Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2016 | Aug. 12, 2016 | |
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, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q2 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 5,977,240 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
A S S E T S | ||
Cash and cash equivalents | $ 17,379,350 | $ 34,425,105 |
Restricted cash | 11,160,793 | 2,341,900 |
Investment in life insurance contracts, at fair value | 431,820,437 | 356,649,715 |
Secured MCA advances | 4,328,317 | |
Life insurance contract benefits receivable | 6,829,022 | |
Other assets | 3,510,443 | 2,461,045 |
TOTAL ASSETS | 475,028,362 | 395,877,765 |
LIABILITIES | ||
Revolving Senior Credit Facility | 77,475,992 | 63,279,596 |
Series I Secured Notes | 17,965,653 | 23,287,704 |
L Bonds | 327,322,906 | 276,482,796 |
Accounts payable | 2,529,206 | 1,517,440 |
Interest payable | 13,323,746 | 12,340,061 |
Other accrued expenses | 1,355,266 | 1,060,786 |
Deferred taxes, net | 4,670,715 | 1,763,968 |
TOTAL LIABILITIES | 444,643,484 | 379,732,351 |
STOCKHOLDERS' EQUITY | ||
CONVERTIBLE PREFERRED STOCK (par value $0.001; shares authorized 40,000,000; shares outstanding 2,737,698 and 2,781,735; liquidation preference of $20,533,000 and $20,863,000 on June 30, 2016 and December 31, 2015, respectively) | 20,445,320 | 20,784,841 |
REDEEMABLE PREFERRED STOCK (par value $0.001; shares authorized 100,000; shares outstanding 12,222 on June 30, 2016) | 12,212,767 | |
MCA PREFERRED STOCK (par value $0.001; shares authorized 2,000,000; shares outstanding 7,155 on June 30, 2016) | 71,555 | |
COMMON STOCK (par value $0.001: shares authorized 210,000,000; shares issued and outstanding 5,974,790 and 5,941,790 on June 30, 2016 and December 31, 2015) | 5,975 | 5,942 |
Additional paid-in capital | 16,488,390 | 17,149,391 |
Accumulated deficit | (18,839,129) | (21,794,760) |
TOTAL STOCKHOLDERS' EQUITY | 30,384,878 | 16,145,414 |
TOTAL LIABILITIES & EQUITY | $ 475,028,362 | $ 395,877,765 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Convertible preferred stock, par value | $ 0.001 | $ 0.001 |
Convertible preferred stock, shares authorized | 40,000,000 | 40,000,000 |
Convertible preferred stock, shares outstanding | 2,737,698 | 2,781,735 |
Convertible preferred stock, liquidation preference | $ 20,533,000 | $ 20,863,000 |
Redeemable preferred stock, par value | $ 0.001 | |
Redeemable preferred stock, shares authorized | 100,000 | |
Redeemable preferred stock, shares outstanding | 12,222 | |
MCA preferred stock, par value | $ 0.001 | |
MCA preferred stock, shares authorized | 2,000,000 | |
MCA preferred stock, shares outstanding | 7,155 | |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 210,000,000 | 210,000,000 |
Common stock, shares issued | 5,974,790 | 5,941,790 |
Common stock, shares outstanding | 5,974,790 | 5,941,790 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
REVENUE | ||||
Gain on life insurance contracts, net | $ 20,383,347 | $ 8,473,886 | $ 38,097,059 | $ 25,257,295 |
MCA income | 223,255 | 368,216 | ||
Interest and other income | 170,880 | 90,380 | 216,100 | 139,676 |
TOTAL REVENUE | 20,777,482 | 8,564,266 | 38,681,375 | 25,396,971 |
EXPENSES | ||||
Interest expense | 10,365,581 | 7,322,347 | 20,025,966 | 14,498,881 |
Employee compensation and benefits | 3,071,507 | 2,144,725 | 5,537,705 | 3,872,642 |
Legal and professional fees | 1,304,353 | 642,931 | 2,510,481 | 1,166,184 |
Other expenses | 2,332,685 | 1,881,321 | 4,744,845 | 3,415,060 |
TOTAL EXPENSES | 17,074,126 | 11,991,324 | 32,818,997 | 22,952,767 |
INCOME (LOSS) BEFORE INCOME TAXES | 3,703,356 | (3,427,058) | 5,862,378 | 2,444,204 |
INCOME TAX EXPENSE (BENEFIT) | 1,822,030 | (1,176,643) | 2,906,747 | 1,432,728 |
NET INCOME (LOSS) | 1,881,326 | (2,250,415) | 2,955,631 | 1,011,476 |
Loss attributable to preferred shareholders | 429,760 | 344,847 | 772,722 | 698,003 |
INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ 2,311,086 | $ (1,905,568) | $ 3,728,353 | $ 1,709,479 |
NET INCOME (LOSS) PER SHARE | ||||
Basic | $ 0.32 | $ (0.38) | $ 0.50 | $ 0.17 |
Diluted | $ 0.29 | $ (0.38) | $ 0.46 | $ 0.21 |
WEIGHTED AVERAGE SHARES OUTSTANDING | ||||
Basic | 5,967,098 | 5,876,618 | 5,954,944 | 5,873,423 |
Diluted | 8,081,895 | 5,876,618 | 8,036,501 | 7,987,923 |
Condensed Consolidated Stateme5
Condensed Consolidated Statement of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||||
Net income (loss) | $ 1,881,326 | $ (2,250,415) | $ 2,955,631 | $ 1,011,476 |
Adjustments to reconcile net income (loss) to net cash flows from operating activities: | ||||
Gain on life insurance contracts | (21,241,376) | (14,028,327) | (32,772,929) | (12,134,482) |
Amortization of deferred financing and issuance costs | 2,527,974 | 507,026 | 3,312,162 | (42,004) |
Deferred income taxes | 1,851,018 | (930,470) | 2,906,747 | 1,251,781 |
Preferred stock dividends payable | 166,472 | 146,420 | 330,049 | 335,232 |
(Increase) decrease in operating assets: | ||||
Life insurance contract benefits receivable | 9,083,817 | 17,140,000 | (6,829,022) | (750,000) |
Other assets | (1,210,892) | (225,376) | (1,037,466) | (356,549) |
Increase (decrease) in operating liabilities: | ||||
Due to related party | (1,814,173) | (101,781) | ||
Accounts payable and other accrued expenses | (775,213) | (1,333,241) | 1,192,756 | 1,302,446 |
NET CASH FLOWS USED IN OPERATING ACTIVITIES | (9,531,047) | (974,383) | (30,043,853) | (9,382,100) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||||
Investment in life insurance contracts | (24,373,714) | (7,777,541) | (48,700,036) | (10,224,018) |
Carrying value of matured life insurance contracts | 1,691,764 | 132,388 | 6,302,243 | 3,742,983 |
Investment in Secured MCA advances | (1,293,829) | (5,647,414) | ||
Proceeds from Secured MCA advances | 907,649 | 1,025,792 | ||
NET CASH FLOWS USED IN INVESTING ACTIVITIES | (23,068,130) | (7,645,153) | (47,019,415) | (6,481,035) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||||
Net borrowings on (repayments of) Senior Revolving Credit Facility | (3,000,000) | (7,150,000) | 17,000,000 | (7,150,000) |
Payments for redemption of Series I Secured Notes | (485,350) | (2,344,355) | (5,722,743) | (3,617,544) |
Proceeds from issuance of L Bonds | 36,757,771 | 22,538,059 | 71,126,660 | 50,498,356 |
Payments for issuance and redemption of L Bonds | (11,753,782) | (6,134,935) | (22,663,475) | (13,013,057) |
Proceeds from (increase in) restricted cash | 8,667,826 | 3,410,427 | (8,818,894) | (3,627,137) |
Issuance of common stock | 166,125 | 582,000 | 212,670 | 582,000 |
Proceeds from issuance of preferred stock | 9,472,673 | 10,501,209 | ||
Payments for issuance and redemption of preferred stock | (845,361) | (273,998) | (1,617,914) | (273,998) |
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 38,979,902 | 10,627,198 | 60,017,513 | 23,398,620 |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 6,380,725 | 2,007,662 | (17,045,755) | 7,535,485 |
CASH AND CASH EQUIVALENTS | ||||
BEGINNING OF PERIOD | 10,998,625 | 36,190,527 | 34,425,105 | 30,662,704 |
END OF PERIOD | 17,379,350 | 38,198,189 | 17,379,350 | 38,198,189 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||
Interest and preferred dividends paid | 10,714,000 | 7,041,000 | 17,168,000 | 13,143,000 |
Premiums paid | 8,995,000 | 6,141,000 | 17,441,000 | 12,466,000 |
Stock-based compensation | 41,000 | 50,000 | 32,000 | |
Series I Secured Notes: | ||||
Conversion of accrued interest and commissions payable to principal | 142,000 | 86,000 | 187,000 | 127,000 |
L Bonds: | ||||
Conversion of accrued interest and commissions payable to principal | 370,000 | 219,000 | 661,000 | 438,000 |
Issuance of Series A Preferred Stock in lieu of cash dividends | 171,000 | 150,000 | 339,000 | 334,000 |
Investment in life insurance contracts included in accounts payable | $ 780,000 | $ 61,000 | $ 780,000 | $ 61,000 |
Consolidated Statement of Chang
Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - USD ($) | Total | Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit |
Beginning balance at Dec. 31, 2014 | $ 22,389,936 | $ 20,527,866 | $ 5,870 | $ 16,257,686 | $ (14,401,486) |
Begining balance, shares at Dec. 31, 2014 | 2,738,966 | 5,870,193 | |||
Net income/loss | (7,393,274) | (7,393,274) | |||
Issuance of common stock | 582,000 | $ 60 | $ 581,940 | ||
Issuance of common stock, shares | 60,000 | ||||
Series A Preferred Stock conversion to common stock | $ (115,973) | $ 12 | $ 115,961 | ||
Series A Preferred Stock conversion to common stock, shares | (15,463) | 11,597 | |||
Issuance of preferred stock | 387,948 | $ 387,948 | |||
Issuance of preferred stock, shares | 58,232 | ||||
Issuance of stock options | 193,804 | $ 193,804 | |||
Ending balance at Dec. 31, 2015 | 16,145,414 | $ 20,799,841 | $ 5,942 | 17,149,391 | (21,794,760) |
Ending balance, shares at Dec. 31, 2015 | 2,781,735 | 5,941,790 | |||
Net income/loss | 2,955,631 | 2,955,631 | |||
Issuance of common stock | 212,670 | $ 33 | $ 212,637 | ||
Issuance of common stock, shares | 33,000 | ||||
Redemption of Series A Preferred Stock | (693,955) | $ (693,955) | |||
Redemption of Series A Preferred Stock, shares | (92,527) | ||||
Issuance of Series A Preferred Stock | 339,433 | $ 339,433 | |||
Issuance of Series A Preferred Stock, shares | 48,490 | ||||
Issuance of redeemable preferred stock | 11,296,149 | $ 12,212,767 | (916,618) | ||
Issuance of redeemable preferred stock, shares | 12,222 | ||||
Issuance of MCA preferred stock | 64,216 | $ 71,556 | (7,340) | ||
Issuance of MCA preferred stock, shares | 7,155 | ||||
Issuance of stock options | 50,320 | 50,320 | |||
Ending balance at Jun. 30, 2016 | $ 30,384,878 | $ 32,729,642 | $ 5,975 | $ 16,488,390 | $ (18,839,129) |
Ending balance, shares at Jun. 30, 2016 | 2,757,075 | 5,974,790 |
Nature of Business and Summary
Nature of Business and Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2016 | |
Nature of Business and Summary of Significant Accounting Policies [Abstract] | |
Nature of business and summary of significant accounting policies | (1) Nature of Business and Summary of Significant Accounting Policies Nature of Business GWG Holdings, Inc. and all of its subsidiaries are incorporated and organized in Delaware. Unless the context otherwise requires or we specifically so indicate, all references in these footnotes to “we,” “us,” “our,” “our Company,” “GWG,” or the “Company” refer to GWG Holdings, Inc. and its subsidiaries collectively and on a consolidated basis. References to the full names of particular entities, such as “GWG Holdings, Inc.” or “GWG Holdings,” are meant to refer only to the particular entity referenced. Use of Estimates Cash and Cash Equivalents Life Insurance Contracts Investments in Insurance Contracts We also recognize realized gain (revenue) from a life insurance contract upon one of the two following events: (1) our receipt of notice or verified mortality of the insured; or (2) our sale of the contract, filing of change-of-ownership forms and receipt of payment. In the case of mortality, the gain (or loss) we recognize is the difference between the contract benefits and the carrying values of the contract once we determine that collection of the contract benefits is realizable and reasonably assured. In the case of a contract sale, the gain (or loss) we recognize is the difference between the sale price and the carrying value of the contract on the date of our receipt of sale proceeds. In a case where our acquisition of a contract is not complete as of a reporting date, but we have nonetheless advanced direct costs and deposits for the acquisition, those costs and deposits are recorded as “other assets” on our balance sheet until the acquisition is complete and we secured title to the contract. On June 30, 2016 and December 31, 2015, a total of $16,000 and $31,000, respectively, of our “other assets” comprised direct costs and deposits that we advanced for contract acquisitions. Deferred Financing and Issuance Costs Earnings (loss) per Share Recently Adopted Pronouncements On April 7, 2015, the FASB issued Accounting Standards Update No. 2015-03, Simplifying the Presentation of Debt Issuance Costs adopted ASU 2015-03 corresponding reduction to our liabilities, by approximately $2,288,000 as of December 31, 2015. There was no impact on our statements of operations in 2015 Reclassification |
Restrictions on Cash
Restrictions on Cash | 6 Months Ended |
Jun. 30, 2016 | |
Restrictions on Cash [Abstract] | |
Restrictions on cash | (2) Restrictions on Cash Under the terms of our revolving senior credit facility (discussed in Note 5), we are required to maintain collection and escrow accounts that are used to fund the acquisition of contracts, pay annual contract premiums, pay interest and other charges under the facility, and collect contract benefits. The agent for the lender authorizes the disbursements from these accounts. At June 30, 2016 and December 31, 2015, there was a balance of $11,161,000, and $2,342,000, respectively, in these restricted cash accounts. |
Investment in Life Insurance Co
Investment in Life Insurance Contracts | 6 Months Ended |
Jun. 30, 2016 | |
Investment in Life Insurance Contracts [Abstract] | |
Investment in Life Insurance Contracts | (3) Investment in Life Insurance Contracts Life insurance contracts are valued based on unobservable inputs that are significant to their overall fair value. Changes in the fair value of these contracts are recorded as gain or loss on life insurance contracts, net of cash premiums paid on those contracts, in our consolidated statements of operations. Fair value is determined on a discounted cash flow basis that incorporates life expectancy assumptions derived from reports obtained from widely accepted life expectancy providers, and assumptions relating to cost-of-insurance (premium) rates. The discount rate we apply incorporates current information about discount rate applied by other reporting companies owning portfolios of life insurance contracts, the discount rates observed in the life insurance secondary market, market interest rates, the credit exposure to the insurance company that issued the life insurance contract and management’s estimate of the risk premium a purchaser would require to receive the future cash flows derived from our portfolio as a whole. As a result of management’s analysis, discount rates of 11.05% and 11.09% were applied to our portfolio as of June 30, 2016 and December 31, 2015, respectively. A summary of our contracts, organized according to their estimated life expectancy dates as of the date of this report, is as follows: As of June 30, 2016 As of December 31, 2015 Years Ending December 31, Number of Contracts Estimated Fair Value Face Value Number of Contracts Estimated Fair Value Face Value 2016 2 $ 4,535,000 $ 5,000,000 5 $ 7,503,000 $ 8,500,000 2017 13 13,967,000 17,339,000 12 12,875,000 17,418,000 2018 32 38,125,000 54,499,000 27 37,109,000 58,428,000 2019 52 55,547,000 95,808,000 51 54,242,000 100,967,000 2020 79 75,764,000 150,740,000 59 64,750,000 137,868,000 2021 66 58,619,000 138,718,000 48 45,724,000 116,805,000 2022 51 40,488,000 118,010,000 44 38,394,000 116,998,000 Thereafter 252 144,775,000 574,684,000 150 96,053,000 387,860,000 Totals 547 $ 431,820,000 $ 1,154,798,000 396 $ 356,650,000 944,844,000 We recognized life insurance benefits of $9,829,000 and $750,000 during the three months ended June 30, 2016 and 2015, respectively, related to contracts with a carrying value of $1,692,000 and $132,000, respectively, and as a result recorded realized gains of $8,137,000 and $618,000. We recognized life insurance benefits of $29,067,000 and $29,375,000 during the six months ended June 30, 2016 and 2015, respectively, related to contracts with a carrying value of $6,302,000 and $3,743,000, respectively, and as a result recorded realized gains of $22,765,000 and $25,632,000. Reconciliation of gain on life insurance contracts: Three Months Ended Six Months Ended 2016 2015 2016 2015 Change in fair value $ 21,241,000 $ 14,028,000 $ 32,773,000 $ 12,134,000 Premiums and other fees (8,995,000 ) (6,172,000 ) (17,441,000 ) (12,509,000 ) Contract maturities 8,137,000 618,000 22,765,000 25,632,000 Gain on life insurance contracts, net $ 20,383,000 $ 8,474,000 $ 38,097,000 $ 25,257,000 We currently estimate that premium payments and servicing fees required to maintain our current portfolio of life insurance contracts in force for the next five years, assuming no mortalities, are as follows: Years Ending December 31, Premiums Servicing Premiums and Servicing Fees Six months ending December 31, 2016 $ 18,708,000 $ 656,000 $ 19,364,000 2017 39,266,000 656,000 39,922,000 2018 43,010,000 656,000 43,666,000 2019 48,131,000 656,000 48,787,000 2020 53,558,000 656,000 54,214,000 2021 59,829,000 656,000 60,485,000 $ 262,502,000 $ 3,936,000 $ 266,438,000 Management anticipates funding the premium payments estimated above with proceeds from our revolving senior credit facility, proceeds from additional debt and equity financing, and proceeds from maturities of life insurance contracts. The proceeds of these capital sources may also be used for the purchase, financing, and maintenance of additional life insurance contracts. |
Fair Value Definition and Hiera
Fair Value Definition and Hierarchy | 6 Months Ended |
Jun. 30, 2016 | |
Fair Value Definition and Hierarchy [Abstract] | |
Fair Value Definition and Hierarchy | (4) Fair Value Definition and Hierarchy ASC 820, Fair Value Measurement The hierarchy is broken down into three levels based on the observability of inputs as follows: ● Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. ● Level 2 - Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. ● Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The availability of observable inputs can vary by types of assets and liabilities and is affected by a wide variety of factors, including, for example, whether an instrument is established in the marketplace, the liquidity of markets and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by management in determining fair value is greatest for assets and liabilities categorized in Level 3. Level 3 Valuation Process The estimated fair value of our portfolio of life insurance contracts is determined on a quarterly basis by our portfolio management committee, taking into consideration changes in discount rate assumptions, estimated premium payments and life expectancy estimate assumptions, as well as any changes in economic and other relevant conditions. The discount rate incorporates current information about discount rate applied by other reporting companies owning portfolios of life insurance contracts, the discount rates observed in the life insurance secondary market, market interest rates, the credit exposure to the insurance company that issued the life insurance contract and management’s estimate of the risk premium a purchaser would require to receive the future cash flows derived from our portfolio as a whole. These inputs are then used to estimate the discounted cash flows from the portfolio using the Model Actuarial Pricing System probabilistic portfolio price model, which estimates the cash flows using various mortality probabilities and scenarios. The valuation process includes a review by senior management as of each valuation date. We also engage a third-party expert to independently test the accuracy of the valuations using the inputs we provide on a quarterly basis. See Exhibit 99.1 filed herewith. The following table reconciles the beginning and ending fair value of our Level 3 investments in our portfolio of life insurance contracts for the periods ended June 30, as follows: Three month ended Six months ended 2016 2015 2016 2015 Beginning balance $ 387,402,000 $ 278,395,000 $ 356,650,000 $ 282,883,000 Purchases 24,869,000 9,208,000 48,700,000 10,225,000 Maturities (cash in excess of carrying value) (1,692,000 ) (132,000 ) (6,303,000 ) (3,743,000 ) Net change in fair value 21,241,000 14,028,000 32,773,000 12,134,000 Ending balance (June 30) $ 431,820,000 $ 301,499,000 $ 431,820,000 $ 301,499,000 We periodically update the independent life expectancy estimates on the insured lives in our portfolio, other than insured lives covered under small face amount contracts (i.e., under $1 million in face amount), on a continuous rotating three-year cycle. Accordingly, we update life expectancies for approximately one-twelfth of our portfolio each quarter. The following table summarizes the inputs utilized in estimating the fair value of our portfolio of life insurance contracts: As of June 30, 2016 As of December 31, 2015 Weighted-average age of insured, years 82.1 82.6 Weighted-average life expectancy, months 81.3 79.3 Average face amount per contract $ 2,111,000 $ 2,386,000 Discount rate 11.05 % 11.09 % These assumptions are, by their nature, inherently uncertain and the effect of changes in estimates may be significant. For example, if the life expectancy estimates were increased or decreased by four and eight months on each outstanding contract, and the discount rates were increased or decreased by 1% and 2%, while all other variables were held constant, the fair value of our investment in life insurance contracts would increase or (decrease) as summarized below: Change in Fair Value of the Investment in Life Insurance Contracts Change in life expectancy estimates minus 8 months minus 4 months plus 4 months plus 8 months June 30, 2016 $ 58,540,000 $ 29,087,000 $ (28,537,000 ) $ (56,562,000 ) December 31, 2015 $ 48,339,000 $ 24,076,000 $ (23,501,000 ) $ (46,482,000 ) Change in discount rate minus 2% minus 1% plus 1% plus 2% June 30, 2016 $ 45,656,000 $ 21,871,000 $ (20,155,000 ) $ (38,770,000 ) December 31, 2015 $ 35,024,000 $ 16,786,000 $ (15,485,000 ) $ (29,803,000 ) Other Fair Value Considerations The carrying value of receivables, prepaid expenses, accounts payable and accrued expenses approximate fair value due to their short-term maturities and low credit risk. Using the income-based valuation approach, the estimated fair value of our Series I Secured Notes payable and L Bonds, having a combined aggregate face value of $352,997,000 as of June 30, 2016, is approximately $354,557,000 based on a weighted-average market interest rate of 7.10%. The carrying value of the revolving senior 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 contracts collateralizing the debt. The overall rate reflects market, and the carrying value of the facility approximates fair value. Our wholly owned subsidiary GWG MCA Capital, Inc. (“GWG MCA”) participates in the merchant cash advance by directly advancing sums to merchants and lending money, on a secured basis, to companies that advance sums to merchants. Each quarter, we review the carrying value of these advances and loans, and determine if an impairment reserve is necessary. At June 30, 2016 we determined that one of our secured loans was potentially impaired. The secured loan to Nulook Capital LLC had an outstanding balance of $3,304,000 and a loan loss reserve of $400,000 at June 30, 2016. We deem fair value to be the estimated collectible value on each loan made from GWG MCA. Where we estimate the collectible amount to be less than the outstanding balance, we record a reserve for the difference. The following table summarizes outstanding warrants as of June 30, 2016: 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 |
Credit Facility - Autobahn Fund
Credit Facility - Autobahn Funding Company LLC | 6 Months Ended |
Jun. 30, 2016 | |
Credit Facility - Autobahn Funding Company LLC / Series I Secured Notes Renewable / L Bonds [Abstract] | |
Credit Facility - Autobahn Funding Company LLC | (5) Credit Facility – Autobahn Funding Company LLC Through our subsidiaries GWG DLP Funding II, LLC (“DLP II”) and GWG DLP Funding III, LLC (“DLP III”), we are party to a $105 million revolving senior credit facility with Autobahn Funding Company LLC (“Autobahn”), providing us with a $105 million maximum borrowing amount. The facility is governed by a Credit and Security Agreement (the “Agreement”), and DZ Bank AG Deutsche Zentral-Genossenschaftsbank (“DZ Bank”) acts as the agent for Autobahn under the Agreement. The Agreement was amended and restated for the second time on May 11, 2015, primarily to add DLP III as a party, increase the total borrowing limit from $100 million to $105 million, and extend the maturity date for borrowings under the facility to June 30, 2018. Advances under the facility bear interest at a commercial paper rate of the lender at the time of the advance, or at the lender’s cost of borrowing plus 4.25%, which is 1.75% less than interest charged under the facility prior to May 11, 2015 amendment. We make interest payments on a monthly basis. The effective rate of interest was 5.48% at June 30, 2016 and 5.58% at December 31, 2015. The weighted-average effective interest rate, after excluding an unused line fee, was 5.47% and 5.37% for the three months ended June 30, 2016 and 2015, respectively, and 5.57% and 6.00% for the six months ended June 30, 2016 and 2015, respectively. The amount outstanding under this facility was $82,011,000 and $65,011,000 at June 30, 2016 and December 31, 2015, respectively. GWG Holdings is a performance guarantor of the various obligations of GWG Life, LLC (“GWG Life”), as servicer, under the Agreement. Obligations under the facility are secured by our pledge of ownership in our life insurance contracts to DZ Bank through an arrangement under which Wells Fargo serves as a securities intermediary. The Agreement has certain financial (as described below) and nonfinancial covenants, and we were in compliance with these covenants at June 30, 2016 and December 31, 2015. The Company has agreed to maintain (i) a positive consolidated net income on a non-GAAP basis (as defined and calculated under the Agreement) for each complete fiscal year, (ii) a tangible net worth on a non-GAAP basis (again, as defined and calculated under the Agreement) of not less than $45 million, and (iii) maintain cash and eligible investments of $15 million or above. Consolidated non-GAAP net income and non-GAAP tangible net worth as of and for the four quarters ended June 30, 2016, as calculated under the Agreement, was $30,628,000 and $128,454,000, respectively. Total funds available for additional borrowings under the facility at June 30, 2016 and December 31, 2015, were $22,989,000 and $39,989,000 respectively. |
Series I Secured Notes
Series I Secured Notes | 6 Months Ended |
Jun. 30, 2016 | |
Credit Facility - Autobahn Funding Company LLC / Series I Secured Notes Renewable / L Bonds [Abstract] | |
Series I Secured Notes | (6) Series I Secured Notes Series I Secured Notes (“Notes”) are legal obligations of our subsidiary GWG Life and were privately offered and sold from August 2009 through June 2011. The Notes are secured by the assets of GWG Life and are subordinate to obligations under our revolving senior credit facility (see Note 5). We are party to a Third Amended and Restated Note Issuance and Security Agreement dated November 1, 2011, as amended, under which GWG Life is obligor, GWG Holdings is guarantor, and Lord Securities Corporation serves as trustee of the GWG Life Trust (“Trust”). This agreement contains certain financial and non-financial covenants, and we were in compliance with these covenants at June 30, 2016 and December 31, 2015. The Notes were sold with original maturity dates ranging from six months to seven years, and with fixed interest rates varying from 5.65% to 9.55% depending on the term of the Note. The Notes have renewal features under which we may elect to permit their renewal, subject to the right of bondholders to elect to receive payment at maturity. Effective September 1, 2016, we no longer anticipate renewing the Notes. Interest on the Notes is payable monthly, quarterly, annually or at maturity depending on the election of the investor. At June 30, 2016 and December 31, 2015, the weighted-average interest rate of our Notes was 8.62% and 8.47%, respectively. The principal amount of Notes outstanding was $18,283,000 and $23,578,000 at June 30, 2016 and December 31, 2015, respectively. The difference between the amount outstanding on the Notes and the carrying amount on our balance sheet is due to netting of unamortized deferred issuance costs. Overall, interest expense includes amortization of deferred financing and issuance costs of $82,000 and $193,000 for the three and six months ended June 30, 2016 and $81,000 and $211,000 for the three and six months ended June 30, 2015. Future expected amortization of deferred financing costs is $317,000 in total over the next six years. Future contractual maturities of Notes payable and future amortization of their deferred financing costs at June 30, 2016 are as follows: Years Ending December 31, Contractual Maturities Amortization of Deferred Financing Costs Six months ending December 31, 2016 $ 3,574,000 $ 14,000 2017 8,758,000 113,000 2018 2,401,000 56,000 2019 869,000 16,000 2020 1,766,000 59,000 Thereafter 915,000 59,000 $ 18,283,000 $ 317,000 |
L Bonds
L Bonds | 6 Months Ended |
Jun. 30, 2016 | |
Credit Facility - Autobahn Funding Company LLC / Series I Secured Notes Renewable / L Bonds [Abstract] | |
L Bonds | (7) L Bonds Our L Bonds are legal obligations of GWG Holdings. Obligations under the L Bonds are secured by the assets of GWG Holdings and by GWG Life, as a guarantor, and are subordinate to the obligations under our revolving senior credit facility (see Note 5). We began publicly offering and selling L Bonds in January 2012 under the name “Renewable Secured Debentures.” These debt securities were re-named “L Bonds” in January 2015. L Bonds are presently being publicly offered and sold on a continuous basis under a registration statement permitting us to sell up to $1.0 billion in principal amount of L Bonds. We are party to an indenture governing the L Bonds and dated October 19, 2011, as amended (“Indenture”), under which GWG Holdings is obligor, GWG Life is guarantor, and Bank of Utah serves as indenture trustee. The Indenture contains certain financial and non-financial covenants, and we were in compliance with these covenants at June 30, 2016 and December 31, 2015. L Bonds have maturity dates ranging from six months to seven years, and fixed interest rates varying from 4.25% to 9.50% depending on the term of the bond. The bonds have renewal features under which we may elect to permit their renewal, subject to the right of bondholders to elect to receive payment at maturity. Interest is payable monthly or annually depending on the election of the investor. At June 30, 2016 and December 31, 2015, the weighted-average interest rate of our L Bonds was 7.17% and 7.18%, respectively. The principal amount of L Bonds outstanding was $334,714,000 and $282,171,000 at June 30, 2016 and December 31, 2015, respectively. The difference between the amount of outstanding L Bonds and the carrying amount on our balance sheets is due to netting of unamortized deferred issuance costs and cash receipts for new issuances in process. Amortization of deferred issuance costs was $1,721,000 and $3,289,000 for the three and six months ended June 30, 2016 and $1,366,000 and $2,340,000 for the three and six months ended June 30, 2015. Future expected amortization of deferred financing costs as of June 30, 2016 is $9,960,000 in total over the next eight years. Effective September 1, 2016, we will cease selling 6-month and 1-year L Bonds until further notice. In addition, effective September 1, 2016, the L Bond interest rates will change to 5.50%, 6.25%, 7.50% and 8.50% for the 2-, 3-, 5- and 7-year L Bonds, respectively. Future contractual maturities of L Bonds, and future amortization of their deferred financing costs, at June 30, 2016 are as follows: Years Ending December 31, Contractual Maturities Amortization of Deferred Financing Costs Six months ending December 31, 2016 $ 58,270,000 $ 364,000 2017 85,052,000 1,764,000 2018 87,168,000 2,986,000 2019 50,526,000 2,148,000 2020 19,457,000 845,000 Thereafter 34,241,000 1,853,000 $ 334,714,000 $ 9,960,000 |
Note Payable to Related Party
Note Payable to Related Party | 6 Months Ended |
Jun. 30, 2016 | |
Note Payable to Related Party [Abstract] | |
Note Payable to Related Party | (8) Note Payable to Related Party In February 2016, GWG MCA acquired certain assets relating to our merchant cash advance business. To finance this acquisition, GWG MCA borrowed $1,760,000 from Insurance Strategies Fund, LLC, as evidenced by an unsecured promissory note dated February 16, 2016. GWG MCA paid off the promissory note in its entirety in June 2016. |
Convertible Preferred Stock
Convertible Preferred Stock | 6 Months Ended |
Jun. 30, 2016 | |
Convertible and Redeemable Preferred Stock/Common Stock [Abstract] | |
Convertible Preferred Stock | (9) Convertible Preferred Stock From July 2011 until September 2012, we privately offered shares of Series A Preferred Stock (“Series A”) of GWG Holdings at $7.50 per share. In the offering, we sold an aggregate of 3,278,000 shares for gross consideration of $24,582,000. Holders of Series A are entitled to cumulative dividends at the rate of 10% per annum, paid quarterly. Dividends on the Series A are included as interest expense in the statements of operations. Under certain circumstances described in the Certificate of Designation for the Series A, additional Series A shares may be issued in lieu of cash dividends at the rate of $7.00 per share. Holders of Series A are entitled to a liquidation preference equal to the stated value of their preferred shares (i.e., $7.50 per share) plus accrued but unpaid dividends. Holders of Series A may presently convert each share of their Series A into 0.75 shares of our common stock. As of June 30, 2016, we issued an aggregate of 423,000 shares of Series A in satisfaction of $2,959,000 in dividends on the Series A, and an aggregate of 693,000 shares of Series A were converted into 520,000 shares of our common stock. As of June 30, 2016, we had 2,738,000 Series A shares outstanding with respect to which we incurred aggregate issuance costs of $2,838,000, all of which is included as a component of additional paid-in capital. Purchasers of Series A in our offering received three-year warrants to purchase an aggregate of 431,954 shares of our common stock at an exercise price of $12.50 per share. The grant date fair value of these warrants was $428,000. As of June 30, 2016 and December 31, 2015, none of these warrants were exercised, and the weighted-average remaining life of these warrants was 0.93 and 1.43, respectively. In September 2012, we completed a public offering of our common stock and, as a result, the Series A was reclassified from temporary equity to permanent equity. We may redeem Series A shares at a price equal to 110% of their liquidation preference ($7.50 per share) at any time. As of June 30, 2016, we have redeemed an aggregate of 277,000 shares of Series A. |
Redeemable Preferred Stock
Redeemable Preferred Stock | 6 Months Ended |
Jun. 30, 2016 | |
Convertible and Redeemable Preferred Stock/Common Stock [Abstract] | |
Redeemable Preferred Stock | (10) Redeemable Preferred Stock Beginning November 30, 2015, we began publicly offering up to 100,000 shares of Redeemable Preferred Stock (“RPS”) at $1,000 per share. Holders of RPS are entitled to cumulative dividends at the rate of 7% per annum, paid monthly. Dividends on the RPS are included as interest expense in the statements of operations. Under certain circumstances described in the Certificate of Designation for the RPS, additional shares of RPS may be issued in lieu of cash dividends. The RPS ranks senior to our common stock and pari passu with our Series A, and entitles its holders to a liquidation preference equal to the stated value per share (i.e., $1,000) plus accrued but unpaid dividends. Holders of RPS may presently convert their RPS into our common stock at a conversion price equal to the volume-weighted average price of our common stock for the 20 trading days immediately prior to the date of conversion, subject to a minimum conversion price of $15.00 and in an aggregate amount limited to 15% of the stated value of RPS originally purchased by such holder from us and Holders of RPS may request that we redeem their RPS at a price equal to their liquidation preference, less an applicable redemption fee, if any. Nevertheless, the Certificate of Designation for RPS permits us to decline requests for redemption in certain circumstances. Subject to certain restrictions and conditions, we may also redeem shares of RPS without a redemption fee upon a holder’s death, total disability or bankruptcy. In addition, after one year from the date of original issuance, we may, at our option, call and redeem shares of RPS at a price equal to their liquidation preference. As of June 30, 2016, we had sold 12,222 shares of RPS for aggregate gross consideration of $12,213,000, and incurred approximately $917,000 of selling costs related to the sale of those shares. |
GWG MCA Capital, Inc - 9% Prefe
GWG MCA Capital, Inc - 9% Preferred Stock | 6 Months Ended |
Jun. 30, 2016 | |
Convertible and Redeemable Preferred Stock/Common Stock [Abstract] | |
GWG MCA Capital, Inc - 9% Preferred Stock | (11) GWG MCA Capital, Inc - 9% Preferred Stock Beginning March 31, 2016, GWG MCA began privately offering up to 2,000,000 shares of GWG MCA 9% Preferred Stock (“MCA Preferred”) at $10.00 per share. Holders of MCA Preferred are entitled to cumulative dividends at a rate of 9% per annum, paid monthly. Dividends on the MCA Preferred are included as interest expense in the statements of operations. Under certain circumstances described in the Certificate of Designation for the MCA Preferred, additional shares of MCA Preferred may be issued in lieu of cash dividends. The MCA Preferred ranks senior to the common stock of MCA (all of which common stock is held by GWG Holdings) and entitles its holders to a liquidation preference equal to the stated value per share (i.e., $10.00) plus accrued but unpaid dividends. Holders of MCA Preferred may request that GWG MCA redeem their MCA Preferred at a price equal to their liquidation preference, less an applicable redemption fee, if any. Nevertheless, the Certificate of Designation for MCA Preferred permits GWG MCA to decline requests for redemption in certain circumstances. In addition, after one year from the date of original issuance, GWG MCA may, at its option, call and redeem shares of MCA Preferred at a price equal to the stated value per share. As of June 30, 2016, a total of 7,155 shares of MCA Preferred had been sold for aggregate gross consideration of $72,000 and approximately $7,000 of selling costs related to the sale of these shares were incurred. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2016 | |
Income Taxes [Abstract] | |
Income Taxes | (12) Income Taxes We had a current income tax liability as of $0 as of both June 30, 2016 and December 31, 2015. The components of current and deferred income tax expense for the three and six months ended June 30, 2016 and 2015, respectfully, consisted of the following: Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2016 2015 2016 2015 Income tax provision (benefit): Current: Federal $ (23,000 ) $ (182,000 ) $ - $ 141,000 State $ (6,000 ) $ (64,000 ) $ - $ 40,000 Total current tax expense (benefit) (29,000 ) (246,000 ) - 181,000 Deferred: Federal $ 1,397,000 $ (670,000 ) $ 2,203,000 $ 984,000 State $ 454,000 $ (261,000 ) $ 704,000 $ 268,000 Total deferred tax expense (benefit) 1,851,000 (931,000 ) 2,907,000 1,252,000 Total income tax expense (benefit) 1,822,000 (1,177,000 ) 2,907,000 1,433,000 The primary differences between the June 30, 2016 effective tax rate and the statutory federal rate are the accrual of non-deductible preferred stock dividend expense of $1,112,000, state taxes, and other non-deductible expenses. The most significant temporary differences between GAAP net income and taxable net income are the treatment of interest costs with respect to the acquisition of the life insurance contracts and revenue recognition with respect to the mark-to-market of our life insurance portfolio. |
Common Stock
Common Stock | 6 Months Ended |
Jun. 30, 2016 | |
Convertible and Redeemable Preferred Stock/Common Stock [Abstract] | |
Common Stock | (13) Common Stock In September 2014, we consummated an initial public offering of our common stock resulting in the sale of 800,000 shares of common stock at $12.50 per share, and net proceeds of approximately $8.6 million after the payment of underwriting commissions, discounts and expense reimbursements. In connection with this offering, we listed our common stock on the NASDAQ Capital Market under the ticker symbol “GWGH.” On June 24, 2015 we issued 60,000 restricted common shares at $9.70 per share, determined by the closing market price on the date of grant, to a vendor as payment for services to be rendered over three years. The cost of these shares is amortized over a 12-month period. On March 17, 2016 we issued an additional 6,500 restricted common shares at an average price of $7.16 per share, determined by the closing market price on the date of grant, to this same vendor for additional services provided to us. On April 25, 2016, we issued 25,000 restricted shares of common stock at $6.25 per share, determined by the closing market price on the date of grant, to a vendor as a form of payment for services the vendor is providing to us, which is expensed in the current period. |
Stock Incentive Plan
Stock Incentive Plan | 6 Months Ended |
Jun. 30, 2016 | |
Stock Incentive Plan [Abstract] | |
Stock Incentive Plan | (14) Stock Incentive Plan We adopted our GWG Holdings 2013 Stock Incentive Plan in March 2013. The Compensation Committee of our Board of Directors administers the plan. Incentives under the plan may be granted incentive stock options and non-statutory stock options; stock appreciation rights; stock awards; restricted stock; restricted stock units; and performance shares. Eligible participants include officers and employees of GWG Holdings and its subsidiaries, members of our Board of Directors, and consultants. 2,000,000 common shares are presently issuable under the plan. Through June 30, 2016, we issued stock options for 1,110,865 shares of common stock to employees, officers, and directors under the plan. Options for 577,196 shares have vested, and the remaining options are scheduled to vest over three years. The options were issued with an exercise price between $6.35 and $10.18 for those beneficially owning more than 10% of our common stock, and between $6.00 and $10.25 for all others, which is equal to the estimated market price of the shares on the date of grant using Black-Scholes binomial option pricing model. The expected annualized volatility used in the Black-Scholes model valuation of options issued during the period was 26.6%. The annual volatility rate is based on the standard deviation of the average continuously compounded rate of return of five selected comparable companies over the previous 52 weeks. A forfeiture rate of 15% is based on historical information and expected future trend. As of June 30, 2016, stock options for 360,685 shares were forfeited and stock options for 28,001 shares were exercised. Outstanding stock options: Vested Un-vested Total Balance as of December 31, 2014 314,288 685,813 1,000,101 Granted during the year 79,500 273,700 353,200 Vested during the year 238,999 (238,999 ) - Exercised during the year (27,667 ) - (27,667 ) Forfeited during the year (121,417 ) (150,602 ) (272,019 ) Balance as of December 31, 2015 483,703 569,912 1,053,615 Granted during the year 15,000 67,750 82,750 Vested during the year 84,917 (84,917 ) - Forfeited during the year (6,424 ) (19,076 ) (25,500 ) Balance as of June 30, 2016 577,196 533,669 1,110,865 Compensation expense related to un-vested options not yet recognized is $475,000. We expect to recognize this compensation expense over the next three years ($173,000 in 2016, $208,000 in 2017, $72,000 in 2018, and $22,000 in 2019). |
Net Income per Common Share
Net Income per Common Share | 6 Months Ended |
Jun. 30, 2016 | |
Net Income Per Common Share [Abstract] | |
Net Income per Common Share | (15) Net Income per Common Share We have outstanding Series A shares, as described in Note 9. The Series A is dilutive to our net income per common share calculation at both June 30, 2016 and 2015. We also issued warrants to purchase common stock in conjunction with the sale of Series A (see Note 9). Both those warrants and our vested stock options are anti-dilutive as of both June 30, 2016 and 2015 and have not been included in the fully diluted net loss per common share calculation. We issued Redeemable Preferred Stock (see Note 10) that is non-dilutive, as the minimum conversion price of $15 per common share is above market price. |
Commitments
Commitments | 6 Months Ended |
Jun. 30, 2016 | |
Commitments [Abstract] | |
Commitments | (16) Commitments We are party to an office lease with U.S. Bank National Association as the landlord. The lease was originally for 11,695 square feet of office space located at 220 South Sixth Street, Minneapolis, Minnesota, began in April 2012 and had an original term expiring August 31, 2015. On September 1, 2015, we entered into an amendment to this lease that expanded the leased space to 17,687 square feet and extended the term through August 31, 2025. Under the amended lease we are obligated to pay base rent plus common area maintenance and a share of building operating costs. Rent expenses under these lease arrangements were $123,000 and $55,000 for the three months ended June 30, 2016 and 2015, respectively, and $232,000 and $122,000 for the six months ended June 30, 2016 and 2015, respectively. Minimum lease payments under the amended lease are as follows: Six months ending December 31, 2016 $ 87,000 2017 178,000 2018 185,000 2019 191,000 2020 198,000 2021 204,000 2022 210,000 2023 217,000 2024 223,000 2025 230,000 2026 38,000 $ 1,961,000 |
Contingencies
Contingencies | 6 Months Ended |
Jun. 30, 2016 | |
Commitments [Abstract] | |
Contingencies | (17) Contingencies Litigation – In the normal course of business, we are involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings would not have a material adverse effect on our financial position, results of operations or cash flows. |
Guarantee of L Bonds
Guarantee of L Bonds | 6 Months Ended |
Jun. 30, 2016 | |
Guarantee of L Bonds [Abstract] | |
Guarantee of L Bonds | (18) Guarantee of L Bonds We are publicly offering and selling L Bond under a registration statement declared effective by the SEC, as described in Note 7. Our obligations under the L Bonds are secured by substantially all the assets of GWG Holdings, a pledge of all the common stock held by our largest individual stockholders, and by a guarantee and corresponding grant of a security interest in substantially all the assets of GWG Life. As a guarantor, GWG Life has fully and unconditionally guaranteed the payment of principal and interest on the L Bonds. Substantially all of GWG’s life insurance contracts are held by DLP III and the Trust. The contracts held by DLP III are not collateral for the L Bond obligations as such contracts serve as collateral for the senior credit facility. The consolidating financial statements are presented in lieu of separate financial statements and other related disclosures of the subsidiary guarantor and issuer because management does not believe that separate financial statements and related disclosures would be material to investors. There are currently no significant restrictions on the ability of GWG Holdings or GWG Life, the guarantor subsidiary, to obtain funds from its subsidiaries by dividend or loan, except as provided herein. DLP II and DLP III are borrowers under a revolving senior credit facility with Autobahn, under which DZ Bank serves as agent, as described in Note 5. The significant majority of insurance contracts we own are subject to a collateral arrangement with DZ Bank described in Notes 2 and 5. Under this arrangement, collection and escrow accounts are used to fund premiums for the insurance contracts and to pay interest and other charges under the revolving senior credit facility. DZ Bank 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 (i.e., DLP II, DLP III, GWG Life and GWG Holdings) realizing an annualized rate of return on mortality benefits for such assets of not more than 18%, as determined by DZ Bank. After such amount is reached, the agreement governing the senior revolving credit facility 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, 2016 and December 31, 2015, with respect to the financial position, and for the three and six months ended June 30, 2016 and 2015, with respect to results of operations and cash flows of GWG Holdings and its subsidiaries. The parent column presents the financial information of GWG Holdings, the primary obligor for the L Bonds. The guarantor subsidiary column presents the financial information of GWG Life, the guarantor subsidiary of the L Bonds, presenting its investment in DLP II, DLP III and the 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 the Trust. Condensed Consolidating Balance Sheets June 30, 2016 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated A S S E T S Cash and cash equivalents $ 10,051,621 $ 6,822,484 $ 505,245 $ - $ 17,379,350 Restricted cash - 4,924,308 6,236,485 - 11,160,793 Investment in life insurance contracts, at fair value - - 431,820,437 - 431,820,437 Secured MCA advances - - 4,328,317 - 4,328,317 Life insurance contract benefits receivable - - 6,829,022 - 6,829,022 Other assets 4,901,911 1,367,483 30,926 (2,789,877 ) 3,510,443 Investment in subsidiaries 358,804,767 363,647,320 - (722,452,087 ) - TOTAL ASSETS $ 373,758,299 $ 376,761,595 $ 449,750,432 $ (725,241,964 ) $ 475,028,362 L I A B I L I T I E S & S T O C K H O L D E R S' E Q U I T Y (D E F I C I T) LIABILITIES Revolving senior credit facility $ - $ (2,639,306 ) $ 80,115,298 $ - $ 77,475,992 Series I Secured Notes - 17,965,653 - - 17,965,653 L Bonds 327,322,906 - - - 327,322,906 Notes payable to related parties - - 2,700,000 (2,700,000 ) - Accounts payable 1,270,216 462,220 796,770 - 2,529,206 Interest payable 9,493,254 3,502,812 417,557 (89,877 ) 13,323,746 Other accrued expenses 680,545 589,682 85,039 - 1,355,266 Deferred taxes, net 4,670,715 - - - 4,670,715 TOTAL LIABILITIES 343,437,636 19,881,061 84,114,664 (2,789,877 ) 444,643,484 STOCKHOLDERS’ EQUITY (DEFICIT) Member capital - 356,880,534 365,571,553 (722,452,087 ) - Convertible preferred stock 20,445,320 - - - 20,445,320 Redeemable preferred stock 12,212,767 - - - 12,212,767 MCA preferred stock - - 71,555 - 71,555 Common stock 5,975 - - - 5,975 Additional paid-in capital 16,495,730 - (7,340 ) - 16,488,390 Accumulated deficit (18,839,129 ) - - - (18,839,129 ) TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) 30,320,663 356,880,534 365,635,768 (722,452,087 ) 30,384,878 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) $ 373,758,299 $ 376,761,595 $ 449,750,432 $ (725,241,964 ) $ 475,028,362 December 31, 2015 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated A S S E T S Cash and cash equivalents $ 32,292,162 $ 1,982,722 $ 150,221 $ - $ 34,425,105 Restricted cash - 2,102,257 239,643 - 2,341,900 Investment in life insurance contracts, at fair value - - 356,649,715 - 356,649,715 Other assets 1,742,074 688,071 30,900 - 2,461,045 Investment in subsidiaries 269,886,254 291,295,951 - (561,182,205 ) - TOTAL ASSETS $ 303,920,490 $ 296,069,001 $ 357,070,479 $ (561,182,205 ) $ 395,877,765 L I A B I L I T I E S & S T O C K H O L D E R S' E Q U I T Y (D E F I C I T) LIABILITIES Revolving senior credit facility $ - $ (1,000,000 ) $ 64,279,596 $ - $ 63,279,596 Series I Secured Notes - 23,287,704 - - 23,287,704 L Bonds 276,482,796 - - - 276,482,796 Accounts payable 280,988 157,217 1,079,235 - 1,517,440 Interest payable 8,529,959 3,544,626 265,476 - 12,340,061 Other accrued expenses 717,365 343,421 - - 1,060,786 Deferred taxes, net 1,763,968 - - - 1,763,968 TOTAL LIABILITIES 287,775,076 26,332,968 65,624,307 - 379,732,351 STOCKHOLDERS’ EQUITY (DEFICIT) Member capital - 269,736,033 291,446,172 (561,182,205 ) - Convertible preferred stock 20,784,841 - - - 20,784,841 Common stock 5,942 - - - 5,942 Additional paid-in capital 17,149,391 - - - 17,149,391 Accumulated deficit (21,794,760 ) - - - (21,794,760 ) TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) 16,145,414 269,736,033 291,446,172 (561,182,205 ) 16,145,414 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) $ 303,920,490 $ 296,069,001 $ 357,070,479 $ (561,182,205 ) $ 395,877,765 Condensed Consolidating Statements of Operations For the six months ended June 30, 2016 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated REVENUE Origination and servicing income $ - $ 13,417 $ - $ (13,417 ) $ - Gain on life insurance contracts, net - - 38,097,059 - 38,097,059 MCA income - - 368,216 - 368,216 Interest and other income 106,019 1,012 198,946 (89,877 ) 216,100 TOTAL REVENUE 106,019 14,429 38,664,221 (103,294 ) 38,681,375 EXPENSES Origination and servicing fees - - 13,417 (13,417 ) - Interest expense 15,730,192 1,301,971 3,083,680 (89,877 ) 20,025,966 Employee compensation and benefits 3,175,323 2,113,049 249,333 - 5,537,705 Legal and professional fees 1,378,335 1,011,155 120,991 - 2,510,481 Other expenses 2,777,326 1,394,028 573,491 - 4,744,845 TOTAL EXPENSES 23,061,176 5,820,203 4,040,912 (103,294 ) 32,818,997 INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES (22,955,157 ) (5,805,774 ) 34,623,309 - 5,862,378 EQUITY IN INCOME OF SUBSIDIARY 28,817,535 35,136,402 - (63,953,937 ) - INCOME BEFORE INCOME TAXES 5,862,378 29,330,628 34,623,309 (63,953,937 ) 5,862,378 INCOME TAX EXPENSE 2,906,747 - - - 2,906,747 NET INCOME $ 2,955,631 $ 29,330,628 $ 34,623,309 $ (63,953,937 ) $ 2,955,631 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 insurance contracts, 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 ) - Interest expense 11,031,758 1,458,965 2,008,158 - 14,498,881 Employee compensation and benefits 2,911,596 961,046 - - 3,872,642 Legal and professional fees 828,858 337,326 - - 1,166,184 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 ) - 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 INCOME $ 1,011,476 $ 19,247,474 $ 22,281,324 $ (41,528,798 ) $ 1,011,476 For the three months ended June 30, 2016 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated REVENUE Gain on life insurance contracts, net - - 20,383,347 - 20,383,347 MCA income - - 223,255 - 223,255 Interest and other income 71,222 706 157,927 (58,975 ) 170,880 TOTAL REVENUE 71,222 706 20,764,529 (58,975 ) 20,777,482 EXPENSES Interest expense 8,131,369 644,735 1,648,452 (58,975 ) 10,365,581 Employee compensation and benefits 1,638,893 1,283,968 148,646 - 3,071,507 Legal and professional fees 783,596 476,505 44,252 - 1,304,353 Other expenses 1,519,349 425,354 387,982 - 2,332,685 TOTAL EXPENSES 12,073,207 2,830,562 2,229,332 (58,975 ) 17,074,126 INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES (12,001,985 ) (2,829,856 ) 18,535,197 - 3,703,356 EQUITY IN INCOME OF SUBSIDIARY 15,705,341 18,835,036 - (34,540,377 ) - INCOME BEFORE INCOME TAXES 3,703,356 16,005,180 18,535,197 (34,540,377 ) 3,703,356 INCOME TAX BENEFIT 1,822,030 - - - 1,822,030 NET INCOME $ 1,881,326 $ 16,005,180 $ 18,535,197 $ (34,540,377 ) $ 1,881,326 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 insurance contracts, 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 ) - Interest expense 5,781,796 684,879 855,672 - 7,322,347 Employee compensation and benefits 1,605,795 538,930 - - 2,144,725 Legal and professional fees 351,507 291,424 - - 642,931 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 ) - 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 INCOME (LOSS) $ (2,250,415 ) $ 5,399,330 $ 6,985,168 $ (12,384,498 ) $ (2,250,415 ) Condensed Consolidating Statements of Cash Flows For the six months ended June 30, 2016 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 2,955,631 $ 29,330,628 $ 34,623,309 $ (63,953,937 ) $ 2,955,631 Adjustments to reconcile net income to net cash flows from operating activities: (Equity) of subsidiaries (28,817,535 ) (35,136,402 ) - 63,953,937 - Gain on life insurance contracts - - (32,772,929 ) - (32,772,929 ) Amortization of deferred financing and issuance costs 3,909,923 (1,446,463 ) 848,702 - 3,312,162 Deferred income taxes 2,906,747 - - - 2,906,747 Preferred stock dividends payable 330,049 - - - 330,049 (Increase) in operating assets: Life insurance contract benefits receivable - - (6,829,022 ) (6,829,022 ) Other assets (60,457,838 ) (37,895,574 ) - 97,315,946 (1,037,466 ) Increase (decrease) in operating liabilities: Due to related party (2,802,976 ) 1,195 2,700,000 - (101,781 ) Accounts payable and accrued expenses 2,240,523 717,298 (1,765,065 ) - 1,192,756 NET CASH FLOWS USED IN OPERATING ACTIVITIES (79,735,476 ) (44,429,318 ) (3,195,005 ) 97,315,946 (30,043,853 ) CASH FLOWS FROM INVESTING ACTIVITIES Investment in life insurance contracts - - (48,700,036 ) - (48,700,036 ) Carrying value of matured life insurance contracts - - 6,302,243 - 6,302,243 Investment in Secured MCA advances - - (5,647,414 ) - (5,647,414 ) Proceeds from Secured MCA advances - - 1,025,792 - 1,025,792 NET CASH FLOWS USED IN INVESTING ACTIVITIES - - (47,019,415 ) - (47,019,415 ) CASH FLOWS FROM FINANCING ACTIVITIES Net borrowings on Senior Revolving Credit Facility - - 17,000,000 - 17,000,000 Payments for redemption of Series I Secured Notes - (5,722,743 ) - - (5,722,743 ) Proceeds from issuance of L Bonds 71,126,660 - - - 71,126,660 Payments for redemption and issuance of L Bonds (22,663,475 ) - - - (22,663,475 ) Proceeds from (increase in) restricted cash - (2,822,051 ) (5,996,843 ) - (8,818,894 ) Issuance of common stock 212,670 - - - 212,670 Proceeds from issuance of preferred stock 10,429,654 - 71,555 - 10,501,209 Payments for issuance and redemption of preferred stock (1,610,574 ) - (7,340 ) - (1,617,914 ) Issuance of member capital - 57,813,874 39,502,072 (97,315,946 ) - NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 57,494,935 49,269,080 50,569,444 (97,315,946 ) 60,017,513 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (22,240,541 ) 4,839,762 355,024 - (17,045,755 ) CASH AND CASH EQUIVALENTS BEGINNING OF THE PERIOD 32,292,162 1,982,722 150,221 - 34,425,105 END OF THE PERIOD $ 10,051,621 $ 6,822,484 $ 505,245 $ - $ 17,379,350 For the six months ended June 30, 2015 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries 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 insurance contracts - - (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 Preferred stock dividends payable 335,232 - - - 335,232 (Increase) in operating assets: Life insurance contract 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 insurance contracts - - (10,224,018 ) - (10,224,018 ) Carrying value of matured life insurance contracts - - 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 Senior 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 (increase in) restricted cash - (102,500 ) (3,524,637 ) - (3,627,137 ) Issuance of common stock 582,000 - - - 582,000 Payments for issuance and redemption of 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 three months ended June 30, 2016 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 1,881,326 $ 16,005,180 $ 18,535,197 $ (34,540,377 ) $ 1,881,326 Adjustments to reconcile net loss to net cash flows from operating activities: (Equity) of subsidiaries (15,705,341 ) (18,835,036 ) - 34,540,377 - Gain on life insurance contracts - - (21,241,376 ) - (21,241,376 ) Amortization of deferred financing and issuance costs 2,261,032 (282,257 ) 549,199 - 2,527,974 Deferred income taxes 1,851,018 - - - 1,851,018 Preferred stock dividends payable 166,472 - - - 166,472 (Increase) in operating assets: Life insurance contract benefits receivable - - 9,083,817 - 9,083,817 Other assets (21,796,633 ) (12,903,506 ) - 33,489,247 (1,210,892 ) Increase (decrease) in operating liabilities: Due to related party (71,975 ) 17,802 (1,760,000 ) - (1,814,173 ) Accounts payable and other accrued expenses 1,458,476 130,596 (2,364,285 ) - (775,213 ) NET CASH FLOWS USED IN OPERATING ACTIVITIES (29,955,625 ) (15,867,221 ) 2,802,552 33,489,247 (9,531,047 ) CASH FLOWS FROM INVESTING ACTIVITIES Investment in life insurance contracts - - (24,373,714 ) - (24,373,714 ) Carrying value of matured life insurance contracts - - 1,691,764 - 1,691,764 Investment in Secured MCA advances - - (1,293,829 ) (1,293,829 ) Proceeds from Secured MCA advances - - 907,649 - 907,649 NET CASH FLOWS USED IN INVESTING ACTIVITIES - - (23,068,130 ) - (23,068,130 ) CASH FLOWS FROM FINANCING ACTIVITIES Net repayment of Senior Revolving Credit Facility - - (3,000,000 ) (3,000,000 ) Payments for redemption of Series I Secured Notes - (485,350 ) - - (485,350 ) Proceeds from issuance of L Bonds 36,757,771 - - - 36,757,771 Payments for redemption and issuance of L Bonds (11,753,782 ) - - - (11,753,782 ) Proceeds from (increase in) restricted cash - (116,672 ) 8,784,498 - 8,667,826 Issuance of member capital - 18,951,362 14,537,885 (33,489,247 ) - Issuance of common stock 166,125 - - - 166,125 Proceeds from issuance of preferred stock 9,401,118 - 71,555 - 9,472,673 Payments for issuance and redemption of preferred stock (838,021 ) - (7,340 ) - (845,361 ) NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 33,733,211 18,349,340 20,386,598 (33,489,247 ) 38,979,902 NET INCREASE IN CASH AND CASH EQUIVALENTS 3,777,586 2,482,119 121,020 - 6,380,725 CASH AND CASH EQUIVALENTS BEGINNING OF THE PERIOD 6,274,035 4,340,365 384,225 - 10,998,625 END OF THE PERIOD $ 10,051,621 $ 6,822,484 $ 505,245 $ - $ 17,379,350 For the three months ended June 30, 2015 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries 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 insurance contracts - - (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 ) Preferred stock dividends payable 146,420 - - - 146,420 (Increase) in operating assets: Life insurance contract 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 insurance contracts - - (7,777,541 ) - (7,777,541 ) Carrying value of matured life insurance contracts - - 132,388 - 132,388 NET CASH FLOWS USED IN INVESTING ACTIVITIES - - (7,645,153 ) - (7,645,153 ) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of Senior 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 (increase in) 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 Payments for issuance and redemption of 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 |
Concentrations
Concentrations | 6 Months Ended |
Jun. 30, 2016 | |
Concentrations [Abstract] | |
Concentrations | (19) Concentrations We purchase life insurance contracts written by life insurance companies having investment grade ratings by independent rating agencies. As a result, there may be concentrations of contracts with certain life insurance companies. The following summarizes the face value of insurance contracts with specific life insurance companies exceeding 10% of the total face value held by us. Life insurance company June 30, December 31, 2016 2015 AXA Equitable 15.1 % 14.0 % Transamerica 10.8 % * John Hancock 10.0 % 12.7 % * percentage does not exceed 10% of the total face value. The following summarizes the number of insurance contracts insuring the lives of persons living in specific states exceeding 10% of the total face value held by us: State of Residence June 30, December 31, 2016 2015 California 21.8 % 25.2 % Florida 19.6 % 19.2 % |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent events | (20) Subsequent events Subsequent to June 30, 2016, one policy covering one individual matured. The life insurance contract benefit of this policy was $700,000 and we recorded realized gains of $452,000 on this policy. Su b s e t June 30 we i im t l i additional i c i m o Subsequent to June 30, 2016 , the Company has issued 500 shares of common stock to a vendor as a form of payment for services the vendor provided to the Company. Also, one of our Series A Preferred Stock holders converted 2,600 shares of preferred stock into 1,950 shares of common stock. Effective September 1, 2016, we will cease selling 6-month and 1-year L Bonds until further notice. In addition, effective September 1, 2016, the L Bond interest rates will change to 5.50%, 6.25%, 7.50% and 8.50% for the 2-, 3-, 5- and 7-year L Bonds, respectively. Effective September 1, 2016, we no longer anticipate renewing Series I Secured Notes. |
Nature of Business and Summar27
Nature of Business and Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2016 | |
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 insurance contracts | Life Insurance Contracts Investments in Insurance Contracts We also recognize realized gain (revenue) from a life insurance contract upon one of the two following events: (1) our receipt of notice or verified mortality of the insured; or (2) our sale of the contract, filing of change-of-ownership forms and receipt of payment. In the case of mortality, the gain (or loss) we recognize is the difference between the contract benefits and the carrying values of the contract once we determine that collection of the contract benefits is realizable and reasonably assured. In the case of a contract sale, the gain (or loss) we recognize is the difference between the sale price and the carrying value of the contract on the date of our receipt of sale proceeds. In a case where our acquisition of a contract is not complete as of a reporting date, but we have nonetheless advanced direct costs and deposits for the acquisition, those costs and deposits are recorded as “other assets” on our balance sheet until the acquisition is complete and we secured title to the contract. On June 30, 2016 and December 31, 2015, a total of $16,000 and $31,000, respectively, of our “other assets” comprised direct costs and deposits that we advanced for contract acquisitions. |
Deferred financing and issuance costs | Deferred Financing and Issuance Costs |
Earnings (loss) per share | Earnings (loss) per Share |
Recently adopted pronouncements | Recently Adopted Pronouncements On April 7, 2015, the FASB issued Accounting Standards Update No. 2015-03, Simplifying the Presentation of Debt Issuance Costs adopted ASU 2015-03 corresponding reduction to our liabilities, by approximately $2,288,000 as of December 31, 2015. There was no impact on our statements of operations in 2015 |
Reclassification | Reclassification |
Investment in Life Insurance 28
Investment in Life Insurance Contracts (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Investment in Life Insurance Contracts [Abstract] | |
Summary of life insurance policies, under the fair value method and estimated life expectancy dates, based on remaining life expectancy | As of June 30, 2016 As of December 31, 2015 Years Ending December 31, Number of Contracts Estimated Fair Value Face Value Number of Contracts Estimated Fair Value Face Value 2016 2 $ 4,535,000 $ 5,000,000 5 $ 7,503,000 $ 8,500,000 2017 13 13,967,000 17,339,000 12 12,875,000 17,418,000 2018 32 38,125,000 54,499,000 27 37,109,000 58,428,000 2019 52 55,547,000 95,808,000 51 54,242,000 100,967,000 2020 79 75,764,000 150,740,000 59 64,750,000 137,868,000 2021 66 58,619,000 138,718,000 48 45,724,000 116,805,000 2022 51 40,488,000 118,010,000 44 38,394,000 116,998,000 Thereafter 252 144,775,000 574,684,000 150 96,053,000 387,860,000 Totals 547 $ 431,820,000 $ 1,154,798,000 396 $ 356,650,000 944,844,000 |
Reconciliation of gain on life insurance contracts | Three Months Ended Six Months Ended 2016 2015 2016 2015 Change in fair value $ 21,241,000 $ 14,028,000 $ 32,773,000 $ 12,134,000 Premiums and other fees (8,995,000 ) (6,172,000 ) (17,441,000 ) (12,509,000 ) Contract maturities 8,137,000 618,000 22,765,000 25,632,000 Gain on life insurance contracts, net $ 20,383,000 $ 8,474,000 $ 38,097,000 $ 25,257,000 |
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, 2016 $ 18,708,000 $ 656,000 $ 19,364,000 2017 39,266,000 656,000 39,922,000 2018 43,010,000 656,000 43,666,000 2019 48,131,000 656,000 48,787,000 2020 53,558,000 656,000 54,214,000 2021 59,829,000 656,000 60,485,000 $ 262,502,000 $ 3,936,000 $ 266,438,000 |
Fair Value Definition and Hie29
Fair Value Definition and Hierarchy (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Fair Value Definition and Hierarchy [Abstract] | |
Reconciliation of investments in life insurance contracts | Three month ended Six months ended 2016 2015 2016 2015 Beginning balance $ 387,402,000 $ 278,395,000 $ 356,650,000 $ 282,883,000 Purchases 24,869,000 9,208,000 48,700,000 10,225,000 Maturities (cash in excess of carrying value) (1,692,000 ) (132,000 ) (6,303,000 ) (3,743,000 ) Net change in fair value 21,241,000 14,028,000 32,773,000 12,134,000 Ending balance (June 30) $ 431,820,000 $ 301,499,000 $ 431,820,000 $ 301,499,000 |
Summary of inputs utilized in estimating the fair value of life insurance contracts | As of June 30, 2016 As of December 31, 2015 Weighted-average age of insured, years 82.1 82.6 Weighted-average life expectancy, months 81.3 79.3 Average face amount per contract $ 2,111,000 $ 2,386,000 Discount rate 11.05 % 11.09 % |
Summary of change in fair value of the investment in life insurance contracts | Change in life expectancy estimates minus 8 months minus 4 months plus 4 months plus 8 months June 30, 2016 $ 58,540,000 $ 29,087,000 $ (28,537,000 ) $ (56,562,000 ) December 31, 2015 $ 48,339,000 $ 24,076,000 $ (23,501,000 ) $ (46,482,000 ) Change in discount rate minus 2% minus 1% plus 1% plus 2% June 30, 2016 $ 45,656,000 $ 21,871,000 $ (20,155,000 ) $ (38,770,000 ) December 31, 2015 $ 35,024,000 $ 16,786,000 $ (15,485,000 ) $ (29,803,000 ) |
Summary of outstanding warrants | Month issued Warrants issued Fair value per share Risk free 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, 2016 | |
Credit Facility - Autobahn Funding Company LLC / Series I Secured Notes Renewable / L Bonds [Abstract] | |
Future contractual maturities of series I secured notes payable and future amortization of their deferred financing costs | Years Ending December 31, Contractual Maturities Amortization of Deferred Financing Costs Six months ending December 31, 2016 $ 3,574,000 $ 14,000 2017 8,758,000 113,000 2018 2,401,000 56,000 2019 869,000 16,000 2020 1,766,000 59,000 Thereafter 915,000 59,000 $ 18,283,000 $ 317,000 |
L Bonds (Tables)
L Bonds (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Credit Facility - Autobahn Funding Company LLC / Series I Secured Notes Renewable / L Bonds [Abstract] | |
Schedule of future contractual maturities of L Bonds and future amortization of their deferred financing costs | Years Ending December 31, Contractual Maturities Amortization of Deferred Financing Costs Six months ending December 31, 2016 $ 58,270,000 $ 364,000 2017 85,052,000 1,764,000 2018 87,168,000 2,986,000 2019 50,526,000 2,148,000 2020 19,457,000 845,000 Thereafter 34,241,000 1,853,000 $ 334,714,000 $ 9,960,000 |
Income Taxes (Tables)
Income Taxes (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Income Taxes [Abstract] | |
Components of current and deferred income tax expense | Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2016 2015 2016 2015 Income tax provision (benefit): Current: Federal $ (23,000 ) $ (182,000 ) $ - $ 141,000 State $ (6,000 ) $ (64,000 ) $ - $ 40,000 Total current tax expense (benefit) (29,000 ) (246,000 ) - 181,000 Deferred: Federal $ 1,397,000 $ (670,000 ) $ 2,203,000 $ 984,000 State $ 454,000 $ (261,000 ) $ 704,000 $ 268,000 Total deferred tax expense (benefit) 1,851,000 (931,000 ) 2,907,000 1,252,000 Total income tax expense (benefit) 1,822,000 (1,177,000 ) 2,907,000 1,433,000 |
Stock Incentive Plan (Tables)
Stock Incentive Plan (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Stock Incentive Plan [Abstract] | |
Schedule of outstanding stock options | Vested Un-vested Total Balance as of December 31, 2014 314,288 685,813 1,000,101 Granted during the year 79,500 273,700 353,200 Vested during the year 238,999 (238,999 ) - Exercised during the year (27,667 ) - (27,667 ) Forfeited during the year (121,417 ) (150,602 ) (272,019 ) Balance as of December 31, 2015 483,703 569,912 1,053,615 Granted during the year 15,000 67,750 82,750 Vested during the year 84,917 (84,917 ) - Forfeited during the year (6,424 ) (19,076 ) (25,500 ) Balance as of June 30, 2016 577,196 533,669 1,110,865 |
Commitments (Tables)
Commitments (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Commitments [Abstract] | |
Schedule of minimum lease payments under the amendment lease | Six months ending December 31, 2016 $ 87,000 2017 178,000 2018 185,000 2019 191,000 2020 198,000 2021 204,000 2022 210,000 2023 217,000 2024 223,000 2025 230,000 2026 38,000 $ 1,961,000 |
Guarantee of L Bonds (Tables)
Guarantee of L Bonds (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Guarantee of L Bonds [Abstract] | |
Condensed consolidating balance sheets | June 30, 2016 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated A S S E T S Cash and cash equivalents $ 10,051,621 $ 6,822,484 $ 505,245 $ - $ 17,379,350 Restricted cash - 4,924,308 6,236,485 - 11,160,793 Investment in life insurance contracts, at fair value - - 431,820,437 - 431,820,437 Secured MCA advances - - 4,328,317 - 4,328,317 Life insurance contract benefits receivable - - 6,829,022 - 6,829,022 Other assets 4,901,911 1,367,483 30,926 (2,789,877 ) 3,510,443 Investment in subsidiaries 358,804,767 363,647,320 - (722,452,087 ) - TOTAL ASSETS $ 373,758,299 $ 376,761,595 $ 449,750,432 $ (725,241,964 ) $ 475,028,362 L I A B I L I T I E S & S T O C K H O L D E R S' E Q U I T Y (D E F I C I T) LIABILITIES Revolving senior credit facility $ - $ (2,639,306 ) $ 80,115,298 $ - $ 77,475,992 Series I Secured Notes - 17,965,653 - - 17,965,653 L Bonds 327,322,906 - - - 327,322,906 Notes payable to related parties - - 2,700,000 (2,700,000 ) - Accounts payable 1,270,216 462,220 796,770 - 2,529,206 Interest payable 9,493,254 3,502,812 417,557 (89,877 ) 13,323,746 Other accrued expenses 680,545 589,682 85,039 - 1,355,266 Deferred taxes, net 4,670,715 - - - 4,670,715 TOTAL LIABILITIES 343,437,636 19,881,061 84,114,664 (2,789,877 ) 444,643,484 STOCKHOLDERS’ EQUITY (DEFICIT) Member capital - 356,880,534 365,571,553 (722,452,087 ) - Convertible preferred stock 20,445,320 - - - 20,445,320 Redeemable preferred stock 12,212,767 - - - 12,212,767 MCA preferred stock - - 71,555 - 71,555 Common stock 5,975 - - - 5,975 Additional paid-in capital 16,495,730 - (7,340 ) - 16,488,390 Accumulated deficit (18,839,129 ) - - - (18,839,129 ) TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) 30,320,663 356,880,534 365,635,768 (722,452,087 ) 30,384,878 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) $ 373,758,299 $ 376,761,595 $ 449,750,432 $ (725,241,964 ) $ 475,028,362 December 31, 2015 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated A S S E T S Cash and cash equivalents $ 32,292,162 $ 1,982,722 $ 150,221 $ - $ 34,425,105 Restricted cash - 2,102,257 239,643 - 2,341,900 Investment in life insurance contracts, at fair value - - 356,649,715 - 356,649,715 Other assets 1,742,074 688,071 30,900 - 2,461,045 Investment in subsidiaries 269,886,254 291,295,951 - (561,182,205 ) - TOTAL ASSETS $ 303,920,490 $ 296,069,001 $ 357,070,479 $ (561,182,205 ) $ 395,877,765 L I A B I L I T I E S & S T O C K H O L D E R S' E Q U I T Y (D E F I C I T) LIABILITIES Revolving senior credit facility $ - $ (1,000,000 ) $ 64,279,596 $ - $ 63,279,596 Series I Secured Notes - 23,287,704 - - 23,287,704 L Bonds 276,482,796 - - - 276,482,796 Accounts payable 280,988 157,217 1,079,235 - 1,517,440 Interest payable 8,529,959 3,544,626 265,476 - 12,340,061 Other accrued expenses 717,365 343,421 - - 1,060,786 Deferred taxes, net 1,763,968 - - - 1,763,968 TOTAL LIABILITIES 287,775,076 26,332,968 65,624,307 - 379,732,351 STOCKHOLDERS’ EQUITY (DEFICIT) Member capital - 269,736,033 291,446,172 (561,182,205 ) - Convertible preferred stock 20,784,841 - - - 20,784,841 Common stock 5,942 - - - 5,942 Additional paid-in capital 17,149,391 - - - 17,149,391 Accumulated deficit (21,794,760 ) - - - (21,794,760 ) TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) 16,145,414 269,736,033 291,446,172 (561,182,205 ) 16,145,414 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) $ 303,920,490 $ 296,069,001 $ 357,070,479 $ (561,182,205 ) $ 395,877,765 |
Condensed consolidating statements of operations | For the six months ended June 30, 2016 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated REVENUE Origination and servicing income $ - $ 13,417 $ - $ (13,417 ) $ - Gain on life insurance contracts, net - - 38,097,059 - 38,097,059 MCA income - - 368,216 - 368,216 Interest and other income 106,019 1,012 198,946 (89,877 ) 216,100 TOTAL REVENUE 106,019 14,429 38,664,221 (103,294 ) 38,681,375 EXPENSES Origination and servicing fees - - 13,417 (13,417 ) - Interest expense 15,730,192 1,301,971 3,083,680 (89,877 ) 20,025,966 Employee compensation and benefits 3,175,323 2,113,049 249,333 - 5,537,705 Legal and professional fees 1,378,335 1,011,155 120,991 - 2,510,481 Other expenses 2,777,326 1,394,028 573,491 - 4,744,845 TOTAL EXPENSES 23,061,176 5,820,203 4,040,912 (103,294 ) 32,818,997 INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES (22,955,157 ) (5,805,774 ) 34,623,309 - 5,862,378 EQUITY IN INCOME OF SUBSIDIARY 28,817,535 35,136,402 - (63,953,937 ) - INCOME BEFORE INCOME TAXES 5,862,378 29,330,628 34,623,309 (63,953,937 ) 5,862,378 INCOME TAX EXPENSE 2,906,747 - - - 2,906,747 NET INCOME $ 2,955,631 $ 29,330,628 $ 34,623,309 $ (63,953,937 ) $ 2,955,631 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 insurance contracts, 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 ) - Interest expense 11,031,758 1,458,965 2,008,158 - 14,498,881 Employee compensation and benefits 2,911,596 961,046 - - 3,872,642 Legal and professional fees 828,858 337,326 - - 1,166,184 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 ) - 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 INCOME $ 1,011,476 $ 19,247,474 $ 22,281,324 $ (41,528,798 ) $ 1,011,476 For the three months ended June 30, 2016 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated REVENUE Gain on life insurance contracts, net - - 20,383,347 - 20,383,347 MCA income - - 223,255 - 223,255 Interest and other income 71,222 706 157,927 (58,975 ) 170,880 TOTAL REVENUE 71,222 706 20,764,529 (58,975 ) 20,777,482 EXPENSES Interest expense 8,131,369 644,735 1,648,452 (58,975 ) 10,365,581 Employee compensation and benefits 1,638,893 1,283,968 148,646 - 3,071,507 Legal and professional fees 783,596 476,505 44,252 - 1,304,353 Other expenses 1,519,349 425,354 387,982 - 2,332,685 TOTAL EXPENSES 12,073,207 2,830,562 2,229,332 (58,975 ) 17,074,126 INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES (12,001,985 ) (2,829,856 ) 18,535,197 - 3,703,356 EQUITY IN INCOME OF SUBSIDIARY 15,705,341 18,835,036 - (34,540,377 ) - INCOME BEFORE INCOME TAXES 3,703,356 16,005,180 18,535,197 (34,540,377 ) 3,703,356 INCOME TAX BENEFIT 1,822,030 - - - 1,822,030 NET INCOME $ 1,881,326 $ 16,005,180 $ 18,535,197 $ (34,540,377 ) $ 1,881,326 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 insurance contracts, 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 ) - Interest expense 5,781,796 684,879 855,672 - 7,322,347 Employee compensation and benefits 1,605,795 538,930 - - 2,144,725 Legal and professional fees 351,507 291,424 - - 642,931 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 ) - 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 INCOME (LOSS) $ (2,250,415 ) $ 5,399,330 $ 6,985,168 $ (12,384,498 ) $ (2,250,415 ) |
Condensed consolidating statements of cash flows | For the six months ended June 30, 2016 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 2,955,631 $ 29,330,628 $ 34,623,309 $ (63,953,937 ) $ 2,955,631 Adjustments to reconcile net income to net cash flows from operating activities: (Equity) of subsidiaries (28,817,535 ) (35,136,402 ) - 63,953,937 - Gain on life insurance contracts - - (32,772,929 ) - (32,772,929 ) Amortization of deferred financing and issuance costs 3,909,923 (1,446,463 ) 848,702 - 3,312,162 Deferred income taxes 2,906,747 - - - 2,906,747 Preferred stock dividends payable 330,049 - - - 330,049 (Increase) in operating assets: Life insurance contract benefits receivable - - (6,829,022 ) (6,829,022 ) Other assets (60,457,838 ) (37,895,574 ) - 97,315,946 (1,037,466 ) Increase (decrease) in operating liabilities: Due to related party (2,802,976 ) 1,195 2,700,000 - (101,781 ) Accounts payable and accrued expenses 2,240,523 717,298 (1,765,065 ) - 1,192,756 NET CASH FLOWS USED IN OPERATING ACTIVITIES (79,735,476 ) (44,429,318 ) (3,195,005 ) 97,315,946 (30,043,853 ) CASH FLOWS FROM INVESTING ACTIVITIES Investment in life insurance contracts - - (48,700,036 ) - (48,700,036 ) Carrying value of matured life insurance contracts - - 6,302,243 - 6,302,243 Investment in Secured MCA advances - - (5,647,414 ) - (5,647,414 ) Proceeds from Secured MCA advances - - 1,025,792 - 1,025,792 NET CASH FLOWS USED IN INVESTING ACTIVITIES - - (47,019,415 ) - (47,019,415 ) CASH FLOWS FROM FINANCING ACTIVITIES Net borrowings on Senior Revolving Credit Facility - - 17,000,000 - 17,000,000 Payments for redemption of Series I Secured Notes - (5,722,743 ) - - (5,722,743 ) Proceeds from issuance of L Bonds 71,126,660 - - - 71,126,660 Payments for redemption and issuance of L Bonds (22,663,475 ) - - - (22,663,475 ) Proceeds from (increase in) restricted cash - (2,822,051 ) (5,996,843 ) - (8,818,894 ) Issuance of common stock 212,670 - - - 212,670 Proceeds from issuance of preferred stock 10,429,654 - 71,555 - 10,501,209 Payments for issuance and redemption of preferred stock (1,610,574 ) - (7,340 ) - (1,617,914 ) Issuance of member capital - 57,813,874 39,502,072 (97,315,946 ) - NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 57,494,935 49,269,080 50,569,444 (97,315,946 ) 60,017,513 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (22,240,541 ) 4,839,762 355,024 - (17,045,755 ) CASH AND CASH EQUIVALENTS BEGINNING OF THE PERIOD 32,292,162 1,982,722 150,221 - 34,425,105 END OF THE PERIOD $ 10,051,621 $ 6,822,484 $ 505,245 $ - $ 17,379,350 For the six months ended June 30, 2015 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries 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 insurance contracts - - (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 Preferred stock dividends payable 335,232 - - - 335,232 (Increase) in operating assets: Life insurance contract 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 insurance contracts - - (10,224,018 ) - (10,224,018 ) Carrying value of matured life insurance contracts - - 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 Senior 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 (increase in) restricted cash - (102,500 ) (3,524,637 ) - (3,627,137 ) Issuance of common stock 582,000 - - - 582,000 Payments for issuance and redemption of 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 three months ended June 30, 2016 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 1,881,326 $ 16,005,180 $ 18,535,197 $ (34,540,377 ) $ 1,881,326 Adjustments to reconcile net loss to net cash flows from operating activities: (Equity) of subsidiaries (15,705,341 ) (18,835,036 ) - 34,540,377 - Gain on life insurance contracts - - (21,241,376 ) - (21,241,376 ) Amortization of deferred financing and issuance costs 2,261,032 (282,257 ) 549,199 - 2,527,974 Deferred income taxes 1,851,018 - - - 1,851,018 Preferred stock dividends payable 166,472 - - - 166,472 (Increase) in operating assets: Life insurance contract benefits receivable - - 9,083,817 - 9,083,817 Other assets (21,796,633 ) (12,903,506 ) - 33,489,247 (1,210,892 ) Increase (decrease) in operating liabilities: Due to related party (71,975 ) 17,802 (1,760,000 ) - (1,814,173 ) Accounts payable and other accrued expenses 1,458,476 130,596 (2,364,285 ) - (775,213 ) NET CASH FLOWS USED IN OPERATING ACTIVITIES (29,955,625 ) (15,867,221 ) 2,802,552 33,489,247 (9,531,047 ) CASH FLOWS FROM INVESTING ACTIVITIES Investment in life insurance contracts - - (24,373,714 ) - (24,373,714 ) Carrying value of matured life insurance contracts - - 1,691,764 - 1,691,764 Investment in Secured MCA advances - - (1,293,829 ) (1,293,829 ) Proceeds from Secured MCA advances - - 907,649 - 907,649 NET CASH FLOWS USED IN INVESTING ACTIVITIES - - (23,068,130 ) - (23,068,130 ) CASH FLOWS FROM FINANCING ACTIVITIES Net repayment of Senior Revolving Credit Facility - - (3,000,000 ) (3,000,000 ) Payments for redemption of Series I Secured Notes - (485,350 ) - - (485,350 ) Proceeds from issuance of L Bonds 36,757,771 - - - 36,757,771 Payments for redemption and issuance of L Bonds (11,753,782 ) - - - (11,753,782 ) Proceeds from (increase in) restricted cash - (116,672 ) 8,784,498 - 8,667,826 Issuance of member capital - 18,951,362 14,537,885 (33,489,247 ) - Issuance of common stock 166,125 - - - 166,125 Proceeds from issuance of preferred stock 9,401,118 - 71,555 - 9,472,673 Payments for issuance and redemption of preferred stock (838,021 ) - (7,340 ) - (845,361 ) NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 33,733,211 18,349,340 20,386,598 (33,489,247 ) 38,979,902 NET INCREASE IN CASH AND CASH EQUIVALENTS 3,777,586 2,482,119 121,020 - 6,380,725 CASH AND CASH EQUIVALENTS BEGINNING OF THE PERIOD 6,274,035 4,340,365 384,225 - 10,998,625 END OF THE PERIOD $ 10,051,621 $ 6,822,484 $ 505,245 $ - $ 17,379,350 For the three months ended June 30, 2015 Parent Guarantor Subsidiary Non-Guarantor Subsidiaries 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 insurance contracts - - (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 ) Preferred stock dividends payable 146,420 - - - 146,420 (Increase) in operating assets: Life insurance contract 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 insurance contracts - - (7,777,541 ) - (7,777,541 ) Carrying value of matured life insurance contracts - - 132,388 - 132,388 NET CASH FLOWS USED IN INVESTING ACTIVITIES - - (7,645,153 ) - (7,645,153 ) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of Senior 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 (increase in) 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 Payments for issuance and redemption of 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 |
Concentrations (Tables)
Concentrations (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Concentrations [Abstract] | |
Summary of the face value of insurance contracts | Life insurance company June 30, December 31, 2016 2015 AXA Equitable 15.1 % 14.0 % Transamerica 10.8 % * John Hancock 10.0 % 12.7 % * percentage does not exceed 10% of the total face value. |
Summary of the number of insurance contracts | State of Residence June 30, December 31, 2016 2015 California 21.8 % 25.2 % Florida 19.6 % 19.2 % |
Nature of Business and Summar37
Nature of Business and Summary of Significant Accounting Policies (Details) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Nature of business and summary of significant accounting policies (Textual) | ||
Portfolio of life insurance contracts aggreate fair value | $ 431,800,000 | |
Direct costs and deposits | 16,000 | $ 31,000 |
Liabilities and stockholders' equity | $ 2,288,000 |
Restrictions on Cash (Details)
Restrictions on Cash (Details) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Restrictions on Cash (Textual) | ||
Restricted cash | $ 11,161,000 | $ 2,342,000 |
Investment in Life Insurance 39
Investment in Life Insurance Contracts (Details) | Jun. 30, 2016USD ($)Contract | Dec. 31, 2015USD ($)Contract |
Summary of Company's life insurance contracts accounted for under fair value method and their estimated maturity dates, based on remaining life expectancy | ||
Number of Contracts, 2016 | Contract | 2 | 5 |
Number of Contracts, 2017 | Contract | 13 | 12 |
Number of Contracts, 2018 | Contract | 32 | 27 |
Number of Contracts, 2019 | Contract | 52 | 51 |
Number of Contracts, 2020 | Contract | 79 | 59 |
Number of Contracts, 2021 | Contract | 66 | 48 |
Number of Contracts, 2022 | Contract | 51 | 44 |
Number of Contracts, Thereafter | Contract | 252 | 150 |
Life Settlement Contracts, Number of Contracts, Total | Contract | 547 | 396 |
Estimated Fair Value, 2016 | $ 4,535,000 | $ 7,503,000 |
Estimated Fair Value, 2017 | 13,967,000 | 12,875,000 |
Estimated Fair Value, 2018 | 38,125,000 | 37,109,000 |
Estimated Fair Value, 2019 | 55,547,000 | 54,242,000 |
Estimated Fair Value, 2020 | 75,764,000 | 64,750,000 |
Estimated Fair Value, 2021 | 58,619,000 | 45,724,000 |
Estimated Fair Value, 2022 | 40,488,000 | 38,394,000 |
Estimated Fair Value, Thereafter | 144,775,000 | 96,053,000 |
Life Settlement Contracts, Estimated Fair Value, Total | 431,820,000 | 356,650,000 |
Face Value, 2016 | 5,000,000 | 8,500,000 |
Face Value, 2017 | 17,339,000 | 17,418,000 |
Face Value, 2018 | 54,499,000 | 58,428,000 |
Face Value, 2019 | 95,808,000 | 100,967,000 |
Face Value, 2020 | 150,740,000 | 137,868,000 |
Face Value, 2021 | 138,718,000 | 116,805,000 |
Face Value, 2022 | 118,010,000 | 116,998,000 |
Face Value, Thereafter | 574,684,000 | 387,860,000 |
Life Settlement Contracts, Face Value, Total | $ 1,154,798,000 | $ 944,844,000 |
Investment in Life Insurance 40
Investment in Life Insurance Contracts (Details 1) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Summary of reconciliation of gain on life settlements | ||||
Change in fair value | $ 21,241,000 | $ 14,028,000 | $ 32,773,000 | $ 12,134,000 |
Premiums and other fees | (8,995,000) | (6,172,000) | (17,441,000) | (12,509,000) |
Contract maturities | 8,137,000 | 618,000 | 22,765,000 | 25,632,000 |
Gain on life insurance contracts, net | $ 20,383,000 | $ 8,474,000 | $ 38,097,000 | $ 25,257,000 |
Investment in Life Insurance 41
Investment in Life Insurance Contracts (Details 2) | Jun. 30, 2016USD ($) |
Summary of estimated expected premium payments to maintain the above life insurance policies assuming no mortalities | |
Six months ending December 31, 2016 | $ 19,364,000 |
2,017 | 39,922,000 |
2,018 | 43,666,000 |
2,019 | 48,787,000 |
2,020 | 54,214,000 |
2,021 | 60,485,000 |
Estimated expected premium payments | 266,438,000 |
Premiums [Member] | |
Summary of estimated expected premium payments to maintain the above life insurance policies assuming no mortalities | |
Six months ending December 31, 2016 | 18,708,000 |
2,017 | 39,266,000 |
2,018 | 43,010,000 |
2,019 | 48,131,000 |
2,020 | 53,558,000 |
2,021 | 59,829,000 |
Estimated expected premium payments | 262,502,000 |
Servicing [Member] | |
Summary of estimated expected premium payments to maintain the above life insurance policies assuming no mortalities | |
Six months ending December 31, 2016 | 656,000 |
2,017 | 656,000 |
2,018 | 656,000 |
2,019 | 656,000 |
2,020 | 656,000 |
2,021 | 656,000 |
Estimated expected premium payments | $ 3,936,000 |
Investment in Life Insurance 42
Investment in Life Insurance Contracts (Details Textual) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | Mar. 31, 2016 | |
Investment in Life Insurance Contracts (Textual) | ||||||
Benefit recognized from insurance policy | $ 9,829,000 | $ 29,067,000 | ||||
Carrying value of life insurance policy | 1,692,000 | $ 132,000 | 6,302,000 | $ 3,743,000 | ||
Realized gains from life insurance policy | $ 8,137,000 | $ 618,000 | $ 22,765,000 | $ 25,632,000 | ||
Change in fair value related to policies | $ 2,395,000 | |||||
Life insurance policies [Member] | ||||||
Investment in Life Insurance Contracts (Textual) | ||||||
Discount rate applied to portfolio | 11.05% | 11.09% |
Fair Value Definition and Hie43
Fair Value Definition and Hierarchy (Details) - Life insurance contracts [Member] - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Summary of reconciliation of investments in life insurance contracts | ||||
Beginning balance | $ 387,402,000 | $ 278,395,000 | $ 356,650,000 | $ 282,883,000 |
Purchases | 24,869,000 | 9,208,000 | 48,700,000 | 10,225,000 |
Maturities (cash in excess of carrying value) | (1,692,000) | (132,000) | (6,303,000) | (3,743,000) |
Net change in fair value | 21,241,000 | 14,028,000 | 32,773,000 | 12,134,000 |
Ending balance (June 30) | $ 431,820,000 | $ 301,499,000 | $ 431,820,000 | $ 301,499,000 |
Fair Value Definition and Hie44
Fair Value Definition and Hierarchy (Details 1) - Life insurance policies [Member] - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2016 | Dec. 31, 2015 | |
Summary of inputs utilized in estimating the fair value | ||
Weighted-average age of insured, years | 82 years 1 month 6 days | 82 years 7 months 6 days |
Weighted-average life expectancy, months | 81 months 9 days | 79 months 9 days |
Average face amount per contract | $ 2,111,000 | $ 2,386,000 |
Discount rate | 11.05% | 11.09% |
Fair Value Definition and Hie45
Fair Value Definition and Hierarchy (Details 2) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Minus 8 months [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life insurance contracts | $ 58,540,000 | $ 48,339,000 |
Minus 4 Months [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life insurance contracts | 29,087,000 | 24,076,000 |
Plus 4 Months [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life insurance contracts | (28,537,000) | (23,501,000) |
Plus 8 months [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life insurance contracts | (56,562,000) | (46,482,000) |
Minus 2% [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life insurance contracts | 45,656,000 | 35,024,000 |
Minus 1% [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life insurance contracts | 21,871,000 | 16,786,000 |
Plus 1% [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life insurance contracts | (20,155,000) | (15,485,000) |
Plus 2% [Member] | ||
Fair value sensitivity analysis on the investment in life insurance policies | ||
Investment in life insurance contracts | $ (38,770,000) | $ (29,803,000) |
Fair value definition and hie46
Fair value definition and hierarchy (Details 3) - Level 3 [Member] | 6 Months Ended |
Jun. 30, 2016$ / sharesshares | |
Warrants Level 3 instruments and measured at fair value upon issuance | |
Warrants issued | 431,954 |
December 2011 [Member] | |
Warrants Level 3 instruments and measured at fair value upon issuance | |
Month issued | Dec. 31, 2011 |
Warrants issued | 68,937 |
Fair value per share | $ / shares | $ 0.22 |
Risk free rate | 0.42% |
Volatility | 25.25% |
Term | 5 years |
March 2012 [Member] | |
Warrants Level 3 instruments and measured at fair value upon issuance | |
Month issued | Mar. 31, 2012 |
Warrants issued | 38,130 |
Fair value per share | $ / shares | $ 0.52 |
Risk free rate | 0.38% |
Volatility | 36.20% |
Term | 5 years |
June 2012 [Member] | |
Warrants Level 3 instruments and measured at fair value upon issuance | |
Month issued | Jun. 12, 2012 |
Warrants issued | 161,840 |
Fair value per share | $ / shares | $ 1.16 |
Risk free rate | 0.41% |
Volatility | 47.36% |
Term | 5 years |
July 2012 [Member] | |
Warrants Level 3 instruments and measured at fair value upon issuance | |
Month issued | Jul. 31, 2012 |
Warrants issued | 144,547 |
Fair value per share | $ / shares | $ 1.16 |
Risk free rate | 0.41% |
Volatility | 47.36% |
Term | 5 years |
September 2012 [Member] | |
Warrants Level 3 instruments and measured at fair value upon issuance | |
Month issued | Sep. 30, 2012 |
Warrants issued | 2,500 |
Fair value per share | $ / shares | $ 0.72 |
Risk free rate | 0.31% |
Volatility | 40.49% |
Term | 5 years |
September 2014 [Member] | |
Warrants Level 3 instruments and measured at fair value upon issuance | |
Month issued | Sep. 30, 2014 |
Warrants issued | 16,000 |
Fair value per share | $ / shares | $ 1.26 |
Risk free rate | 1.85% |
Volatility | 17.03% |
Term | 5 years |
Fair Value Definition and Hie47
Fair Value Definition and Hierarchy (Details Textual) | 6 Months Ended |
Jun. 30, 2016USD ($) | |
Fair Value Definition and Hierarchy (Textual) | |
Life expectancy report, description | We periodically update the independent life expectancy estimates on the insured lives in our portfolio, other than insured lives covered under small face amount contracts (i.e., under $1 million in face amount), on a continuous rotating three-year cycle. Accordingly, we update life expectancies for approximately one-twelfth of our portfolio each quarter. |
Description for change in discount factor | If the life expectancy estimates were increased or decreased by four and eight months on each outstanding contract, and the discount rates were increased or decreased by 1% and 2%, while all other variables were held constant. |
Increase decrease in life expectancy | Four and eight months |
Increase decrease in discount rate | 1% and 2 |
Estimated fair value of series I secured notes payable and L Bonds | $ 352,997,000 |
Debt instruments face value | $ 354,557,000 |
Weighted average market interest rate of secured notes payable | 7.10% |
Loan receivable through credit agreement | $ 3,304,000 |
Loan loss reserve | $ 400,000 |
Credit Facility - Autobahn Fu48
Credit Facility - Autobahn Funding Company LLC (Details) - USD ($) | May 11, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 |
Credit Facility - Autobahn Funding Company LLC (Textual) | ||||||
Maximum borrowing amount under line of credit facility | $ 105,000,000 | $ 105,000,000 | ||||
Expiry date of line of credit | Jun. 30, 2018 | |||||
Effective rate of interest | 5.48% | 5.48% | 5.58% | |||
Weighted average effective interest rate | 5.47% | 5.37% | 5.57% | 6.00% | ||
Amount outstanding under line of credit facility | $ 82,011,000 | $ 82,011,000 | $ 65,011,000 | |||
Minimum tangible net worth to be maintained by company | 45,000,000 | |||||
Minimum cash and eligible investments | 15,000,000 | |||||
Consolidated tangible net worth under credit and security agreement | 30,628,000 | |||||
Consolidated net income under credit and security agreement | $ 128,454,000 | |||||
Credit facility, Description | Advances under the facility bear interest at a commercial paper rate of the lender at the time of the advance, or at the lender's cost of borrowing plus 4.25%, which is 1.75% less than interest charged under the facility prior to May 11, 2015. | |||||
Total funds available for additional borrowings under the borrowing base formula criteria | $ 22,989,000 | $ 22,989,000 | $ 39,989,000 | |||
Minimum [Member] | ||||||
Credit Facility - Autobahn Funding Company LLC (Textual) | ||||||
Increased the total borrowing limit | $ 100,000,000 | |||||
Maximum [Member] | ||||||
Credit Facility - Autobahn Funding Company LLC (Textual) | ||||||
Increased the total borrowing limit | $ 105,000,000 |
Series I Secured Notes (Details
Series I Secured Notes (Details) - Series I Secured Notes Payable [Member] | Jun. 30, 2016USD ($) |
Summary of future contractual maturities of notes payable | |
Six months ending December 31, 2016 | $ 3,574,000 |
2,017 | 8,758,000 |
2,018 | 2,401,000 |
2,019 | 869,000 |
2,020 | 1,766,000 |
Thereafter | 915,000 |
Total | 18,283,000 |
Summary of amortization of deferred financing costs of notes payable | |
Six months ending December 31, 2016 | 14,000 |
2,017 | 113,000 |
2,018 | 56,000 |
2,019 | 16,000 |
2,020 | 59,000 |
Thereafter | 59,000 |
Total | $ 317,000 |
Series I Secured Notes (Detai50
Series I Secured Notes (Details Textual) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2011 | Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | |
Series I Secured Notes Payable (Textual) | ||||||
Effective rate of interest | 5.48% | 5.48% | 5.58% | |||
Weighted average interest rate of secured notes payable | 7.10% | 7.10% | ||||
Series I Secured Notes Payable [Member] | ||||||
Series I Secured Notes Payable (Textual) | ||||||
Description of interest payment | Interest is payable monthly, quarterly, annually or at maturity depending on the terms of the note. | |||||
Weighted average interest rate of secured notes payable | 8.62% | 8.62% | 8.47% | |||
Principal amount outstanding under Series I Secured notes | $ 18,283,000 | $ 18,283,000 | $ 23,578,000 | |||
Amortization of deferred financing and issuance costs | $ 82,000 | $ 81,000 | 193,000 | $ 211,000 | ||
Future expected amortization of deferred financing costs | $ 317,000 | |||||
Minimum maturity period of secured notes | 6 months | 6 months | ||||
Maximum maturity period of secured notes | 7 years | 7 years | ||||
Amortizatoin period of deferred financing cost | 6 years | |||||
Series I Secured Notes Payable [Member] | Maximum [Member] | ||||||
Series I Secured Notes Payable (Textual) | ||||||
Effective rate of interest | 9.55% | |||||
Series I Secured Notes Payable [Member] | Minimum [Member] | ||||||
Series I Secured Notes Payable (Textual) | ||||||
Effective rate of interest | 5.65% |
L Bonds (Details)
L Bonds (Details) - Renewable Secured Debentures [Member] | Jun. 30, 2016USD ($) |
Summary of future contractual maturities of L Bonds | |
Six months ending December 31, 2016 | $ 58,270,000 |
2,017 | 85,052,000 |
2,018 | 87,168,000 |
2,019 | 50,526,000 |
2,020 | 19,457,000 |
Thereafter | 34,241,000 |
Total | 334,714,000 |
Summary of amortization of deferred financing costs of L Bonds | |
Six months ending December 31, 2016 | 364,000 |
2,017 | 1,764,000 |
2,018 | 2,986,000 |
2,019 | 2,148,000 |
2,020 | 845,000 |
Thereafter | 1,853,000 |
Total | $ 9,960,000 |
L Bonds (Details Textual)
L Bonds (Details Textual) - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | Jan. 09, 2015 | |
L Bonds (Textual) | ||||||
Debentures offer for sale | $ 354,557,000 | $ 354,557,000 | ||||
Weighted average market interest rate of secured notes payable | 7.10% | 7.10% | ||||
For the 2 year [Member] | ||||||
L Bonds (Textual) | ||||||
Interest rate change | 5.50% | |||||
For the 3 year [Member] | ||||||
L Bonds (Textual) | ||||||
Interest rate change | 6.25% | |||||
For the 5 year [Member] | ||||||
L Bonds (Textual) | ||||||
Interest rate change | 7.50% | |||||
For the 7 year [Member] | ||||||
L Bonds (Textual) | ||||||
Interest rate change | 8.50% | |||||
Renewable Secured Debentures [Member] | ||||||
L Bonds (Textual) | ||||||
Debentures offer for sale | $ 1,000,000,000 | |||||
Maturity period of debentures, minimum | 6 months | |||||
Maturity period of debentures, maximum | 7 years | |||||
Description of interest payment | Interest is payable monthly or annually depending on the election of an investor. | |||||
Weighted average market interest rate of secured notes payable | 7.17% | 7.17% | 7.18% | |||
Amount outstanding under L bonds | $ 334,714,000 | $ 334,714,000 | $ 282,171,000 | |||
Amortization of deferred issuance costs | $ 1,721,000 | $ 1,366,000 | 3,289,000 | $ 2,340,000 | ||
Future expected amortization of deferred financing costs | $ 9,960,000 | |||||
Amortizatoin period of deferred financing cost | 8 years | |||||
Renewable Secured Debentures [Member] | Maximum [Member] | ||||||
L Bonds (Textual) | ||||||
Interest rate | 9.50% | 9.50% | ||||
Renewable Secured Debentures [Member] | Minimum [Member] | ||||||
L Bonds (Textual) | ||||||
Interest rate | 4.25% | 4.25% |
Note Payable to Related Party (
Note Payable to Related Party (Details) - USD ($) | Jun. 30, 2016 | Feb. 16, 2016 |
Related Party Transaction [Line Items] | ||
Notes payable to related parties | ||
Insurance Strategies Fund, LLC [Member] | ||
Related Party Transaction [Line Items] | ||
Notes payable to related parties | $ 1,760,000 |
Convertible Preferred Stock (De
Convertible Preferred Stock (Details) - USD ($) | 6 Months Ended | 12 Months Ended | 15 Months Ended |
Jun. 30, 2016 | Dec. 31, 2015 | Sep. 30, 2012 | |
Convertible Preferred Stock (Textual) | |||
Series A preferred stock outstanding | 12,222 | ||
Series A Convertible Preferred Stock [Member] | |||
Convertible Preferred Stock (Textual) | |||
Series A preferred stock shares sold for cash | 3,278,000 | ||
Consideration received on sale of Series A preferred stock | $ 24,582,000 | ||
Series A preferred stock, Dividend rate | 7.00% | ||
Conversion term for series A preferred stock | Holders of Series A are entitled to a liquidation preference equal to the stated value of their preferred shares (i.e., $7.50 per share) plus accrued but unpaid dividends. Holders of Series A may presently convert each share of their Series A into 0.75 shares of our common stock. | ||
Series A preferred stock shares issued in conversion of dividends | 423,000 | ||
Series A preferred stock value issued in conversion of dividends | $ 2,959,000 | ||
Aggregate shares of common stock, Warrants | 431,954 | ||
Convertible preferred stock, shares issued upon conversion | 693,000 | ||
Conversion of stock, shares converted into common stock | 520,000 | ||
Exercise price | $ 12.50 | ||
Preferred stock, liquidation preference per share | $ 7.50 | ||
Series A preferred stock outstanding | 2,738,000 | ||
Series A preferred stock issuance costs | $ 2,838,000 | ||
Fair value of warrants | $ 428,000 | ||
Weighted average remaining life of warrants outstanding | 11 months 5 days | 1 year 5 months 5 days | |
Preferred stock redemption terms | We may redeem Series A shares at a price equal to 110% of their liquidation preference ($7.50 per share) at any time. | ||
Redeemed shares of Series A preferred stock | 277,000 | ||
Cumulative dividends rate, Percentage | 10.00% |
Redeemable Preferred Stock (Det
Redeemable Preferred Stock (Details) | 3 Months Ended | 6 Months Ended |
Jun. 30, 2016USD ($)$ / sharesshares | Jun. 30, 2016USD ($)Tradingdays$ / sharesshares | |
Subsidiary, Sale of Stock [Line Items] | ||
Minimum conversion price | $ / shares | $ 15 | $ 15 |
Number of trading days | Tradingdays | 20 | |
Proceeds from redeemable preferred stock | $ | $ 9,472,673 | $ 10,501,209 |
Series A 7% redeemable preferred stocks [Member] | ||
Subsidiary, Sale of Stock [Line Items] | ||
Company offering shares of convertible redeemable preferred stock | shares | 100,000 | |
Offering price of series redeemable preferred stock | $ / shares | $ 1,000 | $ 1,000 |
Redeemable preferred stock par value per share | $ / shares | $ 1,000 | $ 1,000 |
Dividend rate of convertible redeemable preferred stock | 7.00% | |
Preferred stock redemption percentage | 15.00% | |
Redeemable Preferred Stock [Member] | ||
Subsidiary, Sale of Stock [Line Items] | ||
Proceeds from redeemable preferred stock | $ | $ 72,000 | |
Redeemable Preferred Stock For Sale | $ | $ 7,000 | |
Redeemable preferred stock, shares issued | shares | 7,155 | 7,155 |
GWG MCA Capital, Inc - 9% Pre56
GWG MCA Capital, Inc - 9% Preferred Stock (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2016 | Mar. 31, 2016 | Jun. 30, 2016 | |
Subsidiary, Sale of Stock [Line Items] | |||
Proceeds from redeemable preferred stock | $ 9,472,673 | $ 10,501,209 | |
Redeemable Preferred Stock [Member] | |||
Subsidiary, Sale of Stock [Line Items] | |||
Proceeds from redeemable preferred stock | 72,000 | ||
Redeemable Preferred Stock For Sale | $ 7,000 | ||
Redeemable preferred stock, shares issued | 7,155 | 7,155 | |
Private Placement [Member] | |||
Subsidiary, Sale of Stock [Line Items] | |||
Preferred stock shares sold for cash, shares | 2,000,000 | ||
Preferred stock, sale price per share | $ 10 | ||
Percentage of preferred stock issued | 9.00% |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | |
Current: | |||||
Federal | $ (23,000) | $ (182,000) | $ 141,000 | ||
State | (6,000) | (64,000) | 40,000 | ||
Total current tax expense (benefit) | (29,000) | (246,000) | 0 | 181,000 | $ 0 |
Deferred: | |||||
Federal | 1,397,000 | (670,000) | 2,203,000 | 984,000 | |
State | 454,000 | (261,000) | 704,000 | 268,000 | |
Total deferred tax expense (benefit) | 1,851,018 | (930,470) | 2,906,747 | 1,251,781 | |
Total income tax expense (benefit) | $ 1,822,030 | $ (1,176,643) | $ 2,906,747 | $ 1,432,728 |
Income Taxes (Details Textual)
Income Taxes (Details Textual) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | |
Income Taxes (Textual) | |||||
Income tax liability current | $ (29,000) | $ (246,000) | $ 0 | $ 181,000 | $ 0 |
Accrual of non-deductible preferred stock dividend expense | $ 1,112,000 |
Common Stock (Details)
Common Stock (Details) - GWG MCA Capital, Inc. (Member) - USD ($) $ / shares in Units, $ in Millions | 1 Months Ended | |||
Apr. 25, 2016 | Mar. 17, 2016 | Jun. 24, 2015 | Sep. 30, 2014 | |
Common Stock (Textual) | ||||
Restricted Common stock issued | 25,000 | 6,500 | 60,000 | 800,000 |
Common stock, par value | $ 6.25 | $ 7.16 | $ 9.70 | $ 12.50 |
Net proceeds | $ 8.6 |
Stock Incentive Plan (Details)
Stock Incentive Plan (Details) - shares | 6 Months Ended | 12 Months Ended |
Jun. 30, 2016 | Dec. 31, 2015 | |
Outstanding stock options | ||
Beginning Balance | 1,053,615 | 1,000,101 |
Granted during the year | 82,750 | 353,200 |
Vested during the year | ||
Exercised during the year | (27,667) | |
Forfeited during the year | (25,500) | (272,019) |
Ending Balance | 1,110,865 | 1,053,615 |
Vested [Member] | ||
Outstanding stock options | ||
Beginning Balance | 483,703 | 314,288 |
Granted during the year | 15,000 | 79,500 |
Vested during the year | 84,917 | 238,999 |
Exercised during the year | (27,667) | |
Forfeited during the year | (6,424) | (121,417) |
Ending Balance | 577,196 | 483,703 |
Un-vested [Member] | ||
Outstanding stock options | ||
Beginning Balance | 569,912 | 685,813 |
Granted during the year | 67,750 | 273,700 |
Vested during the year | (84,917) | (238,999) |
Exercised during the year | ||
Forfeited during the year | (19,076) | (150,602) |
Ending Balance | 533,669 | 569,912 |
Stock Incentive Plan (Details T
Stock Incentive Plan (Details Textual) - USD ($) | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2016 | Dec. 31, 2015 | Mar. 31, 2013 | |
Stock Incentive Plan (Textual) | |||
Number of shares issued to employees, officers and directors | 82,750 | 353,200 | |
Options vesting period | 3 years | ||
Forfeited during the year | 25,500 | 272,019 | |
Compensation expense related to un-vested options not yet recognized | $ 475,000 | ||
Compensation expense related to un-vested options, period of recognition | 3 years | ||
Compensation Expense in 2016 | $ 173,000 | ||
Compensation Expense in 2017 | 208,000 | ||
Compensation Expense in 2018 | 72,000 | ||
Compensation Expense in 2019 | $ 22,000 | ||
Exercised during the year | 27,667 | ||
Common Stock [Member] | |||
Stock Incentive Plan (Textual) | |||
Number of shares issued to employees, officers and directors | 1,110,865 | ||
Number of options vested | 577,196 | ||
Others [Member] | Maximum [Member] | |||
Stock Incentive Plan (Textual) | |||
Exercise Price | $ 10.25 | ||
Others [Member] | Minimum [Member] | |||
Stock Incentive Plan (Textual) | |||
Exercise Price | 6 | ||
Owning more than 10% [Member] | Maximum [Member] | |||
Stock Incentive Plan (Textual) | |||
Exercise Price | 10.18 | ||
Owning more than 10% [Member] | Minimum [Member] | |||
Stock Incentive Plan (Textual) | |||
Exercise Price | $ 6.35 | ||
2013 Stock Incentive Plan [Member] | |||
Stock Incentive Plan (Textual) | |||
Number of shares issuable | 2,000,000 | ||
Stock based compensation, Method used | The annual volatility rate is based on the standard deviation of the average continuously compounded rate of return of five selected comparable companies over the previous 52 weeks. | ||
Expected volatility rate | 26.60% | ||
2013 Stock Incentive Plan [Member] | Common Stock [Member] | |||
Stock Incentive Plan (Textual) | |||
Forfeited during the year | 360,685 | ||
Forfeited during the year, Percent | 15.00% | ||
Exercised during the year | 28,001 |
Commitments (Details)
Commitments (Details) | Jun. 30, 2016USD ($) |
Summary of Minimum lease payments under the lease agreement | |
Six months ending December 31, 2016 | $ 87,000 |
2,017 | 178,000 |
2,018 | 185,000 |
2,019 | 191,000 |
2,020 | 198,000 |
2,021 | 204,000 |
2,022 | 210,000 |
2,023 | 217,000 |
2,024 | 223,000 |
2,025 | 230,000 |
2,026 | 38,000 |
Total | $ 1,961,000 |
Commitments (Details Textual)
Commitments (Details Textual) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2016USD ($)ft² | Jun. 30, 2015USD ($) | Jun. 30, 2016USD ($)ft² | Jun. 30, 2015USD ($) | Sep. 01, 2015ft² | |
Commitments (Textual) | |||||
Office space in square feet | ft² | 11,695 | 11,695 | 17,687 | ||
Lease term date | Aug. 31, 2015 | ||||
Rent expenses | $ | $ 123,000 | $ 55,000 | $ 232,000 | $ 122,000 | |
Description of lessor leasing arrangements | On September 1, 2015, we entered into an amendment to this lease that expanded the leased space to 17,687 square feet and extended the term through August 31, 2025 |
Guarantee of L Bonds (Details)
Guarantee of L Bonds (Details) - USD ($) | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2014 |
A S S E T S | ||||||
Cash and cash equivalents | $ 17,379,350 | $ 10,998,625 | $ 34,425,105 | $ 38,198,189 | $ 36,190,527 | $ 30,662,704 |
Restricted cash | 11,160,793 | 2,341,900 | ||||
Investment in life insurance contracts, at fair value | 431,820,437 | 356,649,715 | ||||
Secured MCA advances | 4,328,317 | |||||
Life insurance contract benefits receivable | 6,829,022 | |||||
Other assets | 3,510,443 | 2,461,045 | ||||
Investment in subsidiaries | ||||||
TOTAL ASSETS | 475,028,362 | 395,877,765 | ||||
LIABILITIES | ||||||
Revolving senior credit facility | 77,475,992 | 63,279,596 | ||||
Series I Secured Notes | 17,965,653 | 23,287,704 | ||||
L Bonds | 327,322,906 | 276,482,796 | ||||
Notes payable to related parties | ||||||
Accounts payable | 2,529,206 | 1,517,440 | ||||
Interest payable | 13,323,746 | 12,340,061 | ||||
Other accrued expenses | 1,355,266 | 1,060,786 | ||||
Deferred taxes, net | 4,670,715 | 1,763,968 | ||||
TOTAL LIABILITIES | 444,643,484 | 379,732,351 | ||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||
Member capital | ||||||
Convertible preferred stock | 20,445,320 | 20,784,841 | ||||
Redeemable preferred stock | 12,212,767 | |||||
MCA preferred stock | 71,555 | |||||
Common stock | 5,975 | 5,942 | ||||
Additional paid-in capital | 16,488,390 | 17,149,391 | ||||
Accumulated deficit | (18,839,129) | (21,794,760) | ||||
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | 30,384,878 | 16,145,414 | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | 475,028,362 | 395,877,765 | ||||
Parent [Member] | ||||||
A S S E T S | ||||||
Cash and cash equivalents | 10,051,621 | 6,274,035 | 32,292,162 | 37,814,528 | 34,762,097 | 30,446,473 |
Restricted cash | ||||||
Investment in life insurance contracts, at fair value | ||||||
Secured MCA advances | ||||||
Life insurance contract benefits receivable | ||||||
Other assets | 4,901,911 | 1,742,074 | ||||
Investment in subsidiaries | 358,804,767 | 269,886,254 | ||||
TOTAL ASSETS | 373,758,299 | 303,920,490 | ||||
LIABILITIES | ||||||
Revolving senior credit facility | ||||||
Series I Secured Notes | ||||||
L Bonds | 327,322,906 | 276,482,796 | ||||
Notes payable to related parties | ||||||
Accounts payable | 1,270,216 | 280,988 | ||||
Interest payable | 9,493,254 | 8,529,959 | ||||
Other accrued expenses | 680,545 | 717,365 | ||||
Deferred taxes, net | 4,670,715 | 1,763,968 | ||||
TOTAL LIABILITIES | 343,437,636 | 287,775,076 | ||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||
Member capital | ||||||
Convertible preferred stock | 20,445,320 | 20,784,841 | ||||
Redeemable preferred stock | 12,212,767 | |||||
Common stock | 5,975 | 5,942 | ||||
Additional paid-in capital | 16,495,730 | 17,149,391 | ||||
Accumulated deficit | (18,839,129) | (21,794,760) | ||||
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | 30,320,663 | 16,145,414 | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | 373,758,299 | 303,920,490 | ||||
Guarantor Subsidiary [Member] | ||||||
A S S E T S | ||||||
Cash and cash equivalents | 6,822,484 | 4,340,365 | 1,982,722 | 233,553 | 1,278,378 | 216,231 |
Restricted cash | 4,924,308 | 2,102,257 | ||||
Investment in life insurance contracts, at fair value | ||||||
Secured MCA advances | ||||||
Life insurance contract benefits receivable | ||||||
Other assets | 1,367,483 | 688,071 | ||||
Investment in subsidiaries | 363,647,320 | 291,295,951 | ||||
TOTAL ASSETS | 376,761,595 | 296,069,001 | ||||
LIABILITIES | ||||||
Revolving senior credit facility | (2,639,306) | (1,000,000) | ||||
Series I Secured Notes | 17,965,653 | 23,287,704 | ||||
L Bonds | ||||||
Notes payable to related parties | ||||||
Accounts payable | 462,220 | 157,217 | ||||
Interest payable | 3,502,812 | 3,544,626 | ||||
Other accrued expenses | 589,682 | 343,421 | ||||
Deferred taxes, net | ||||||
TOTAL LIABILITIES | 19,881,061 | 26,332,968 | ||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||
Member capital | 356,880,534 | 269,736,033 | ||||
Convertible preferred stock | ||||||
Redeemable preferred stock | ||||||
Common stock | ||||||
Additional paid-in capital | ||||||
Accumulated deficit | ||||||
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | 356,880,534 | 269,736,033 | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | 376,761,595 | 296,069,001 | ||||
Non-Guarantor Subsidiaries [Member] | ||||||
A S S E T S | ||||||
Cash and cash equivalents | 505,245 | 384,225 | 150,221 | 150,108 | 150,052 | |
Restricted cash | 6,236,485 | 239,643 | ||||
Investment in life insurance contracts, at fair value | 431,820,437 | 356,649,715 | ||||
Secured MCA advances | 4,328,317 | |||||
Life insurance contract benefits receivable | 6,829,022 | |||||
Other assets | 30,926 | 30,900 | ||||
Investment in subsidiaries | ||||||
TOTAL ASSETS | 449,750,432 | 357,070,479 | ||||
LIABILITIES | ||||||
Revolving senior credit facility | 80,115,298 | 64,279,596 | ||||
Series I Secured Notes | ||||||
L Bonds | ||||||
Notes payable to related parties | 2,700,000 | |||||
Accounts payable | 796,770 | 1,079,235 | ||||
Interest payable | 417,557 | 265,476 | ||||
Other accrued expenses | 85,039 | |||||
Deferred taxes, net | ||||||
TOTAL LIABILITIES | 84,114,664 | 65,624,307 | ||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||
Member capital | 365,571,553 | 291,446,172 | ||||
Convertible preferred stock | ||||||
Redeemable preferred stock | ||||||
MCA preferred stock | 71,555 | |||||
Common stock | ||||||
Additional paid-in capital | (7,340) | |||||
Accumulated deficit | ||||||
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | 365,635,768 | 291,446,172 | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | 449,750,432 | 357,070,479 | ||||
Eliminations [Member] | ||||||
A S S E T S | ||||||
Cash and cash equivalents | ||||||
Restricted cash | ||||||
Investment in life insurance contracts, at fair value | ||||||
Secured MCA advances | ||||||
Life insurance contract benefits receivable | ||||||
Other assets | (2,789,877) | |||||
Investment in subsidiaries | (722,452,087) | (561,182,205) | ||||
TOTAL ASSETS | (725,241,964) | (561,182,205) | ||||
LIABILITIES | ||||||
Revolving senior credit facility | ||||||
Series I Secured Notes | ||||||
L Bonds | ||||||
Notes payable to related parties | (2,700,000) | |||||
Accounts payable | ||||||
Interest payable | (89,877) | |||||
Other accrued expenses | ||||||
Deferred taxes, net | ||||||
TOTAL LIABILITIES | (2,789,877) | |||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||
Member capital | (722,452,087) | (561,182,205) | ||||
Convertible preferred stock | ||||||
Redeemable preferred stock | ||||||
Common stock | ||||||
Additional paid-in capital | ||||||
Accumulated deficit | ||||||
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | (722,452,087) | (561,182,205) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ (725,241,964) | $ (561,182,205) |
Guarantee of L Bonds (Details 1
Guarantee of L Bonds (Details 1) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | |
REVENUE | |||||
Origination and servicing income | |||||
Gain on life insurance contracts, net | $ 20,383,347 | 8,473,886 | 38,097,059 | 25,257,295 | |
MCA income | 223,255 | 368,216 | |||
Interest and other income | 170,880 | 90,380 | 216,100 | 139,676 | |
TOTAL REVENUE | 20,777,482 | 8,564,266 | 38,681,375 | 25,396,971 | |
EXPENSES | |||||
Origination and servicing fees | |||||
Interest expense | 10,365,581 | 7,322,347 | 20,025,966 | 14,498,881 | |
Employee compensation and benefits | 3,071,507 | 2,144,725 | 5,537,705 | 3,872,642 | |
Legal and professional fees | 1,304,353 | 642,931 | 2,510,481 | 1,166,184 | |
Other expenses | 2,332,685 | 1,881,321 | 4,744,845 | 3,415,060 | |
TOTAL EXPENSES | 17,074,126 | 11,991,324 | 32,818,997 | 22,952,767 | |
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES | 3,703,356 | (3,427,058) | 5,862,378 | 2,444,204 | |
EQUITY IN INCOME OF SUBSIDIARY | |||||
INCOME BEFORE INCOME TAXES | 3,703,356 | (3,427,058) | 5,862,378 | 2,444,204 | |
INCOME TAX EXPENSE | 1,822,030 | (1,176,643) | 2,906,747 | 1,432,728 | |
NET INCOME | 1,881,326 | (2,250,415) | 2,955,631 | 1,011,476 | $ (7,393,274) |
Parent [Member] | |||||
REVENUE | |||||
Origination and servicing income | |||||
Gain on life insurance contracts, net | |||||
MCA income | |||||
Interest and other income | 71,222 | 17,480 | 106,019 | 25,023 | |
TOTAL REVENUE | 71,222 | 17,480 | 106,019 | 25,023 | |
EXPENSES | |||||
Origination and servicing fees | |||||
Interest expense | 8,131,369 | 5,781,796 | 15,730,192 | 11,031,758 | |
Employee compensation and benefits | 1,638,893 | 1,605,795 | 3,175,323 | 2,911,596 | |
Legal and professional fees | 783,596 | 351,507 | 1,378,335 | 828,858 | |
Other expenses | 1,519,349 | 1,104,826 | 2,777,326 | 2,056,188 | |
TOTAL EXPENSES | 12,073,207 | 8,843,924 | 23,061,176 | 16,828,400 | |
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES | (12,001,985) | (8,826,444) | (22,955,157) | (16,803,377) | |
EQUITY IN INCOME OF SUBSIDIARY | 15,705,341 | 5,399,386 | 28,817,535 | 19,247,581 | |
INCOME BEFORE INCOME TAXES | 3,703,356 | (3,427,058) | 5,862,378 | 2,444,204 | |
INCOME TAX EXPENSE | 1,822,030 | (1,176,643) | 2,906,747 | 1,432,728 | |
NET INCOME | 1,881,326 | (2,250,415) | 2,955,631 | 1,011,476 | |
Guarantor Subsidiary [Member] | |||||
REVENUE | |||||
Origination and servicing income | 661,264 | 13,417 | 1,018,750 | ||
Gain on life insurance contracts, net | |||||
MCA income | |||||
Interest and other income | 706 | 430 | 1,012 | 6,880 | |
TOTAL REVENUE | 706 | 661,694 | 14,429 | 1,025,630 | |
EXPENSES | |||||
Origination and servicing fees | |||||
Interest expense | 644,735 | 684,879 | 1,301,971 | 1,458,965 | |
Employee compensation and benefits | 1,283,968 | 538,930 | 2,113,049 | 961,046 | |
Legal and professional fees | 476,505 | 291,424 | 1,011,155 | 337,326 | |
Other expenses | 425,354 | 732,243 | 1,394,028 | 1,302,036 | |
TOTAL EXPENSES | 2,830,562 | 2,247,476 | 5,820,203 | 4,059,373 | |
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES | (2,829,856) | (1,585,782) | (5,805,774) | (3,033,743) | |
EQUITY IN INCOME OF SUBSIDIARY | 18,835,036 | 6,985,112 | 35,136,402 | 22,281,217 | |
INCOME BEFORE INCOME TAXES | 16,005,180 | 5,399,330 | 29,330,628 | 19,247,474 | |
INCOME TAX EXPENSE | |||||
NET INCOME | 16,005,180 | 5,399,330 | 29,330,628 | 19,247,474 | |
Non-Guarantor Subsidiaries [Member] | |||||
REVENUE | |||||
Origination and servicing income | |||||
Gain on life insurance contracts, net | 20,383,347 | 8,473,886 | 38,097,059 | 25,257,295 | |
MCA income | 223,255 | 368,216 | |||
Interest and other income | 157,927 | 72,470 | 198,946 | 107,773 | |
TOTAL REVENUE | 20,764,529 | 8,546,356 | 38,664,221 | 25,365,068 | |
EXPENSES | |||||
Origination and servicing fees | 661,264 | 13,417 | 1,018,750 | ||
Interest expense | 1,648,452 | 855,672 | 3,083,680 | 2,008,158 | |
Employee compensation and benefits | 148,646 | 249,333 | |||
Legal and professional fees | 44,252 | 120,991 | |||
Other expenses | 387,982 | 44,252 | 573,491 | 56,836 | |
TOTAL EXPENSES | 2,229,332 | 1,561,188 | 4,040,912 | 3,083,744 | |
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES | 18,535,197 | 6,985,168 | 34,623,309 | 22,281,324 | |
EQUITY IN INCOME OF SUBSIDIARY | |||||
INCOME BEFORE INCOME TAXES | 18,535,197 | 6,985,168 | 34,623,309 | 22,281,324 | |
INCOME TAX EXPENSE | |||||
NET INCOME | 18,535,197 | 6,985,168 | 34,623,309 | 22,281,324 | |
Eliminations [Member] | |||||
REVENUE | |||||
Origination and servicing income | (661,264) | (13,417) | (1,018,750) | ||
Gain on life insurance contracts, net | |||||
MCA income | |||||
Interest and other income | (58,975) | (89,877) | |||
TOTAL REVENUE | (58,975) | (661,264) | (103,294) | (1,018,750) | |
EXPENSES | |||||
Origination and servicing fees | (661,264) | (13,417) | (1,018,750) | ||
Interest expense | (58,975) | (89,877) | |||
Employee compensation and benefits | |||||
Legal and professional fees | |||||
Other expenses | |||||
TOTAL EXPENSES | (58,975) | (661,264) | (103,294) | (1,018,750) | |
INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES | |||||
EQUITY IN INCOME OF SUBSIDIARY | (34,540,377) | (12,384,498) | (63,953,937) | (41,528,798) | |
INCOME BEFORE INCOME TAXES | (34,540,377) | (12,384,498) | (63,953,937) | (41,528,798) | |
INCOME TAX EXPENSE | |||||
NET INCOME | $ (34,540,377) | $ (12,384,498) | $ (63,953,937) | $ (41,528,798) |
Guarantee of L Bonds (Details 2
Guarantee of L Bonds (Details 2) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES | |||||
Net income | $ 1,881,326 | $ (2,250,415) | $ 2,955,631 | $ 1,011,476 | $ (7,393,274) |
Adjustments to reconcile net income to net cash flows from operating activities: | |||||
(Equity) of subsidiaries | |||||
Gain on life insurance contracts | (21,241,376) | (14,028,327) | (32,772,929) | (12,134,482) | |
Amortization of deferred financing and issuance costs | 2,527,974 | 507,026 | 3,312,162 | (42,004) | |
Deferred income taxes | 1,851,018 | (930,470) | 2,906,747 | 1,251,781 | |
Preferred stock dividends payable | 166,472 | 146,420 | 330,049 | 335,232 | |
(Increase) in operating assets: | |||||
Life insurance contract benefits receivable | 9,083,817 | 17,140,000 | (6,829,022) | (750,000) | |
Other assets | (1,210,892) | (225,376) | (1,037,466) | (356,549) | |
Increase (decrease) in operating liabilities: | |||||
Due to related party | (1,814,173) | (101,781) | |||
Accounts payable and accrued expenses | (775,213) | (1,333,241) | (1,440,926) | 1,302,446 | |
NET CASH FLOWS USED IN OPERATING ACTIVITIES | (9,531,047) | (974,383) | (30,043,853) | (9,382,100) | |
CASH FLOWS FROM INVESTING ACTIVITIES | |||||
Investment in life insurance contracts | (24,373,714) | (7,777,541) | (48,700,036) | (10,224,018) | |
Carrying value of matured life insurance contracts | 1,691,764 | 132,388 | 6,302,243 | 3,742,983 | |
Investment in Secured MCA advances | (1,293,829) | (5,647,414) | |||
Proceeds from Secured MCA advances | 907,649 | 1,025,792 | |||
NET CASH FLOWS UESD IN INVESTING ACTIVITIES | (23,068,130) | (7,645,153) | (47,019,415) | (6,481,035) | |
CASH FLOWS FROM FINANCING ACTIVITIES | |||||
Net borrowings on Senior Revolving Credit Facility | (3,000,000) | (7,150,000) | 17,000,000 | (7,150,000) | |
Payments for redemption of Series I Secured Notes | (485,350) | (2,344,355) | (5,722,743) | (3,617,544) | |
Proceeds from issuance of L Bonds | 36,757,771 | 22,538,059 | 71,126,660 | 50,498,356 | |
Payments for redemption and issuance of L Bonds | (11,753,782) | (6,134,935) | (22,663,475) | (13,013,057) | |
Proceeds from (increase in) restricted cash | 8,667,826 | 3,410,427 | (8,818,894) | (3,627,137) | |
Issuance of common stock | 166,125 | 582,000 | 212,670 | 582,000 | |
Proceeds from issuance of preferred stock | 9,472,673 | 10,501,209 | |||
Payments for issuance and redemption of preferred stock | 9,472,673 | 10,501,209 | |||
Issuance of member capital | |||||
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 38,979,902 | 10,627,198 | 60,017,513 | 23,398,620 | |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 6,380,725 | 2,007,662 | (17,045,755) | 7,535,485 | |
CASH AND CASH EQUIVALENTS | |||||
BEGINNING OF PERIOD | 10,998,625 | 36,190,527 | 34,425,105 | 30,662,704 | 30,662,704 |
END OF PERIOD | 17,379,350 | 38,198,189 | 17,379,350 | 38,198,189 | 34,425,105 |
Parent [Member] | |||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||
Net income | 1,881,326 | (2,250,415) | 2,955,631 | 1,011,476 | |
Adjustments to reconcile net income to net cash flows from operating activities: | |||||
(Equity) of subsidiaries | (15,705,341) | (5,399,386) | (28,817,535) | (19,247,581) | |
Gain on life insurance contracts | |||||
Amortization of deferred financing and issuance costs | 2,261,032 | 1,685,700 | 3,909,923 | 1,729,175 | |
Deferred income taxes | 1,851,018 | (930,470) | 2,906,747 | 1,251,781 | |
Preferred stock dividends payable | 166,472 | (1,192,756) | 330,049 | 335,232 | |
(Increase) in operating assets: | |||||
Life insurance contract benefits receivable | |||||
Other assets | (21,796,633) | (7,124,387) | (60,457,838) | (17,998,823) | |
Increase (decrease) in operating liabilities: | |||||
Due to related party | (71,975) | (2,802,976) | |||
Accounts payable and accrued expenses | 1,458,476 | 213,843 | 2,240,523 | 2,493,495 | |
NET CASH FLOWS USED IN OPERATING ACTIVITIES | (29,955,625) | (13,658,695) | (79,735,476) | (30,425,246) | |
CASH FLOWS FROM INVESTING ACTIVITIES | |||||
Investment in life insurance contracts | |||||
Carrying value of matured life insurance contracts | |||||
Investment in Secured MCA advances | |||||
Proceeds from Secured MCA advances | |||||
NET CASH FLOWS UESD IN INVESTING ACTIVITIES | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||
Net borrowings on Senior Revolving Credit Facility | |||||
Payments for redemption of Series I Secured Notes | |||||
Proceeds from issuance of L Bonds | 36,757,771 | 22,538,059 | 71,126,660 | 50,498,356 | |
Payments for redemption and issuance of L Bonds | (11,753,782) | (6,134,935) | (22,663,475) | (13,013,057) | |
Proceeds from (increase in) restricted cash | |||||
Issuance of common stock | 166,125 | 582,000 | 212,670 | 582,000 | |
Proceeds from issuance of preferred stock | 9,401,118 | 10,429,654 | |||
Payments for issuance and redemption of preferred stock | (838,021) | (273,998) | (1,610,574) | (273,998) | |
Issuance of member capital | |||||
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 33,733,211 | 16,711,126 | 57,494,935 | 37,793,301 | |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 3,777,586 | 3,052,431 | (22,240,541) | 7,368,055 | |
CASH AND CASH EQUIVALENTS | |||||
BEGINNING OF PERIOD | 6,274,035 | 34,762,097 | 32,292,162 | 30,446,473 | 30,446,473 |
END OF PERIOD | 10,051,621 | 37,814,528 | 10,051,621 | 37,814,528 | 32,292,162 |
Guarantor Subsidiary [Member] | |||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||
Net income | 16,005,180 | 5,399,330 | 29,330,628 | 19,247,474 | |
Adjustments to reconcile net income to net cash flows from operating activities: | |||||
(Equity) of subsidiaries | (18,835,036) | (6,985,112) | (35,136,402) | (22,281,217) | |
Gain on life insurance contracts | |||||
Amortization of deferred financing and issuance costs | (282,257) | 80,928 | (1,446,463) | 211,116 | |
Deferred income taxes | |||||
Preferred stock dividends payable | |||||
(Increase) in operating assets: | |||||
Life insurance contract benefits receivable | |||||
Other assets | (12,903,506) | (5,236,604) | (37,895,574) | (11,114,039) | |
Increase (decrease) in operating liabilities: | |||||
Due to related party | 17,802 | 1,195 | |||
Accounts payable and accrued expenses | 130,596 | (509,444) | 717,298 | 228,640 | |
NET CASH FLOWS USED IN OPERATING ACTIVITIES | (15,867,221) | (7,250,902) | (44,429,318) | (13,708,025) | |
CASH FLOWS FROM INVESTING ACTIVITIES | |||||
Investment in life insurance contracts | |||||
Carrying value of matured life insurance contracts | |||||
Investment in Secured MCA advances | |||||
Proceeds from Secured MCA advances | |||||
NET CASH FLOWS UESD IN INVESTING ACTIVITIES | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||
Net borrowings on Senior Revolving Credit Facility | |||||
Payments for redemption of Series I Secured Notes | (485,350) | (2,344,355) | (5,722,743) | (3,617,544) | |
Proceeds from issuance of L Bonds | |||||
Payments for redemption and issuance of L Bonds | |||||
Proceeds from (increase in) restricted cash | (116,672) | 1,677,500 | (2,822,051) | (102,500) | |
Issuance of common stock | |||||
Proceeds from issuance of preferred stock | |||||
Payments for issuance and redemption of preferred stock | |||||
Issuance of member capital | 18,951,362 | 6,872,932 | 57,813,874 | 17,445,391 | |
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 18,349,340 | 6,206,077 | 49,269,080 | 13,725,347 | |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 2,482,119 | (1,044,825) | 4,839,762 | 17,322 | |
CASH AND CASH EQUIVALENTS | |||||
BEGINNING OF PERIOD | 4,340,365 | 1,278,378 | 1,982,722 | 216,231 | 216,231 |
END OF PERIOD | 6,822,484 | 233,553 | 6,822,484 | 233,553 | 1,982,722 |
Non-Guarantor Subsidiaries [Member] | |||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||
Net income | 18,535,197 | 6,985,168 | 34,623,309 | 22,281,324 | |
Adjustments to reconcile net income to net cash flows from operating activities: | |||||
(Equity) of subsidiaries | |||||
Gain on life insurance contracts | (21,241,376) | (14,028,327) | (32,772,929) | (12,134,482) | |
Amortization of deferred financing and issuance costs | 549,199 | (1,259,602) | 848,702 | (1,982,295) | |
Deferred income taxes | |||||
Preferred stock dividends payable | |||||
(Increase) in operating assets: | |||||
Life insurance contract benefits receivable | 9,083,817 | 17,140,000 | (6,829,022) | (750,000) | |
Other assets | |||||
Increase (decrease) in operating liabilities: | |||||
Due to related party | (1,760,000) | 2,700,000 | |||
Accounts payable and accrued expenses | (2,364,285) | (1,037,640) | (1,765,065) | (1,419,689) | |
NET CASH FLOWS USED IN OPERATING ACTIVITIES | 2,802,552 | 7,799,599 | (3,195,005) | (5,994,858) | |
CASH FLOWS FROM INVESTING ACTIVITIES | |||||
Investment in life insurance contracts | (24,373,714) | (7,777,541) | (48,700,036) | (10,224,018) | |
Carrying value of matured life insurance contracts | 1,691,764 | 132,388 | 6,302,243 | 3,742,983 | |
Investment in Secured MCA advances | (1,293,829) | (5,647,414) | |||
Proceeds from Secured MCA advances | 907,649 | 1,025,792 | |||
NET CASH FLOWS UESD IN INVESTING ACTIVITIES | (23,068,130) | (7,645,153) | (47,019,415) | (6,481,035) | |
CASH FLOWS FROM FINANCING ACTIVITIES | |||||
Net borrowings on Senior Revolving Credit Facility | (3,000,000) | (7,150,000) | 17,000,000 | (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 (increase in) restricted cash | 8,784,498 | 1,732,927 | (5,996,843) | (3,524,637) | |
Issuance of common stock | |||||
Proceeds from issuance of preferred stock | 71,555 | 71,555 | |||
Payments for issuance and redemption of preferred stock | (7,340) | (7,340) | |||
Issuance of member capital | 14,537,885 | 5,262,683 | 39,502,072 | 11,310,922 | |
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 20,386,598 | (154,390) | 50,569,444 | 636,285 | |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 121,020 | 56 | 355,024 | 150,108 | |
CASH AND CASH EQUIVALENTS | |||||
BEGINNING OF PERIOD | 384,225 | 150,052 | 150,221 | ||
END OF PERIOD | 505,245 | 150,108 | 505,245 | 150,108 | 150,221 |
Eliminations [Member] | |||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||
Net income | (34,540,377) | (12,384,498) | (63,953,937) | (41,528,798) | |
Adjustments to reconcile net income to net cash flows from operating activities: | |||||
(Equity) of subsidiaries | 34,540,377 | 12,384,498 | 63,953,937 | 41,528,798 | |
Gain on life insurance contracts | |||||
Amortization of deferred financing and issuance costs | |||||
Deferred income taxes | |||||
Preferred stock dividends payable | |||||
(Increase) in operating assets: | |||||
Life insurance contract benefits receivable | |||||
Other assets | 33,489,247 | 12,135,615 | 97,315,946 | 28,756,313 | |
Increase (decrease) in operating liabilities: | |||||
Due to related party | |||||
Accounts payable and accrued expenses | |||||
NET CASH FLOWS USED IN OPERATING ACTIVITIES | 33,489,247 | 12,135,615 | 97,315,946 | 28,756,313 | |
CASH FLOWS FROM INVESTING ACTIVITIES | |||||
Investment in life insurance contracts | |||||
Carrying value of matured life insurance contracts | |||||
Investment in Secured MCA advances | |||||
Proceeds from Secured MCA advances | |||||
NET CASH FLOWS UESD IN INVESTING ACTIVITIES | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||
Net borrowings on Senior 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 (increase in) restricted cash | |||||
Issuance of common stock | |||||
Proceeds from issuance of preferred stock | |||||
Payments for issuance and redemption of preferred stock | |||||
Issuance of member capital | (33,489,247) | (12,135,615) | (97,315,946) | (28,756,313) | |
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | (33,489,247) | (12,135,615) | (97,315,946) | (28,756,313) | |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | |||||
CASH AND CASH EQUIVALENTS | |||||
BEGINNING OF PERIOD | |||||
END OF PERIOD |
Guarantee of L Bonds (Details T
Guarantee of L Bonds (Details Textual) | 6 Months Ended |
Jun. 30, 2016 | |
Guarantee of L Bonds (Textual) | |
Maximum rate of return on equity fund amount | 18.00% |
Concentrations (Details)
Concentrations (Details) | Jun. 30, 2016 | Dec. 31, 2015 | |
AXA Equitable [Member] | |||
Summary of the face value of insurance contracts with specific life insurance companies | |||
Face value percentage of insurance contracts with specific life insurance companies | 15.10% | 14.00% | |
Transamerica [Member] | |||
Summary of the face value of insurance contracts with specific life insurance companies | |||
Face value percentage of insurance contracts with specific life insurance companies | 10.80% | [1] | |
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 | 10.00% | 12.70% | |
[1] | percentage does not exceed 10% of the total face value. |
Concentrations (Details 1)
Concentrations (Details 1) | Jun. 30, 2016 | Dec. 31, 2015 |
California [Member] | ||
Summary of the number of insurance contracts held in specific states exceeding 10% of the total face value held by the Company | ||
Percentage of insurance contracts held in specific states | 21.80% | 25.20% |
Florida [Member] | ||
Summary of the number of insurance contracts held in specific states exceeding 10% of the total face value held by the Company | ||
Percentage of insurance contracts held in specific states | 19.60% | 19.20% |
Concentrations (Details Textual
Concentrations (Details Textual) | 6 Months Ended |
Jun. 30, 2016 | |
Concentrations (Textual) | |
Description of issuance contracts with specific life insurance companies and contracts held in specific states | Exceeding 10% of the total face value |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) | Sep. 01, 2016 | Jun. 30, 2016 |
Subsequent Events (Textual) | ||
Life insurance contract policy benefit | $ 700,000 | |
Realized gains on life insurance policy contract | 452,000 | |
Additional principal amount of L bonds | $ 19,009,000 | |
Subsequent event description | Subsequent to June 30, 2016 , the Company has issued 500 shares of common stock to a vendor as a form of payment for services the vendor provided to the Company. Also, one of our Series A Preferred Stock holders converted 2,600 shares of preferred stock into 1,950 shares of common stock. | |
Gross consideration for RPS shares | 7,336 | |
Gross consideration for rps value | $ 7,336,000 | |
Subsequent Event [Member] | ||
Subsequent Events (Textual) | ||
Subsequent event description | Effective September 1, 2016, we will cease selling 6-month and 1-year L Bonds until further notice. In addition, effective September 1, 2016, the L Bond interest rates will change to 5.50%, 6.25%, 7.50% and 8.50% for the 2-, 3-, 5- and 7-year L Bonds, respectively. |