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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
For the transition period from _________ to ________
Commission File Number: 001-36615
GWG HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware
26-2222607
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
325 North St. Paul Street, Suite 2650
Dallas, TX 75201
(Address of principal executive offices, including zip code)
(612) 746-1944
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange
on which registered
Common Stock
GWGH
NASDAQ Capital Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes  ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No
As of August 11, 2020, GWG Holdings, Inc. had 33,094,664 shares of common stock outstanding.




GWG HOLDINGS, INC.
Index to Form 10-Q
for the Quarter Ended June 30, 2020
Page No.
i

Table Of Contents
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GWG HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
June 30, 2020 (Unaudited)December 31, 2019
ASSETS
Cash and cash equivalents$149,233  $79,073  
Restricted cash
19,059  20,258  
Investment in life insurance policies, at fair value
794,706  796,039  
Life insurance policy benefits receivable, net
19,789  23,031  
Loans receivable, net of unearned income
218,448  232,344  
Allowance for loan losses
(7,900)   
Loans receivable, net
210,548  232,344  
Fees receivable
31,611  29,168  
Financing receivables from affiliates
69,428  67,153  
Other assets
40,142  30,135  
Goodwill
2,384,121  2,358,005  
TOTAL ASSETS
$3,718,637  $3,635,206  
LIABILITIES & STOCKHOLDERS’ EQUITY
LIABILITIES
Senior credit facility with LNV Corporation
$203,578  $174,390  
L Bonds
1,072,973  926,638  
Seller Trust L Bonds
366,892  366,892  
Other borrowings
152,118  153,086  
Interest and dividends payable
23,284  16,516  
Deferred revenue
37,858  41,444  
Accounts payable and accrued expenses
23,457  27,836  
Deferred tax liability, net
33,674  57,923  
TOTAL LIABILITIES
1,913,834  1,764,725  
Redeemable noncontrolling interests
1,264,031  1,269,654  
STOCKHOLDERS’ EQUITY
REDEEMABLE PREFERRED STOCK
(par value $0.001; shares authorized 100,000; shares outstanding 62,986 and 84,636; liquidation preference of $63,354 and $85,130 as of June 30, 2020 and December 31, 2019, respectively)
52,373  74,023  
SERIES 2 REDEEMABLE PREFERRED STOCK
(par value $0.001; shares authorized 150,000; shares outstanding 144,325 and 147,164; liquidation preference of $145,167 and $148,023 as of June 30, 2020 and December 31, 2019, respectively)
125,029  127,868  
COMMON STOCK
(par value $0.001; shares authorized 210,000,000; shares issued and outstanding, net of common stock in treasury, 30,537,481 and 30,533,793 as of June 30, 2020 and December 31, 2019, respectively)
33  33  
Common stock in treasury, at cost (2,500,000 shares as of both June 30, 2020 and December 31, 2019)
(24,550) (24,550) 
Additional paid-in capital
225,537  233,106  
Accumulated deficit
(136,355) (76,501) 
TOTAL GWG HOLDINGS STOCKHOLDERS’ EQUITY
242,067  333,979  
Noncontrolling interests
298,705  266,848  
TOTAL STOCKHOLDERS’ EQUITY
540,772  600,827  
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY
$3,718,637  $3,635,206  
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
Page 1

GWG HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2020201920202019
REVENUE
Gain on life insurance policies, net$14,788  $19,930  $29,233  $41,426  
Interest income12,671  3,881  26,660  7,337  
Trust services revenues4,829    9,856    
Other income36,501  199  36,597  464  
TOTAL REVENUE68,789  24,010  102,346  49,227  
EXPENSES
Interest expense37,142  28,487  73,013  55,462  
Employee compensation and benefits11,840  6,794  89,544  11,948  
Legal and professional fees7,643  4,722  13,806  7,669  
Provision for loan losses7,200    7,900    
Other expenses4,895  5,938  8,507  8,766  
TOTAL EXPENSES68,720  45,941  192,770  83,845  
INCOME (LOSS) BEFORE INCOME TAXES69  (21,931) (90,424) (34,618) 
INCOME TAX BENEFIT(8,550)   (23,057)   
NET INCOME (LOSS) BEFORE INCOME (LOSS) FROM EQUITY METHOD INVESTMENT8,619  (21,931) (67,367) (34,618) 
Income (loss) from equity method investment(1,318) 600  (2,848) (1,327) 
NET INCOME (LOSS)7,301  (21,331) (70,215) (35,945) 
Net loss (income) attributable to noncontrolling interests(21,723)   10,361    
Less: Preferred stock dividends3,714  4,278  7,666  8,574  
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS$(18,136) $(25,609) $(67,520) $(44,519) 
NET LOSS PER COMMON SHARE
Basic$(0.59) $(0.78) $(2.21) $(1.35) 
Diluted$(0.59) $(0.78) $(2.21) $(1.35) 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic30,536,830  33,011,603  30,535,811  32,998,246  
Diluted30,536,830  33,011,603  30,535,811  32,998,246  
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
Page 2

GWG HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
June 30,
20202019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$(70,215) $(35,945) 
Adjustments to reconcile net loss to net cash flows used in operating activities:
Change in fair value of life insurance policies(17,455) (33,850) 
Amortization of deferred financing and issuance costs8,742  6,522  
Amortization of upfront fees(3,586)   
Amortization of debt premiums(887)   
Amortization and depreciation on long-lived assets492    
Accretion of discount on financing receivable from affiliate  (864) 
Non-cash interest income(25,811)   
Non-cash interest expense1,238    
Loss from equity method investment2,848  1,327  
Provision for loan losses7,900    
Deferred income tax(24,250)   
Equity-based compensation73,060  665  
Forfeiture of vested equity-based compensation(36,267)   
(Increase) decrease in operating assets:
Life insurance policy benefits receivable3,242  10,884  
Fees receivable(2,443)   
Accrued interest on financing receivable  (3,046) 
Other assets(2,869) (4,948) 
Increase (decrease) in operating liabilities:
Accounts payable and other accrued expenses2,592  (4,753) 
NET CASH FLOWS USED IN OPERATING ACTIVITIES(83,669) (64,008) 
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance policies  (31,538) 
Carrying value of matured life insurance policies18,789  14,045  
Purchases of fixed assets(1,743)   
Financing receivables from affiliates issued  (50,000) 
Equity method investments(9,166) (10,000) 
Net change in loans receivable11,169    
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES19,049  (77,493) 
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on senior debt28,530    
Repayments of senior debt  (19,569) 
Purchase of noncontrolling interest(261)   
Proceeds from issuance of L Bonds202,572  171,227  
Payments for issuance and redemption of L Bonds(65,129) (46,977) 
Issuance (repurchase) of common stock24  57  
Payments for redemption of preferred stock(24,489) (3,214) 
Preferred stock dividends(7,666) (8,574) 
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES133,581  92,950  
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH68,961  (48,551) 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
BEGINNING OF PERIOD99,331  125,436  
END OF PERIOD$168,292  $76,885  
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
Page 3

GWG HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended June 30,
20202019
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid$59,615  $49,434  
Premiums paid, including prepaid34,299  34,902  
NON-CASH INVESTING AND FINANCING ACTIVITIES
L Bonds:
Conversion of accrued interest and commissions payable to principal$940  $872  
Investment in life insurance policies included in accounts payable  788  
Business combination measurement period adjustments:
Reduction in loans receivable (see Note 4)$26,116  $  
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
Page 4

GWG HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)

For the three and six months ended June 30, 2020:

Preferred Stock SharesPreferred StockCommon SharesCommon Stock (par)Additional Paid-in CapitalAccumulated DeficitTreasury StockTotal GWG Holdings Stockholders’ EquityNoncontrolling InterestsTotal Stockholders’ EquityRedeemable noncontrolling interests
Balance, March 31, 2020 (unaudited)216,567  $186,658  30,535,249  $33  $229,207  $(121,933) $(24,550) $269,415  $331,711  $601,126  $1,241,641  
Net loss—  —  —  —  —  (14,422) —  (14,422) (667) (15,089) 22,390  
Issuance of common stock—  —  2,232  —  8  —  —  8  —  8  —  
Redemption of redeemable preferred stock(9,256) (9,256) —  —  —  —  —  (9,256) —  (9,256) —  
Preferred stock dividends—  —  —  —  (3,714) —  —  (3,714) —  (3,714) —  
Equity-based compensation—  —  —  —  36  —  —  36  4,189  4,225  —  
Forfeiture of vested equity-based compensation—  —  —  —  —  —  —  —  (36,267) (36,267) —  
Purchase of noncontrolling interest—  —  —  —  —  —  —  —  (261) (261) —  
Balance, June 30, 2020 (unaudited)207,311  $177,402  30,537,481  $33  $225,537  $(136,355) $(24,550) $242,067  $298,705  $540,772  $1,264,031  

Preferred Stock SharesPreferred StockCommon SharesCommon Stock (par)Additional Paid-in CapitalAccumulated DeficitTreasury StockTotal GWG Holdings Stockholders’ EquityNoncontrolling InterestsTotal Stockholders’ EquityRedeemable noncontrolling interests
Balance, December 31, 2019 (audited)231,800  $201,891  30,533,793  $33  $233,106  $(76,501) $(24,550) $333,979  $266,848  $600,827  $1,269,654  
Net loss—  —  —  —  —  (59,854) —  (59,854) (4,738) (64,592) (5,623) 
Issuance of common stock—  —  3,688  —  26  —  —  26  —  26  —  
Redemption of redeemable preferred stock(24,489) (24,489) —  —  —  —  —  (24,489) —  (24,489) —  
Preferred stock dividends—  —  —  —  (7,666) —  —  (7,666) —  (7,666) —  
Equity-based compensation—  —  —  —  71  —  —  71  73,123  73,194  —  
Forfeiture of vested equity-based compensation—  —  —  —  —  —  —  —  (36,267) (36,267) —  
Purchase of noncontrolling interest—  —  —  —  —  —  —  —  (261) (261) —  
Balance, June 30, 2020 (unaudited)207,311  $177,402  30,537,481  $33  $225,537  $(136,355) $(24,550) $242,067  $298,705  $540,772  $1,264,031  

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Page 5

GWG HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)
For the three and six months ended June 30, 2019:
Preferred Stock SharesPreferred StockCommon SharesCommon Stock (par)Additional Paid-in CapitalAccumulated DeficitTotal Stockholders’ Equity
Balance, March 31, 2019 (unaudited)245,064  $215,154  32,992,606  $33  $245,295  $(199,224) $261,258  
Net loss
—  —  —  —  —  (21,331) (21,331) 
Issuance of common stock
—  —  40,874  —  326  —  326  
Repurchase of common stock
—  —  (60) —  —  —  —  
Redemption of redeemable preferred stock
(2,416) (2,416) —  —  —  —  (2,416) 
Preferred stock dividends
—  —  —  —  (4,278)