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Florida
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30-0663473
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer
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¨
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Accelerated filer
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ý
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Page No.
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PART I — FINANCIAL INFORMATION
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PART II — OTHER INFORMATION
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|
•
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our ability to obtain financing on favorable terms or at all;
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•
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our ability to receive distributions from policy proceeds from life insurance policies pledged as collateral under our revolving credit facilities;
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•
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our ability to meet our debt service obligations;
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•
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continuing costs associated with indemnification and cooperation obligations related to the investigation into our legacy premium finance business by the United States Attorneys’ Office for the District of New Hampshire (“USAO”) (the “USAO Investigation”), an investigation by the U.S. Securities and Exchange Commission (“SEC”) (the “SEC Investigation”) and an investigation by the Internal Revenue Services (“IRS”) (the “IRS Investigation”);
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•
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cost and delays in the receipt of death benefits from our portfolio of life insurance policies;
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•
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costs related to obtaining death benefits from our portfolio of life insurance policies;
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•
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our ability to continue to comply with the covenants and other obligations, including the conditions precedent for additional fundings under our revolving credit facilities;
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•
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changes in general economic conditions, including inflation, changes in interest or tax rates and other factors;
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•
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our results of operations;
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•
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our ability to continue to make premium payments on the life insurance policies that we own;
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•
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inaccurate estimates regarding the likelihood and magnitude of death benefits related to life insurance policies that we own;
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•
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increases in premiums on life insurance policies that we own;
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•
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lack of mortalities of insureds of the life insurance policies that we own;
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•
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increases to the discount rates used to value the life insurance policies that we own;
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•
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changes in mortality rates and inaccurate assumptions about life expectancies;
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•
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changes in life expectancy calculation methodologies by third party medical underwriters;
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•
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changes to actuarial life expectancy tables;
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•
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the effect on our financial condition as a result of any lapse of life insurance policies;
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•
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loss of business due to, or litigation arising from, the non-prosecution agreement executed in connection with the USAO Investigation, the SEC Investigation, the IRS Investigation or otherwise;
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•
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our ability to sell the life insurance policies we own at favorable prices, if at all;
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•
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adverse developments in capital markets;
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•
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deterioration of the market for life insurance policies and life settlements;
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•
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increased carrier challenges to the validity of our owned life insurance policies;
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•
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adverse court decisions regarding insurable interest and the obligation of a life insurance carrier to pay death benefits or return premiums;
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•
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challenges to the ownership of the life insurance policies in our portfolio;
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•
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changes in laws and regulations;
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•
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deterioration in the credit worthiness of the life insurance companies that issue the policies included in our portfolio;
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•
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regulation of life settlement transactions as securities;
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•
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liabilities associated with our legacy structured settlement business;
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•
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our failure to maintain the security of personally identifiable information pertaining to insureds and counterparties;
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•
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disruption or breaches of our information technology systems;
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•
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loss of the services of any of our executive officers; and
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•
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the effects of United States involvement in hostilities with other countries and large-scale acts of terrorism, or the threat of hostilities or terrorist acts; and other factors.
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September 30,
2015 |
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December 31,
2014* |
||||
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(Unaudited)
|
|
|
||||
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(In thousands except share data)
|
||||||
ASSETS
|
|
|
|
||||
Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
31,260
|
|
|
$
|
51,166
|
|
Cash and cash equivalents (VIE Note 4)
|
9,157
|
|
|
3,751
|
|
||
Prepaid expenses and other assets
|
1,527
|
|
|
1,502
|
|
||
Deposits - other
|
1,347
|
|
|
1,340
|
|
||
Deposits on purchases of life settlements
|
—
|
|
|
1,630
|
|
||
Structured settlement receivables, at estimated fair value
|
—
|
|
|
384
|
|
||
Structured settlement receivables at cost, net
|
—
|
|
|
597
|
|
||
Life settlements, at estimated fair value
|
13,023
|
|
|
82,575
|
|
||
Life settlements, at estimated fair value (VIE Note 4)
|
444,787
|
|
|
306,311
|
|
||
Receivable for maturity of life settlements (VIE Note 4)
|
10,088
|
|
|
4,000
|
|
||
Fixed assets, net
|
335
|
|
|
355
|
|
||
Investment in affiliates
|
2,384
|
|
|
2,384
|
|
||
Deferred debt costs, net
|
1,907
|
|
|
3,936
|
|
||
Total assets
|
$
|
515,815
|
|
|
$
|
459,931
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Liabilities
|
|
|
|
||||
Accounts payable and accrued expenses
|
$
|
4,817
|
|
|
$
|
6,140
|
|
Accounts payable and accrued expenses (VIE Note 4)
|
388
|
|
|
423
|
|
||
Other liabilities
|
419
|
|
|
1,256
|
|
||
Interest payable - Convertible Notes (Note 11)
|
768
|
|
|
2,272
|
|
||
Convertible Notes, net of discount (Note 11)
|
57,867
|
|
|
55,881
|
|
||
Interest payable - Secured Notes (Note 12)
|
—
|
|
|
261
|
|
||
Secured Notes, net of discount (Note 12)
|
—
|
|
|
24,036
|
|
||
White Eagle Revolving Credit Facility, at estimated fair value (VIE Note 4)
|
157,946
|
|
|
145,831
|
|
||
Red Falcon Revolving Credit Facility, at estimated fair value (VIE Note 4)
|
55,685
|
|
|
—
|
|
||
Deferred tax liability
|
1,524
|
|
|
8,728
|
|
||
Total liabilities
|
279,414
|
|
|
244,828
|
|
||
Commitments and Contingencies (Note 15)
|
|
|
|
||||
Stockholders’ Equity
|
|
|
|
||||
Common stock (par value $0.01 per share, 80,000,000 authorized; 28,130,508 and 21,402,990 issued and outstanding as of September 30, 2015 and December 31, 2014, respectively)
|
281
|
|
|
214
|
|
||
Preferred stock (par value $0.01 per share, 40,000,000 authorized; 0 issued and outstanding as of September 30, 2015 and December 31, 2014)
|
—
|
|
|
—
|
|
||
Treasury Stock, net of cost (65,621 and 0 shares as of September 30, 2015 and December 31, 2014, respectively)
|
(348
|
)
|
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—
|
|
||
Additional paid-in-capital
|
305,389
|
|
|
266,705
|
|
||
Accumulated deficit
|
(68,921
|
)
|
|
(51,816
|
)
|
||
Total stockholders’ equity
|
236,401
|
|
|
215,103
|
|
||
Total liabilities and stockholders’ equity
|
$
|
515,815
|
|
|
$
|
459,931
|
|
|
For the Three Months Ended
September 30, |
|
For the Nine Months Ended
September 30, |
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
(in thousands, except share and per share data)
|
||||||||||||||
Income
|
|
||||||||||||||
Interest income
|
$
|
7
|
|
|
$
|
9
|
|
|
$
|
16
|
|
|
$
|
22
|
|
Loss on life settlements, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(426
|
)
|
||||
Change in fair value of life settlements (Notes 8 & 13)
|
2,667
|
|
|
(3,643
|
)
|
|
43,582
|
|
|
19,313
|
|
||||
Other income
|
95
|
|
|
17
|
|
|
185
|
|
|
72
|
|
||||
Total income (loss)
|
2,769
|
|
|
(3,617
|
)
|
|
43,783
|
|
|
18,981
|
|
||||
Expenses
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
8,614
|
|
|
4,303
|
|
|
21,491
|
|
|
11,165
|
|
||||
Extinguishment of Secured Notes
|
8,782
|
|
|
—
|
|
|
8,782
|
|
|
—
|
|
||||
Change in fair value of Revolving Credit Facilities (Notes 9, 10 & 13)
|
(4,203
|
)
|
|
(8,375
|
)
|
|
13,489
|
|
|
(4,556
|
)
|
||||
Change in fair value of conversion derivative liability (Notes 11 & 13)
|
—
|
|
|
—
|
|
|
—
|
|
|
6,759
|
|
||||
Personnel costs
|
1,945
|
|
|
1,910
|
|
|
5,425
|
|
|
6,627
|
|
||||
Legal fees
|
3,370
|
|
|
2,943
|
|
|
10,345
|
|
|
9,121
|
|
||||
Professional fees
|
1,579
|
|
|
1,143
|
|
|
5,284
|
|
|
3,562
|
|
||||
Insurance
|
309
|
|
|
414
|
|
|
966
|
|
|
1,253
|
|
||||
Other selling, general and administrative expenses
|
585
|
|
|
544
|
|
|
1,671
|
|
|
1,365
|
|
||||
Total expenses
|
20,981
|
|
|
2,882
|
|
|
67,453
|
|
|
35,296
|
|
||||
Income (loss) from continuing operations before income taxes
|
(18,212
|
)
|
|
(6,499
|
)
|
|
(23,670
|
)
|
|
(16,315
|
)
|
||||
Benefit for income taxes
|
4,721
|
|
|
2,235
|
|
|
6,981
|
|
|
2,452
|
|
||||
Net income (loss) from continuing operations
|
$
|
(13,491
|
)
|
|
$
|
(4,264
|
)
|
|
$
|
(16,689
|
)
|
|
$
|
(13,863
|
)
|
Discontinued Operations:
|
|
|
|
|
|
|
|
||||||||
Income (loss) from discontinued operations
|
(147
|
)
|
|
(249
|
)
|
|
(640
|
)
|
|
(454
|
)
|
||||
Benefit for income taxes
|
34
|
|
|
—
|
|
|
224
|
|
|
—
|
|
||||
Net income (loss) from discontinued operations
|
(113
|
)
|
|
(249
|
)
|
|
(416
|
)
|
|
(454
|
)
|
||||
Net income (loss)
|
$
|
(13,604
|
)
|
|
$
|
(4,513
|
)
|
|
$
|
(17,105
|
)
|
|
$
|
(14,317
|
)
|
Basic and diluted income (loss) per share:
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
(0.48
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
(0.70
|
)
|
|
$
|
(0.65
|
)
|
Discontinued operations
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
Net income (loss)
|
$
|
(0.48
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.72
|
)
|
|
$
|
(0.67
|
)
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
28,084,254
|
|
|
21,361,930
|
|
|
23,827,030
|
|
|
21,352,086
|
|
|
Common Stock
|
|
Treasury Stock
|
|
Additional
Paid-in Capital
|
|
Accumulated Deficit
|
|
Total
|
||||||||||||||||
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|||||||||||||||||
|
(in thousands, except share data)
|
||||||||||||||||||||||||
Balance, January 1, 2015
|
21,402,990
|
|
|
$
|
214
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
266,705
|
|
|
$
|
(51,816
|
)
|
|
$
|
215,103
|
|
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17,105
|
)
|
|
(17,105
|
)
|
|||||
Stock-based compensation
|
41,259
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
429
|
|
|
—
|
|
|
429
|
|
|||||
Purchase of treasury stock, net of costs
|
—
|
|
|
—
|
|
|
65,621
|
|
|
(348
|
)
|
|
—
|
|
|
—
|
|
|
(348
|
)
|
|||||
Common stock issued for rights offering, net of costs
|
6,688,433
|
|
|
67
|
|
|
—
|
|
|
—
|
|
|
38,267
|
|
|
—
|
|
|
38,334
|
|
|||||
Retirement of common stock
|
(2,174
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
(12
|
)
|
|||||
Balance, September 30, 2015
|
28,130,508
|
|
|
281
|
|
|
65,621
|
|
|
(348
|
)
|
|
305,389
|
|
|
(68,921
|
)
|
|
236,401
|
|
|
For the Nine Months Ended
September 30, |
||||||
|
2015
|
|
2014
|
||||
|
(In thousands)
|
||||||
Cash flows from operating activities
|
|
|
|
||||
Net income (loss)
|
$
|
(17,105
|
)
|
|
$
|
(14,317
|
)
|
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
|
|
|
||||
Depreciation and amortization
|
74
|
|
|
59
|
|
||
Red Falcon Revolving Credit Facility origination cost
|
3,273
|
|
|
—
|
|
||
White Eagle Revolving Credit Facility financing cost and fees
|
5,566
|
|
|
4,238
|
|
||
Amortization of discount and deferred costs for Convertible Notes
|
2,281
|
|
|
1,648
|
|
||
Amortization of discount and deferred costs for Secured Notes
|
542
|
|
|
—
|
|
||
Stock-based compensation expense
|
429
|
|
|
762
|
|
||
Change in fair value of life settlements
|
(43,582
|
)
|
|
(19,313
|
)
|
||
Unrealized change in fair value of structured settlements
|
(20
|
)
|
|
(24
|
)
|
||
Loss on sale of structured settlements
|
(32
|
)
|
|
—
|
|
||
Change in fair value of Revolving Credit Facilities
|
13,489
|
|
|
(4,556
|
)
|
||
Loss on life settlements, net
|
—
|
|
|
426
|
|
||
Interest income
|
(81
|
)
|
|
(102
|
)
|
||
Extinguishment of Secured Notes
|
8,782
|
|
|
—
|
|
||
Change in fair value of conversion derivative liability
|
—
|
|
|
6,759
|
|
||
Deferred income tax
|
(7,205
|
)
|
|
(2,452
|
)
|
||
Change in assets and liabilities:
|
|
|
|
||||
Restricted cash
|
—
|
|
|
13,506
|
|
||
Deposits - other
|
(654
|
)
|
|
243
|
|
||
Investment in affiliates
|
—
|
|
|
(7
|
)
|
||
Structured settlement receivables
|
1,097
|
|
|
578
|
|
||
Prepaid expenses and other assets
|
(188
|
)
|
|
(413
|
)
|
||
Accounts payable and accrued expenses
|
(1,491
|
)
|
|
2,512
|
|
||
Other liabilities
|
(812
|
)
|
|
(14,301
|
)
|
||
Interest payable - Convertible Notes
|
(1,503
|
)
|
|
768
|
|
||
Interest payable - Secured Notes
|
(261
|
)
|
|
—
|
|
||
Net cash used in operating activities
|
(37,401
|
)
|
|
(23,986
|
)
|
||
Cash flows from investing activities
|
|
|
|
||||
Purchase of fixed assets, net of disposals
|
(47
|
)
|
|
(178
|
)
|
||
Purchase of life settlements
|
(28,904
|
)
|
|
(3,488
|
)
|
||
Premiums paid on life settlements
|
(48,243
|
)
|
|
(40,578
|
)
|
||
Proceeds from sale of life settlements, net
|
—
|
|
|
4,031
|
|
||
Proceeds from maturity of life settlements
|
47,519
|
|
|
13,641
|
|
||
Deposits on purchase of life settlements
|
—
|
|
|
(50
|
)
|
||
Net cash used in investing activities
|
(29,675
|
)
|
|
(26,622
|
)
|
||
Cash flows from financing activities
|
|
|
|
||||
Borrowings from White Eagle Revolving Credit Facility
|
36,880
|
|
|
36,004
|
|
||
Repayment of borrowings under White Eagle Revolving Credit Facility
|
(43,241
|
)
|
|
(17,595
|
)
|
||
Borrowings under Red Falcon Revolving Credit Facility
|
2,967
|
|
|
—
|
|
||
Repayment of borrowings under Red Falcon Revolving Credit Facility
|
(1,863
|
)
|
|
—
|
|
||
Proceeds from Convertible Notes, net
|
—
|
|
|
67,892
|
|
||
Proceeds from rights offering
|
38,458
|
|
|
—
|
|
||
Proceeds from Secured Notes, net
|
23,750
|
|
|
—
|
|
||
Purchase of treasury stock
|
(348
|
)
|
|
—
|
|
||
Payment under finance lease obligations
|
(25
|
)
|
|
—
|
|
||
Extinguishment of Secured Notes
|
(3,570
|
)
|
|
—
|
|
||
Red Falcon Revolving Credit Facility origination costs
|
(427
|
)
|
|
—
|
|
||
Secured Notes deferred costs
|
(5
|
)
|
|
—
|
|
||
Net cash provided by financing activities
|
52,576
|
|
|
86,301
|
|
||
Net decrease/increase in cash and cash equivalents
|
(14,500
|
)
|
|
35,693
|
|
||
Cash and cash equivalents, at beginning of the period
|
54,917
|
|
|
22,699
|
|
||
Cash and cash equivalents, at end of the period
|
$
|
40,417
|
|
|
$
|
58,392
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
||||
Cash paid for interest during the period
|
$
|
12,143
|
|
|
$
|
4,496
|
|
Supplemental disclosures of non-cash financing activities:
|
|
|
|
||||
Interest payment and fees withheld from borrowings by lender
|
$
|
5,566
|
|
|
$
|
4,962
|
|
Red Falcon Revolving Credit Facility origination cost paid to lender
|
$
|
2,200
|
|
|
—
|
|
|
Repayment of Secured Notes by lender of Red Falcon Revolving Credit Facility
|
$
|
51,800
|
|
|
—
|
|
|
Borrowings under Red Falcon Revolving Credit Facility
|
$
|
54,000
|
|
|
—
|
|
|
Primary Beneficiary
|
|
Not Primary
Beneficiary
|
||||||||||||
|
Consolidated VIEs
|
|
Non-consolidated VIEs
|
||||||||||||
|
Assets
|
|
Liabilities
|
|
Total
Assets
|
|
Maximum
Exposure
To Loss
|
||||||||
September 30, 2015
|
$
|
464,032
|
|
|
$
|
214,019
|
|
|
$
|
2,384
|
|
|
$
|
2,384
|
|
December 31, 2014
|
$
|
314,062
|
|
|
$
|
146,254
|
|
|
$
|
2,384
|
|
|
$
|
2,384
|
|
|
For the Three Months Ended
September 30, |
|
For the Nine Months Ended
September 30, |
||||||||||||
|
2015(1)
|
|
2014(2)
|
|
2015(1)
|
|
2014(2)
|
||||||||
Income (loss) per share:
|
|
|
|
|
|
|
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income (loss) from continuing operations
|
$
|
(13,491
|
)
|
|
$
|
(4,264
|
)
|
|
$
|
(16,689
|
)
|
|
$
|
(13,863
|
)
|
Net income (loss) from discontinued operations
|
$
|
(113
|
)
|
|
$
|
(249
|
)
|
|
$
|
(416
|
)
|
|
$
|
(454
|
)
|
Net income (loss)
|
$
|
(13,604
|
)
|
|
$
|
(4,513
|
)
|
|
$
|
(17,105
|
)
|
|
$
|
(14,317
|
)
|
Basic and diluted income (loss) per common share:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted income (loss) from continuing operations
|
$
|
(0.48
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
(0.70
|
)
|
|
$
|
(0.65
|
)
|
Basic and diluted income (loss) from discontinued operations
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
Basic and diluted income (loss) per share available to common shareholders
|
$
|
(0.48
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.72
|
)
|
|
$
|
(0.67
|
)
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
28,084,254
|
|
|
21,361,930
|
|
|
23,827,030
|
|
|
21,352,086
|
|
(1)
|
The computation of diluted EPS does not include
41,259
shares of restricted stock,
774,394
options,
6,240,521
warrants up to
10,738,165
shares of underlying common stock issuable upon conversion of the Convertible Notes and
323,500
performance shares, as the effect of their inclusion would have been anti-dilutive.
|
(2)
|
The computation of diluted EPS did not include
815,448
options,
6,240,521
warrants,
41,060
shares of restricted stock, up to
10,464,491
shares of underlying common stock issuable upon conversion of the Convertible Notes and
299,500
performance shares for the
three months and nine months
ended
September 30, 2014
, as the effect of their inclusion would have been anti-dilutive.
|
Common Stock Options
|
|
Number of
Shares
|
|
Weighted
Average Price
per Share
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|||||
Options outstanding, January 1, 2015
|
|
807,949
|
|
|
$
|
8.50
|
|
|
4.48
|
|
|
—
|
|
Options granted
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
|
Options exercised
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
|
Options forfeited
|
|
(33,555
|
)
|
|
$
|
8.50
|
|
|
—
|
|
|
—
|
|
Options expired
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
|
Options outstanding, September 30, 2015
|
|
774,394
|
|
|
$
|
8.50
|
|
|
3.73
|
|
|
—
|
|
Exercisable at September 30, 2015
|
|
774,394
|
|
|
$
|
8.50
|
|
|
3.73
|
|
|
—
|
|
Unvested at September 30, 2015
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Common Unvested Shares
|
Number of
Shares
|
|
Outstanding January 1, 2015
|
41,060
|
|
Granted
|
41,259
|
|
Vested
|
(41,060
|
)
|
Forfeited
|
—
|
|
Outstanding September 30, 2015
|
41,259
|
|
Performance Shares
|
Number of
Shares
|
|
Outstanding January 1, 2015
|
323,500
|
|
Awarded
|
—
|
|
Vested
|
—
|
|
Forfeited
|
—
|
|
Outstanding September 30, 2015
|
323,500
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Total income (loss)
|
$
|
(13
|
)
|
|
$
|
38
|
|
|
$
|
60
|
|
|
$
|
150
|
|
Total expenses
|
(134
|
)
|
|
(287
|
)
|
|
(700
|
)
|
|
(604
|
)
|
||||
Income (loss) before income taxes
|
(147
|
)
|
|
(249
|
)
|
|
(640
|
)
|
|
(454
|
)
|
||||
Income tax benefit
|
34
|
|
|
—
|
|
|
224
|
|
|
—
|
|
||||
Net income (loss) from discontinued operations
|
$
|
(113
|
)
|
|
$
|
(249
|
)
|
|
$
|
(416
|
)
|
|
$
|
(454
|
)
|
Remaining Life Expectancy (In Years)
|
Number of
Life Settlement
Contracts
|
|
Estimated Fair
Value
|
|
Face
Value
|
|||||
0 - 1
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
1 - 2
|
9
|
|
|
21,516
|
|
|
32,307
|
|
||
2 - 3
|
20
|
|
|
52,926
|
|
|
95,122
|
|
||
3 - 4
|
19
|
|
|
29,638
|
|
|
70,309
|
|
||
4 - 5
|
25
|
|
|
33,129
|
|
|
96,406
|
|
||
Thereafter
|
561
|
|
|
320,601
|
|
|
2,703,759
|
|
||
Total
|
634
|
|
|
$
|
457,810
|
|
|
$
|
2,997,903
|
|
Remaining Life Expectancy (In Years)
|
Number of
Life Settlement
Contracts
|
|
Estimated Fair
Value
|
|
Face
Value
|
|||||
0-1
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
1-2
|
4
|
|
|
9,227
|
|
|
12,728
|
|
||
2-3
|
10
|
|
|
23,202
|
|
|
45,852
|
|
||
3-4
|
16
|
|
|
29,531
|
|
|
67,735
|
|
||
4-5
|
19
|
|
|
23,012
|
|
|
65,614
|
|
||
Thereafter
|
558
|
|
|
303,914
|
|
|
2,739,137
|
|
||
Total
|
607
|
|
|
$
|
388,886
|
|
|
$
|
2,931,066
|
|
|
|
||
Remainder of 2015
|
$
|
16,292
|
|
2016
|
68,891
|
|
|
2017
|
75,602
|
|
|
2018
|
78,260
|
|
|
2019
|
85,030
|
|
|
Thereafter
|
1,110,449
|
|
|
|
$
|
1,434,524
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
Fair Value
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Life settlements
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
457,810
|
|
|
$
|
457,810
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
457,810
|
|
|
$
|
457,810
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
Fair Value
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
White Eagle Revolving Credit Facility
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
157,946
|
|
|
$
|
157,946
|
|
Red Falcon Revolving Credit Facility
|
—
|
|
|
—
|
|
|
55,685
|
|
|
55,685
|
|
||||
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
213,631
|
|
|
$
|
213,631
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Fair
Value
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Life settlements
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
388,886
|
|
|
$
|
388,886
|
|
Structured settlement receivables
|
—
|
|
|
—
|
|
|
384
|
|
|
384
|
|
||||
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
389,270
|
|
|
$
|
389,270
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Fair
Value
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
White Eagle Revolving Credit Facility
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
145,831
|
|
|
$
|
145,831
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
145,831
|
|
|
$
|
145,831
|
|
($ in thousands)
|
Quantitative Information about Level 3 Fair Value Measurements
|
|
|||||||||||||
|
Fair Value
at 9/30/15 |
|
Aggregate
death benefit at 9/30/15 |
|
Valuation Technique
|
|
Unobservable Input (s)
|
|
Range
(Weighted Average)
|
||||||
Non-premium financed
|
$
|
97,022
|
|
|
$
|
343,803
|
|
|
Discounted cash flow
|
|
Discount rate
|
|
15.00%
|
-
|
21.00%
|
|
|
|
|
|
|
|
Life expectancy evaluation
|
|
(6.6 years)
|
||||||
Premium financed
|
$
|
360,788
|
|
|
$
|
2,654,100
|
|
|
Discounted cash flow
|
|
Discount rate
|
|
16.00%
|
-
|
24.75%
|
|
|
|
|
|
|
|
Life expectancy evaluation
|
|
(10.5 years)
|
||||||
Life settlements
|
$
|
457,810
|
|
|
$
|
2,997,903
|
|
|
Discounted cash flow
|
|
Discount rate
|
|
17.00%
|
||
|
|
|
|
|
|
|
Life expectancy evaluation
|
|
(10.0 years)
|
||||||
White Eagle Revolving Credit Facility
|
$
|
157,946
|
|
|
N/A
|
|
Discounted cash flow
|
|
Discount rate
|
|
23.55%
|
||||
|
|
|
|
|
|
|
Life expectancy evaluation
|
|
(9.9 years)
|
||||||
Red Falcon Revolving Credit Facility
|
$
|
55,685
|
|
|
N/A
|
|
Discounted cash flow
|
|
Discount Rate
|
|
11.18%
|
||||
|
|
|
|
|
|
|
Life expectancy evaluation
|
|
(9.5 years)
|
Life Expectancy Months Adjustment
|
Value
|
|
Change in Value
|
||||
+6
|
$
|
384,990
|
|
|
$
|
(72,820
|
)
|
-
|
$
|
457,810
|
|
|
—
|
|
|
-6
|
$
|
536,666
|
|
|
$
|
78,856
|
|
Carrier
|
Percentage of
Total
Fair Value
|
|
Percentage of
Total Death
Benefit
|
|
Moody's
Rating
|
|
S&P
Rating
|
||
Transamerica Life Insurance Company
|
20.6
|
%
|
|
20.5
|
%
|
|
A1
|
|
AA-
|
Lincoln National Life Insurance Company
|
21.6
|
%
|
|
19.6
|
%
|
|
A1
|
|
AA-
|
Weighted Average Rate Calculated Based on
|
|
|
|
|
|
|||||
Death Benefit
|
Rate Adjustment
|
|
Value
|
|
Change in Value
|
|||||
16.50%
|
-0.50%
|
|
|
$
|
469,610
|
|
|
$
|
11,800
|
|
17.00%
|
—
|
|
|
$
|
457,810
|
|
|
$
|
—
|
|
17.50%
|
+0.50%
|
|
|
$
|
446,512
|
|
|
$
|
(11,298
|
)
|
Life Expectancy Months Adjustment
|
Fair Value of White Eagle
Revolving Credit
Facility
|
|
Change in Value
|
||||
+6
|
$
|
132,093
|
|
|
$
|
(25,853
|
)
|
|
$
|
157,946
|
|
|
—
|
|
|
-6
|
$
|
182,793
|
|
|
$
|
24,847
|
|
Discount Rate
|
Rate Adjustment
|
|
Fair Value of White Eagle
Revolving Credit
Facility
|
|
Change in Value
|
|||||
23.05%
|
-0.50
|
%
|
|
$
|
160,730
|
|
|
$
|
2,784
|
|
23.55%
|
—
|
|
|
$
|
157,946
|
|
|
$
|
—
|
|
24.05%
|
+0.50
|
%
|
|
$
|
155,255
|
|
|
$
|
(2,691
|
)
|
Life Expectancy Months Adjustment
|
Fair Value of Red Falcon
Revolving Credit
Facility
|
|
Change in Value
|
||||
+6
|
$
|
53,734
|
|
|
$
|
(1,951
|
)
|
|
$
|
55,685
|
|
|
—
|
|
|
-6
|
$
|
57,236
|
|
|
$
|
1,551
|
|
Discount Rate
|
Rate Adjustment
|
|
Fair Value of Red Falcon
Revolving Credit
Facility
|
|
Change in Value
|
|||||
10.68%
|
-0.50
|
%
|
|
$
|
56,523
|
|
|
$
|
838
|
|
11.18%
|
—
|
|
|
$
|
55,685
|
|
|
$
|
—
|
|
11.68%
|
+0.50
|
%
|
|
$
|
54,868
|
|
|
$
|
(817
|
)
|
Life Settlements:
|
|
||
Balance, January 1, 2015
|
$
|
388,886
|
|
Purchase of policies
|
30,534
|
|
|
Change in fair value
|
43,582
|
|
|
Matured/lapsed/sold policies
|
(53,435
|
)
|
|
Premiums paid
|
48,243
|
|
|
Transfers into level 3
|
—
|
|
|
Transfer out of level 3
|
—
|
|
|
Balance, September 30, 2015
|
$
|
457,810
|
|
Changes in fair value included in earnings for the period relating to assets held at September 30, 2015
|
$
|
2,805
|
|
White Eagle Revolving Credit Facility:
|
|
||
Balance, January 1, 2015
|
$
|
145,831
|
|
Draws under the White Eagle Revolving Credit Facility
|
42,448
|
|
|
Payments on credit facility
|
(43,241
|
)
|
|
Unrealized change in fair value
|
12,908
|
|
|
Transfers into level 3
|
—
|
|
|
Transfer out of level 3
|
—
|
|
|
Balance, September 30, 2015
|
$
|
157,946
|
|
Changes in fair value included in earnings for the period relating to liabilities held at September 30, 2015
|
$
|
12,908
|
|
Red Falcon Revolving Credit Facility:
|
|
||
Balance, January 1, 2015
|
$
|
—
|
|
Initial advance under the Red Falcon Revolving Credit Facility
|
54,000
|
|
|
Subsequent draws under the Red Falcon Revolving Credit Facility
|
2,967
|
|
|
Payments on Red Falcon Revolving Credit Facility
|
(1,863
|
)
|
|
Unrealized change in fair value
|
581
|
|
|
Transfers into level 3
|
—
|
|
|
Transfer out of level 3
|
—
|
|
|
Balance, September 30, 2015
|
$
|
55,685
|
|
Changes in fair value included in earnings for the period relating to liabilities held at September 30, 2015
|
$
|
581
|
|
Life Settlements:
|
|
||
Balance, January 1, 2014
|
$
|
302,961
|
|
Purchase of policies
|
3,488
|
|
|
Change in fair value
|
19,313
|
|
|
Matured/sold policies
|
(15,957
|
)
|
|
Premiums paid
|
40,578
|
|
|
Transfers into level 3
|
—
|
|
|
Transfer out of level 3
|
—
|
|
|
Balance, September 30, 2014
|
350,383
|
|
|
Changes in fair value included in earnings for the period relating to assets held at September 30, 2014
|
$
|
8,627
|
|
White Eagle Revolving Credit Facility:
|
|
||
Balance, January 1, 2014
|
$
|
123,847
|
|
Subsequent draws under the revolving credit facility
|
40,965
|
|
|
Payments on credit facility
|
(17,595
|
)
|
|
Unrealized change in fair value
|
(4,556
|
)
|
|
Transfers into level 3
|
—
|
|
|
Transfer out of level 3
|
—
|
|
|
Balance, September 30, 2014
|
$
|
142,661
|
|
Changes in fair value included in earnings for the period relating to liabilities held at September 30, 2014
|
$
|
(4,556
|
)
|
•
|
Changes in Fair Value of Life Settlements
—When we acquire certain life insurance policies, we initially record these investments at the transaction price, which is the fair value of the policy for those acquired upon relinquishment or the amount paid for policies acquired for cash. The fair value of the insurance policies is evaluated at the end of each reporting period. Changes in the fair value of the investment based on evaluations are recorded as changes in fair value of life settlements in our consolidated statement of operations. The fair value is determined on a discounted cash flow basis that incorporates current life expectancy assumptions. The discount rate incorporates current information about market interest rates, the credit exposure to the insurance company that issued the life insurance policy and our estimate of the risk premium an investor in the policy would require. We recognize income from life settlement maturities upon receipt of death notice or verified obituary of the insured. This income is the difference between the death benefits and fair values of the policy at the time of maturity.
|
•
|
Gain/(Loss) on Life Settlements, Net
—We recognize gain/(loss) from life settlement contracts that we own upon the signed sale agreement and/or filing of ownership forms and funds transferred to escrow.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Period Acquisitions — Policies Owned
|
|
|
|
|
|
|
|
|
||||||||
Number of policies acquired
|
|
3
|
|
|
2
|
|
|
41
|
|
|
2
|
|
||||
Average age of insured at acquisition
|
|
85.4
|
|
|
84.5
|
|
|
85.0
|
|
|
84.5
|
|
||||
Average life expectancy — Calculated LE (Years)
|
|
5.6
|
|
|
5.6
|
|
|
5.4
|
|
|
5.6
|
|
||||
Average death benefit
|
|
$
|
6,232
|
|
|
$
|
7,176
|
|
|
$
|
2,924
|
|
|
$
|
7,176
|
|
Aggregate purchase price
|
|
$
|
2,679
|
|
|
$
|
3,488
|
|
|
$
|
30,534
|
|
|
$
|
3,488
|
|
End of Period — Policies Owned
|
|
|
|
|
|
|
|
|
||||||||
Number of policies owned
|
|
634
|
|
|
595
|
|
|
634
|
|
|
595
|
|
||||
Average Life Expectancy — Calculated LE (Years)
|
|
10.0
|
|
|
11.0
|
|
|
10.0
|
|
|
11.0
|
|
||||
Aggregate Death Benefit
|
|
$
|
2,997,903
|
|
|
$
|
2,888,289
|
|
|
$
|
2,997,903
|
|
|
$
|
2,888,289
|
|
Aggregate fair value
|
|
$
|
457,810
|
|
|
$
|
350,383
|
|
|
$
|
457,810
|
|
|
$
|
350
|
|
Monthly premium — average per policy
|
|
$
|
8.9
|
|
|
$
|
7.6
|
|
|
$
|
8.9
|
|
|
$
|
7.6
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
||||||
|
|
2015
|
|
2014
|
||||
Statement of Cash Flows Data:
|
|
|
|
|
||||
Total cash (used in) provided by :
|
|
|
|
|
||||
Operating activities
|
|
$
|
(37,401
|
)
|
|
$
|
(23,986
|
)
|
Investing activities
|
|
(29,675
|
)
|
|
(26,622
|
)
|
||
Financing activities
|
|
52,576
|
|
|
86,301
|
|
||
Increase (decrease) in cash and cash equivalents
|
|
$
|
(14,500
|
)
|
|
$
|
35,693
|
|
Carrier
|
Percentage of
Total Fair
Value
|
|
Percentage of
Total Death
Benefit
|
|
Moody’s
Rating
|
|
S&P
Rating
|
||
Transamerica Life Insurance Company
|
20.6
|
%
|
|
20.5
|
%
|
|
A1
|
|
AA-
|
Lincoln National Life Insurance Company
|
21.6
|
%
|
|
19.6
|
%
|
|
A1
|
|
AA-
|
Period
|
|
Total Number of Shares Purchased (1)
|
|
Average Price Paid per share
|
July 1 through July 31
|
|
—
|
|
—
|
August 1 through August 31
|
|
—
|
|
—
|
September 1 through September 30
|
|
65,621
|
|
$5.30
|
Total
|
|
65,621
|
|
$5.30
|
(1)
|
On September 1, 2015, the Company announced that its board of directors authorized a
$10 million
share and note repurchase program. The program has a two-year expiration date, and authorizes the Company to repurchase up to
$10 million
of its common stock and/or its Convertible Notes. For the quarter ended
September 30, 2015
, the Company purchased
65,621
shares for a total cost of approximately
$348,000
, which is an average cost of
$5.30
per share including transaction fees. As of
September 30, 2015
, the Company may purchase up to approximately
$9.7 million
of additional common stock or notes under its board authorized plan.
|
|
|
Emergent Capital, Inc.
|
|
|
|
/s/ Richard S. O’Connell, Jr.
|
|
Chief Financial Officer and Chief Credit Officer
|
Richard S. O’Connell, Jr.
|
|
(Principal Financial Officer)
|
Date November 9, 2015
|
|
|
•
|
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
|
•
|
have been qualified by disclosures that were made to the other party in connection with the negotiation of the agreement, which disclosures are not necessarily reflected in the agreement;
|
•
|
may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
|
•
|
were made only as of the date of the agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
|
Exhibit
No.
|
|
Description
|
|
|
|
Exhibit 10.1
|
|
Employment Agreement between the Registrant and David Sasso, dated December 31, 2013 and effective January 1, 2014.
|
|
|
|
Exhibit 31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
Exhibit 31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
Exhibit 32.1
|
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
Exhibit 32.2
|
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
Exhibit 101.
|
|
Interactive Data Files
|
|
|
|
Exhibit 101.INS +
|
|
XBRL Instance Document
|
|
|
|
Exhibit 101.SCH +
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
Exhibit 101.CAL +
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
Exhibit 101.DEF +
|
|
XBRL Taxonomy Definition Linkbase Document
|
|
|
|
Exhibit 101.LAB +
|
|
XBRL Taxonomy Extension Label Linkbase Document 10.1 & 10.2
|
|
|
|
Exhibit 101.PRE +
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Imperial Holdings, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary companies, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Antony Mitchell
|
Antony Mitchell
|
Chief Executive Officer and Director
|
(Principal Executive Officer)
|
|
November 9, 2015
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Imperial Holdings, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary companies, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Richard S. O’Connell, Jr.
|
Richard S. O’Connell, Jr.
|
Chief Financial Officer and Chief Credit Officer
|
(Principal Financial Officer)
|
|
November 9, 2015
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
|
/s/ Antony Mitchell
|
Antony Mitchell
|
Chief Executive Officer and Director
|
|
November 9, 2015
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
|
/s/ Richard S. O’Connell, Jr.
|
Richard S. O’Connell, Jr.
|
Chief Financial Officer and Chief Credit Officer
|
|
November 9, 2015
|