
Other assets | ||||||
Investment in subsidiaries | $ (471,046,306) | $ (400,761,196) | ||||
TOTAL ASSETS | $ (471,046,306) | $ (400,761,196) | ||||
LIABILITIES | ||||||
Revolving credit facility | ||||||
Series I Secured notes | ||||||
L Bonds | ||||||
Interest payable | ||||||
Accounts payable and other accrued expenses | ||||||
Deferred taxes, net | ||||||
TOTAL LIABILITIES | ||||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||
Member capital | $ (471,046,306) | $ (400,761,196) | ||||
Convertible preferred stock | ||||||
Common stock | ||||||
Additional paid-in capital | ||||||
Accumulated deficit | ||||||
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | $ (471,046,306) | $ (400,761,196) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ (471,046,306) | $ (400,761,196) |
Guarantees of Secured Debt (D58
Guarantees of Secured Debt (Details 1) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Dec. 31, 2014 | |
REVENUE | |||||
Origination and servicing income | |||||
Gain on life settlements, net | $ 8,473,886 | $ 5,484,889 | $ 25,257,295 | $ 11,001,094 | |
Interest and other income | 90,380 | 6,380 | 139,676 | 13,747 | |
TOTAL REVENUE | $ 8,564,266 | $ 5,491,269 | $ 25,396,971 | $ 11,014,841 | |
EXPENSES | |||||
Origination and servicing fees | |||||
Employee compensation and benefits | $ 2,144,725 | $ 1,178,819 | $ 3,872,642 | $ 2,147,564 | |
Legal and professional fees | 642,931 | 419,337 | 1,166,184 | 826,339 | |
Interest expense | 7,322,347 | 6,608,043 | 14,498,881 | 12,934,591 | |
Other expenses | 1,881,321 | 1,188,479 | 3,415,060 | 1,865,784 | |
TOTAL EXPENSES | 11,991,324 | 9,394,678 | 22,952,767 | 17,774,278 | |
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES | $ (3,427,058) | $ (3,903,409) | $ 2,444,204 | $ (6,759,437) | |
EQUITY IN INCOME OF SUBSIDIARY | |||||
NET INCOME BEFORE INCOME TAXES | $ (3,427,058) | $ (3,903,409) | $ 2,444,204 | $ (6,759,437) | |
INCOME TAX EXPENSE | (1,176,643) | (1,316,712) | 1,432,728 | (2,271,570) | |
NET LOSS | $ (2,250,415) | $ (2,586,697) | $ 1,011,476 | $ (4,487,867) | $ (5,962,909) |
Parent [Member] | |||||
REVENUE | |||||
Origination and servicing income | |||||
Gain on life settlements, net | |||||
Interest and other income | $ 17,480 | $ 6,000 | $ 25,023 | $ 12,929 | |
TOTAL REVENUE | $ 17,480 | $ 6,000 | $ 25,023 | $ 12,929 | |
EXPENSES | |||||
Origination and servicing fees | |||||
Employee compensation and benefits | $ 1,605,795 | $ 664,495 | $ 2,911,596 | $ 1,255,079 | |
Legal and professional fees | 351,507 | 375,243 | 828,858 | 723,106 | |
Interest expense | 5,781,796 | 4,475,461 | 11,031,758 | 8,691,989 | |
Other expenses | 1,104,826 | 767,096 | 2,056,188 | 1,106,635 | |
TOTAL EXPENSES | 8,843,924 | 6,282,295 | 16,828,400 | 11,776,809 | |
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES | (8,826,444) | (6,276,295) | (16,803,377) | (11,763,880) | |
EQUITY IN INCOME OF SUBSIDIARY | (5,399,386) | 2,372,886 | (19,247,582) | 5,004,443 | |
NET INCOME BEFORE INCOME TAXES | (3,427,058) | (3,903,409) | 2,444,204 | (6,759,437) | |
INCOME TAX EXPENSE | (1,176,643) | (1,316,712) | 1,432,728 | (2,271,570) | |
NET LOSS | (2,250,415) | (2,586,697) | 1,011,476 | (4,487,867) | |
Guarantor Sub [Member] | |||||
REVENUE | |||||
Origination and servicing income | $ 661,264 | $ 342,850 | $ 1,018,750 | $ 1,308,906 | |
Gain on life settlements, net | |||||
Interest and other income | $ 430 | $ 362 | $ 6,880 | $ 169,976 | |
TOTAL REVENUE | $ 661,694 | $ 343,212 | $ 1,025,630 | $ 1,478,882 | |
EXPENSES | |||||
Origination and servicing fees | |||||
Employee compensation and benefits | $ 538,930 | $ 514,324 | $ 961,046 | $ 892,485 | |
Legal and professional fees | 291,424 | 44,094 | 337,326 | 103,233 | |
Interest expense | 684,879 | 793,702 | 1,458,965 | 1,572,269 | |
Other expenses | 732,243 | 408,883 | 1,302,036 | 734,138 | |
TOTAL EXPENSES | 2,247,476 | 1,761,003 | 4,059,373 | 3,302,125 | |
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES | (1,585,782) | (1,417,791) | (3,033,743) | (1,823,243) | |
EQUITY IN INCOME OF SUBSIDIARY | (6,985,112) | 3,790,677 | (22,281,216) | 6,827,686 | |
NET INCOME BEFORE INCOME TAXES | $ 5,399,330 | $ 2,372,886 | $ 19,247,474 | $ 5,004,443 | |
INCOME TAX EXPENSE | |||||
NET LOSS | $ 5,399,330 | $ 2,372,886 | $ 19,247,474 | $ 5,004,443 | |
Non-Guarantor Sub [Member] | |||||
REVENUE | |||||
Origination and servicing income | |||||
Gain on life settlements, net | $ 8,473,886 | $ 5,484,889 | $ 25,257,295 | $ 11,001,094 | |
Interest and other income | 72,470 | 18 | 107,773 | 63 | |
TOTAL REVENUE | 8,546,356 | 5,484,907 | 25,365,068 | 11,001,157 | |
EXPENSES | |||||
Origination and servicing fees | $ 661,264 | $ 342,850 | $ 1,018,750 | $ 1,308,906 | |
Employee compensation and benefits | |||||
Legal and professional fees | |||||
Interest expense | $ 855,672 | $ 1,338,880 | $ 2,008,158 | $ 2,670,333 | |
Other expenses | 44,252 | 12,500 | 56,836 | 194,232 | |
TOTAL EXPENSES | 1,561,188 | 1,694,230 | 3,083,744 | 4,173,471 | |
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES | $ 6,985,168 | $ 3,790,667 | $ 22,281,324 | $ 6,827,686 | |
EQUITY IN INCOME OF SUBSIDIARY | |||||
NET INCOME BEFORE INCOME TAXES | $ 6,985,168 | $ 3,790,667 | $ 22,281,324 | $ 6,827,686 | |
INCOME TAX EXPENSE | |||||
NET LOSS | $ 6,985,168 | $ 3,790,667 | $ 22,281,324 | $ 6,827,686 | |
Eliminations [Member] | |||||
REVENUE | |||||
Origination and servicing income | $ (661,264) | $ (342,850) | $ (1,018,750) | $ (1,308,906) | |
Gain on life settlements, net | |||||
Interest and other income | $ (169,221) | ||||
TOTAL REVENUE | $ (661,264) | $ (342,850) | $ (1,018,750) | (1,478,127) | |
EXPENSES | |||||
Origination and servicing fees | $ (661,264) | $ (342,850) | $ (1,018,750) | $ (1,308,906) | |
Employee compensation and benefits | |||||
Legal and professional fees | |||||
Interest expense | |||||
Other expenses | $ (169,221) | ||||
TOTAL EXPENSES | $ (661,264) | $ (342,850) | $ (1,018,750) | $ (1,478,127) | |
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES | |||||
EQUITY IN INCOME OF SUBSIDIARY | $ 12,384,498 | $ 6,163,563 | $ 41,528,798 | $ 11,832,129 | |
NET INCOME BEFORE INCOME TAXES | $ 12,384,498 | $ 6,163,563 | $ 41,528,798 | $ 11,832,129 | |
INCOME TAX EXPENSE | |||||
NET LOSS | $ (12,384,498) | $ (6,163,563) | $ (41,528,798) | $ (11,832,129) |
Guarantees of Secured Debt (D59
Guarantees of Secured Debt (Details 2) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Dec. 31, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES | |||||
Net income (loss) | $ (2,250,415) | $ (2,586,697) | $ 1,011,476 | $ (4,487,867) | $ (5,962,909) |
Adjustments to reconcile net income to net cash flows from operating activities: | |||||
(Equity) of subsidiaries | |||||
Gain on life settlements | $ 14,028,327 | $ 10,852,425 | $ 12,134,482 | $ 22,211,338 | |
Amortization of deferred financing and issuance costs | 507,026 | 1,354,007 | (42,004) | 1,707,664 | |
Deferred income taxes | (930,470) | (1,316,712) | 1,251,781 | (2,271,570) | |
Convertible, redeemable preferred stock issued for dividends | 146,420 | 196,991 | 335,232 | 389,331 | |
(Increase) in operating assets: | |||||
Policy benefits receivable | 17,140,000 | (300,000) | (750,000) | (300,000) | |
Other assets | 225,376 | 697,073 | 356,549 | 948,919 | |
Increase in operating liabilities: | |||||
Accounts payable and other accrued expenses | (1,333,241) | 1,890,337 | 1,302,446 | 3,168,163 | |
NET CASH FLOWS USED IN OPERATING ACTIVITIES | (974,383) | (12,311,572) | (9,382,100) | (24,954,536) | |
CASH FLOWS FROM INVESTING ACTIVITIES | |||||
Investment in life settlements | 7,777,541 | 2,608,232 | 10,224,018 | 10,879,435 | |
Proceeds from settlement of life settlements | 132,388 | 68,500 | 3,742,983 | 68,500 | |
NET CASH FLOWS USED IN INVESTING ACTIVITIES | (7,645,153) | $ (2,539,732) | (6,481,035) | $ (10,810,935) | |
CASH FLOWS FROM FINANCING ACTIVITIES | |||||
Repayment of revolving credit facility | (7,150,000) | (7,150,000) | |||
Payments for redemption of Series I Secured notes | 2,344,355 | $ 670,621 | 3,617,544 | $ 1,538,924 | |
Proceeds from issuance of L Bonds | 22,538,059 | 14,868,830 | 50,498,356 | 33,234,487 | |
Payments for redemption and issuance of L Bonds | (6,134,935) | (4,393,523) | (13,013,057) | (9,322,411) | |
Proceeds from restricted cash | 3,410,427 | $ 43,330 | (3,627,137) | $ 3,022,537 | |
Issuance of common stock | (582,000) | (582,000) | |||
Redemptions of convertible, redeemable preferred stock | $ (273,998) | $ (20,056) | $ (273,998) | $ (20,056) | |
Issuance of member capital | |||||
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | $ 10,627,198 | $ 9,827,960 | $ 23,398,620 | $ 25,375,633 | |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 2,007,662 | (5,023,344) | 7,535,485 | (10,389,838) | |
CASH AND CASH EQUIVALENTS | |||||
BEGINNING OF PERIOD | 36,190,527 | 28,083,299 | 30,662,704 | 33,449,793 | 33,449,793 |
END OF PERIOD | 38,198,189 | 23,059,955 | 38,198,189 | 23,059,955 | 30,662,704 |
Parent [Member] | |||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||
Net income (loss) | (2,250,415) | (2,586,697) | 1,011,476 | (4,487,867) | |
Adjustments to reconcile net income to net cash flows from operating activities: | |||||
(Equity) of subsidiaries | $ (5,399,386) | $ 2,372,886 | $ (19,247,582) | $ 5,004,443 | |
Gain on life settlements | |||||
Amortization of deferred financing and issuance costs | $ 1,685,700 | $ 880,374 | $ 1,729,175 | $ 1,727,610 | |
Deferred income taxes | (930,470) | (1,316,712) | 1,251,781 | (2,271,570) | |
Convertible, redeemable preferred stock issued for dividends | $ 146,420 | $ 196,991 | $ 335,232 | $ 389,331 | |
(Increase) in operating assets: | |||||
Policy benefits receivable | |||||
Other assets | $ (7,124,387) | $ (10,674,637) | $ (17,998,823) | $ (26,622,350) | |
Increase in operating liabilities: | |||||
Accounts payable and other accrued expenses | 213,843 | 1,257,758 | 2,493,495 | 1,971,543 | |
NET CASH FLOWS USED IN OPERATING ACTIVITIES | $ (13,658,695) | $ (14,615,809) | $ (30,425,246) | $ (34,297,746) | |
CASH FLOWS FROM INVESTING ACTIVITIES | |||||
Investment in life settlements | |||||
Proceeds from settlement of life settlements | |||||
NET CASH FLOWS USED IN INVESTING ACTIVITIES | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||
Repayment of revolving credit facility | |||||
Payments for redemption of Series I Secured notes | |||||
Proceeds from issuance of L Bonds | $ 22,538,059 | $ 14,868,830 | $ 50,498,356 | $ 33,234,487 | |
Payments for redemption and issuance of L Bonds | $ (6,134,935) | $ (4,393,523) | $ (13,013,057) | $ (9,322,411) | |
Proceeds from restricted cash | |||||
Issuance of common stock | $ 582,000 | $ 582,000 | |||
Redemptions of convertible, redeemable preferred stock | $ (273,998) | $ (20,056) | $ (273,998) | $ (20,056) | |
Issuance of member capital | |||||
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | $ 16,711,126 | $ 10,455,251 | $ 37,793,301 | $ 23,892,020 | |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 3,052,431 | (4,160,558) | 7,368,055 | (10,405,723) | |
CASH AND CASH EQUIVALENTS | |||||
BEGINNING OF PERIOD | 34,762,097 | 26,466,468 | 30,446,473 | 32,711,636 | 32,711,636 |
END OF PERIOD | 37,814,528 | 22,305,910 | 37,814,528 | 22,305,910 | 30,446,473 |
Guarantor Subsidiary [Member] | |||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||
Net income (loss) | 5,399,330 | 2,372,886 | 19,247,474 | 5,004,443 | |
Adjustments to reconcile net income to net cash flows from operating activities: | |||||
(Equity) of subsidiaries | $ (6,985,112) | $ 3,790,677 | $ (22,281,216) | $ 6,827,686 | |
Gain on life settlements | |||||
Amortization of deferred financing and issuance costs | $ 80,928 | $ 134,158 | $ 211,116 | $ 301,104 | |
Deferred income taxes | |||||
Convertible, redeemable preferred stock issued for dividends | |||||
(Increase) in operating assets: | |||||
Policy benefits receivable | |||||
Other assets | $ (5,236,604) | $ (9,406,461) | $ (11,114,039) | $ (24,654,818) | |
Increase in operating liabilities: | |||||
Accounts payable and other accrued expenses | (509,444) | 72,959 | 228,640 | 302,402 | |
NET CASH FLOWS USED IN OPERATING ACTIVITIES | $ (7,250,902) | $ (10,617,135) | $ (13,708,025) | $ (25,874,555) | |
CASH FLOWS FROM INVESTING ACTIVITIES | |||||
Investment in life settlements | |||||
Proceeds from settlement of life settlements | |||||
NET CASH FLOWS USED IN INVESTING ACTIVITIES | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||
Repayment of revolving credit facility | |||||
Payments for redemption of Series I Secured notes | $ (2,344,355) | $ (670,621) | $ (3,617,544) | $ (1,538,924) | |
Proceeds from issuance of L Bonds | |||||
Payments for redemption and issuance of L Bonds | |||||
Proceeds from restricted cash | $ 1,677,500 | $ (215,000) | $ (102,500) | $ 855,000 | |
Issuance of common stock | |||||
Redemptions of convertible, redeemable preferred stock | |||||
Issuance of member capital | $ 6,872,932 | $ 10,639,970 | $ 17,445,391 | $ 26,574,367 | |
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 6,206,077 | 9,754,349 | 13,725,347 | 25,890,443 | |
NET INCREASE IN CASH AND CASH EQUIVALENTS | (1,044,825) | (862,786) | 17,322 | 15,888 | |
CASH AND CASH EQUIVALENTS | |||||
BEGINNING OF PERIOD | 1,278,378 | 1,616,831 | 216,231 | 738,157 | 738,157 |
END OF PERIOD | 233,553 | 754,045 | 233,553 | 754,045 | $ 216,231 |
Non-Guarantor Subsidiaries [Member] | |||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||
Net income (loss) | $ 6,985,168 | $ 3,790,667 | $ 22,281,324 | $ 6,827,686 | |
Adjustments to reconcile net income to net cash flows from operating activities: | |||||
(Equity) of subsidiaries | |||||
Gain on life settlements | $ (14,028,327) | $ (10,852,425) | $ (12,134,482) | $ (22,211,338) | |
Amortization of deferred financing and issuance costs | $ (1,259,602) | $ 339,475 | $ (1,982,295) | $ (321,050) | |
Deferred income taxes | |||||
Convertible, redeemable preferred stock issued for dividends | |||||
(Increase) in operating assets: | |||||
Policy benefits receivable | $ 17,140,000 | $ (300,000) | $ (750,000) | $ (300,000) | |
Other assets | |||||
Increase in operating liabilities: | |||||
Accounts payable and other accrued expenses | $ (1,037,640) | $ 559,620 | $ (1,419,689) | $ 894,218 | |
NET CASH FLOWS USED IN OPERATING ACTIVITIES | 7,799,599 | (6,462,653) | (5,994,858) | (15,110,484) | |
CASH FLOWS FROM INVESTING ACTIVITIES | |||||
Investment in life settlements | (7,777,541) | (2,608,232) | (10,224,018) | (10,879,435) | |
Proceeds from settlement of life settlements | 132,388 | 68,500 | 3,742,983 | 68,500 | |
NET CASH FLOWS USED IN INVESTING ACTIVITIES | (7,645,153) | $ (2,539,732) | (6,481,035) | $ (10,810,935) | |
CASH FLOWS FROM FINANCING ACTIVITIES | |||||
Repayment of revolving credit facility | $ (7,150,000) | $ (7,150,000) | |||
Payments for redemption of Series I Secured notes | |||||
Proceeds from issuance of L Bonds | |||||
Payments for redemption and issuance of L Bonds | |||||
Proceeds from restricted cash | $ 1,732,927 | $ 258,330 | $ (3,524,637) | $ 2,167,537 | |
Issuance of common stock | |||||
Redemptions of convertible, redeemable preferred stock | |||||
Issuance of member capital | $ 5,262,683 | $ 8,744,055 | $ 11,310,922 | $ 23,753,882 | |
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | (154,390) | $ 9,002,385 | 636,285 | $ 25,921,419 | |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 56 | $ 150,108 | |||
CASH AND CASH EQUIVALENTS | |||||
BEGINNING OF PERIOD | 150,052 | ||||
END OF PERIOD | 150,108 | $ 150,108 | |||
Eliminations [Member] | |||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||
Net income (loss) | (12,384,498) | $ (6,163,563) | (41,528,798) | $ (11,832,129) | |
Adjustments to reconcile net income to net cash flows from operating activities: | |||||
(Equity) of subsidiaries | $ 12,384,498 | $ 6,163,563 | $ 41,528,798 | $ 11,832,129 | |
Gain on life settlements | |||||
Amortization of deferred financing and issuance costs | |||||
Deferred income taxes | |||||
Convertible, redeemable preferred stock issued for dividends | |||||
(Increase) in operating assets: | |||||
Policy benefits receivable | |||||
Other assets | $ 12,135,615 | $ 19,384,025 | $ 28,756,313 | $ 50,328,249 | |
Increase in operating liabilities: | |||||
Accounts payable and other accrued expenses | |||||
NET CASH FLOWS USED IN OPERATING ACTIVITIES | $ 12,135,615 | $ 19,384,025 | $ 28,756,313 | $ 50,328,249 | |
CASH FLOWS FROM INVESTING ACTIVITIES | |||||
Investment in life settlements | |||||
Proceeds from settlement of life settlements | |||||
NET CASH FLOWS USED IN INVESTING ACTIVITIES | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||
Repayment of revolving credit facility | |||||
Payments for redemption of Series I Secured notes | |||||
Proceeds from issuance of L Bonds | |||||
Payments for redemption and issuance of L Bonds | |||||
Proceeds from restricted cash | |||||
Issuance of common stock | |||||
Redemptions of convertible, redeemable preferred stock | |||||
Issuance of member capital | $ (12,135,615) | $ (19,384,025) | $ (28,756,313) | $ (50,328,249) | |
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | $ (12,135,615) | $ (19,384,025) | $ (28,756,313) | $ (50,328,249) | |
NET INCREASE IN CASH AND CASH EQUIVALENTS | |||||
CASH AND CASH EQUIVALENTS | |||||
BEGINNING OF PERIOD | |||||
END OF PERIOD |
Guarantees of Secured Debt (D60
Guarantees of Secured Debt (Details Textual) - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Jan. 09, 2015 | |
Guarantees of L Bonds (Textual) | ||
Debentures offer for sale | $ 251,038,000 | |
Maximum rate of return on equity fund amount | 18.00% | |
Guarantees of L Bonds [Member] | ||
Guarantees of L Bonds (Textual) | ||
Debentures offer for sale | $ 250,000,000 | $ 1,000,000,000 |
Concentrations (Details)
Concentrations (Details) | Jun. 30, 2015 | Dec. 31, 2014 |
AXA Equitable [Member] | ||
Summary of the face value of insurance contracts with specific life insurance companies | ||
Face value percentage of insurance contracts with specific life insurance companies | 14.06% | 14.55% |
John Hancock [Member] | ||
Summary of the face value of insurance contracts with specific life insurance companies | ||
Face value percentage of insurance contracts with specific life insurance companies | 11.90% | 11.48% |
Concentrations (Details 1)
Concentrations (Details 1) | Jun. 30, 2015 | Dec. 31, 2014 |
California [Member] | ||
Summary of the number of insurance contracts held in specific states exceeding 10% of the total face value held by the Company | ||
Percentage of insurance contracts held in specific states | 27.07% | 28.87% |
Florida [Member] | ||
Summary of the number of insurance contracts held in specific states exceeding 10% of the total face value held by the Company | ||
Percentage of insurance contracts held in specific states | 19.43% | 18.56% |
Concentrations (Details Textual
Concentrations (Details Textual) | 6 Months Ended |
Jun. 30, 2015 | |
Concentration (Textual) | |
Description of issuance contracts with specific life insurance companies and contracts held in specific states | Exceeding 10% of the total face value |
Subsequent Events (Details)
Subsequent Events (Details) $ in Millions | 6 Months Ended |
Jun. 30, 2015USD ($) | |
Subsequent Events (Textual) | |
Additional principal amount of L bonds | $ 11.1 |