10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

__________________________

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934

For the transition period from _________ to ________

Commission File Number:  None

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.)

220 South Sixth Street, Suite 1200

Minneapolis, MN  55402

(Address of principal executive offices, including zip code)

(612) 746-1944

(Registrant’s telephone number, including area code)

________________________

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. T Yes   £ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, 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 or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer £	Accelerated filer £
Non-accelerated filer £	Smaller reporting company T

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). £ Yes  T No

As of November 14, 2012, GWG Holdings, Inc. had 9,989,000 shares of common stock outstanding.

GWG HOLDINGS, INC.

Index to Form 10-Q

for the Quarter Ended September 30, 2012

		Page No.
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2012 (unaudited), and December 31, 2011	2
	Condensed Consolidated Statements of Operations for the three months and nine months ended September 30, 2012 and 2011(unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the three months and nine months ended September 30, 2012 and 2011(unaudited)	5
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 4.	Controls and Procedures	36
PART II.	OTHER INFORMATION
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 6.	Exhibits	37
SIGNATURES		38

PART I—FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

GWG HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2012			December 31, 2011
	(unaudited)
A S S E T S
Cash and cash equivalents	$	18,264,139		$	1,878,349
Restricted cash		1,424,466			4,794,302
Investment in life settlements, at fair value		147,828,800			122,168,524
Other assets		884,631			548,100
TOTAL ASSETS	$	168,402,036		$	129,389,275
L I A B I L I T I E S  &  E Q U I T Y (DEFICIT)
LIABILITIES
Revolving credit facility	$	66,000,000		$	60,000,000
Series I Secured notes payable		39,221,704			48,179,271
Renewable secured debentures		32,112,270			-
Interest payable		2,870,900			1,887,835
Accounts payable and accrued expenses		2,243,000			1,404,107
Deferred taxes, net		4,411,929			4,308,217
TOTAL LIABILITIES		146,859,803			115,779,430
CONVERTIBLE, REDEEMABLE PREFERRED STOCK
(par value $0.001; shares authorized 40,000,000; shares issued and outstanding 3,339,484 and 1,881,329; liquidation preference of $25,046,000 (unaudited) and $14,110,000, respectively)		23,391,533			12,661,276
EQUITY (DEFICIT)
Common stock (par value $0.001: shares authorized  210,000,000; shares issued and outstanding is  9,989,000 on both September 30, 2012 (unaudited) and December 31, 2011)		9,989			9,989
Additional paid-in capital		7,335,887			8,169,303
Accumulated deficit		(9,195,176	)		(7,230,723	)
TOTAL EQUITY (DEFICIT)		(1,849,300	)		948,569
TOTAL LIABILITIES & EQUITY (DEFICIT)	$	168,402,036		$	129,389,275

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

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GWG HOLDINGS, INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
REVENUE
Gain on life settlements, net	$	4,788,291		$	3,857,131		$	10,257,537		$	14,151,240
Interest and other income		5,681			9,280			54,576			41,250
TOTAL REVENUE		4,793,972			3,866,411			10,312,113			14,192,490
EXPENSES
Employee compensation and benefits		745,386			461,824			1,862,469			1,403,844
Legal and professional fees		250,648			286,681			952,051			597,230
Interest expense		2,803,185			2,830,689			7,621,177			6,141,901
Investment banking services		-			3,595,027			-			3,595,027
Other expenses		474,504			375,892			1,737,157			944,409
TOTAL EXPENSES		4,273,723			7,550,113			12,172,854			12,682,411
INCOME (LOSS) BEFORE INCOME TAXES		520,249			(3,683,702	)		(1,860,741	)		1,510,079
INCOME TAX EXPENSE (BENEFIT)		633,572			(1,417,649	)		103,712			2,363,851
NET (LOSS)	$	(113,323	)	$	(2,266,053	)	$	(1,964,453	)	$	(853,772	)
(LOSS) PER SHARE
Basic	$	(0.01	)	$	(0.23	)	$	(0.20	)	$	(0.09	)
Diluted	$	(0.01	)	$	(0.23	)	$	(0.20	)	$	(0.09	)
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		9,989,000			9,870,750			9,989,000			9,293,440
Diluted		9,989,000			9,870,750			9,989,000			9,293,440

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

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GWG HOLDINGS, INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – CONTINUED

(unaudited)

PROFORMA INFORMATION AS IF THE COMPANY HAD BEEN A CORPORATION DURING THE:	Three Months Ended  September 30, 2011			Nine Months Ended  September 30, 2011
INCOME BEFORE INCOME TAXES	$	(3,683,702	)	$	1,510,079
INCOME TAX EXPENSE (BENEFIT)		(1,447,695	)		595,273
NET INCOME (LOSS)	$	(2,236,007	)	$	914,806
PROFORMA EARNINGS PER SHARE ATTRIBUTABLE TO CONTROLLING INTERESTS
BASIC	$	(0.23	)	$	0.10
FULLY DILUTED	$	(0.23	)	$	0.10
PROFORMA WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC		9,870,750			9,293,440
FULLY DILUTED		9,870,750			9,293,440

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

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GWG HOLDINGS, INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)	$	(113,323	)	$	(2,266,053	)	$	(1,964,453	)	$	(853,772	)
Adjustments to reconcile net (loss) to net
cash flows from operating activities:
Gain on life settlements		(8,881,542	)		(7,236,462	)		(19,871,791	)		(23,875,055	)
Amortization of deferred financing and issuance costs		394,438			1,432,625			1,303,895			1,549,073
Investment banking services		-			3,595,027			-			3,595,027
Deferred income taxes		633,572			(1,415,149	)		103,712			2,363,851
Convertible, redeemable preferred stock dividends payable		215,059			44,669			636,069			44,669
(Increase) decrease in operating assets:
Other assets		(115,761	)		(434,341	)		941,525			(986,346	)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		791,825			(436,987	)		1,450,958			(631,830	)
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(7,075,732	)		(6,716,671	)		(17,400,085	)		(18,794,383	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		(5,361,540	)		(1,377,026	)		(7,983,570	)		(10,500,756	)
Proceeds from settlement of life settlements		-			-			416,665			-
NET CASH FLOWS USED IN INVESTING ACTIVITIES		(5,361,540	)		(1,377,026	)		(7,566,905	)		(10,500,756	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from revolving credit facility		-			7,510,001			6,000,000			18,599,549
Proceeds from issuance of Series I Secured notes payable		-			(3,216,821	)		50,000			8,126,034
Payments for redemption of Series I Secured notes payable		(1,843,032	)		3,280,899			(5,311,989	)		(1,006,680	)
Proceeds from issuance of renewable secured debentures		17,878,571			-			33,635,657			-
Payments for redemption and issuance of renewable secured debentures		(914,880	)		-			(1,627,467	)		-
Proceeds from restricted cash		3,427,198			774,560			3,369,837			2,422,118
Issuance of common stock		-			4,973			-			4,973
Issuance of convertible, redeemable preferred stock		500,000			1,670,010			6,287,375			1,670,010
Payments of issuance cost for convertible, redeemable preferred stock		558,729			(956,851	)		(1,050,633	)		(956,851	)
Proceeds from notes receivable from related parties		-			2,306,068			-			2,306,068
Common stock dividends		-			(2,306,068	)		-			(2,306,068	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		19,606,586			9,066,771			41,352,780			28,859,153
NET INCREASE IN CASH AND CASH EQUIVALENTS		7,169,314			973,074			16,385,790			(435,986	)
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD		11,094,825			349,170			1,878,349			1,758,230
END OF PERIOD	$	18,264,139		$	1,322,244		$	18,264,139		$	1,322,244

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

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GWG HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS – CONTINUED

(unaudited)

	Three Months Ended				Nine Months Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	$	1,839,000	$	1,090,000	$	4,958,000	$	3,505,000
NON-CASH INVESTING AND FINANCING ACTIVITIES
Convertible, redeemable preferred stock:
Non-cash conversion of Series I secured notes	$	-	$	7,189,000	$	4,220,000	$	7,189,000
Non-cash conversion of accrued interest payable on Series I secured notes	$	-	$	202,000	$	8,000	$	202,000
Non-cash conversion of dividends payable	$	160,000	$	-	$	408,000	$	-
Warrants issued to purchase common stock	$	2,000	$	-	$	41,000	$	-
Non-cash conversion of accrued interest payable on Series I secured notes to principal	$	43,000	$	106,000	$	80,000	$	106,000
Conversion from LLC to corporation	$	-	$	-	$	-	$	6,871,000
Investment in life settlements included in accounts payable	$	340,000	$	701,000	$	501,000	$	701,000

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

- 6 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

( 1 )   Nature of business and summary of significant accounting policies

Nature of business - GWG Holdings, Inc. (Holdings) (previously GWG Holdings, LLC) and Subsidiaries, located in Minneapolis, Minnesota, facilitates the purchase of life insurance policies for its own investment portfolio through its wholly owned subsidiary, GWG Life Settlements, LLC (GWG Life), and its subsidiaries, GWG Trust (Trust), GWG DLP Funding II, LLC (DLP II) and its wholly owned subsidiary, GWG DLP Master Trust II (the Trust II). Holdings converted from a limited liability company into a corporation effective June 10, 2011 and as a result of this change all member units were converted into common stock. Holdings and its subsidiaries finance the acquisition of life insurance policies and pay policy premiums through funds available on its line of credit and proceeds from other debt and equity securities as well as from revenues from maturities of life insurance policies.  GWG Broker Services, LLC (Broker Services) a wholly owned subsidiary was formed to earn fees for brokering policy transactions between market participants. GWG Member, LLC a wholly owned subsidiary formed November 2010 to facilitate the acquisition of policies, has not commenced operations as of September 30, 2012. The entities were legally organized in Delaware and are collectively referred herein to as GWG, or the Company.

Basis of presentation - The condensed consolidated balance sheet as of September 30, 2012, the condensed consolidated statements of operations for the three months and nine months ended September 30, 2012 and 2011, and the condensed consolidated statements of cash flows for the three months and nine months ended September 30, 2012 and 2011, and the related information presented in these notes, have been prepared by management in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, without audit. To the extent that information and notes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements are contained in or are consistent with the consolidated audited financial statements presented in the Company’s Form 10-K for the year ended December 31, 2011, such information and notes have not been duplicated herein. In the opinion of management, all adjustments considered necessary for a fair presentation of results have been included. The condensed consolidated balance sheet at December 31, 2011 was derived from the audited consolidated financial statements as of that date. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Special Financial Report on Form 10-K for the year ended December 31, 2011.

Use of estimates - The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The most significant estimates with regard to these consolidated financial statements relate to (1) the determination of the assumptions used in estimating the fair value of the investment in life insurance policies, and (2) the valuation of deferred tax assets.

Operating agreement – Effective June 10, 2011, the Company filed a certificate of conversion from a limited liability company into a corporation, registered in the state of Delaware. With this conversion, the Company is authorized to issue 210,000,000 shares of common stock, par value $.001, and 40,000,000 shares of preferred stock, par value $.001. In connection with the conversion, the outstanding member units were converted to 4,500,000 shares of common stock (prior to giving effect to the August 9, 2011 two-for-one forward stock split discussed below). Common stock dividends distributed subsequent to the conversion will be recorded as a reduction of paid in capital until the Company reflects accumulated positive earnings.

On July 31, 2011, the Company began a private placement offering for the sale of up to 3,333,333 shares of Series A 10% convertible, redeemable preferred stock at an offering price of $7.50 per share.  The offering of Series A concluded on September 2, 2012, and resulted in the sale of 3,279,000 shares of Series A and issuance of an additional 60,000 shares as dividends in-kind to shareholders (see note 10). The Company provided for an overallotment of 666,667 shares, allowing for total offering of 4,000,000 shares. As of September 30, 2012 we have issued 3,339,000 shares.

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GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

On August 9, 2011 the Company filed an amendment to its certificate of incorporation to effect a two-for-one forward stock split of its common stock. Unless otherwise noted, all share amounts contained in these consolidated financial statements are post-split share amounts determined after giving effect to the forward stock split.

Life settlements - ASC 325-30, Investments in Insurance Contracts, allows an investor the election to account for its investments in life settlements using either the investment method or the fair value method. The election shall be made on an instrument-by-instrument basis and is irrevocable. Under the investment method, an investor shall recognize the initial investment at the purchase price plus all initial direct costs. Continuing costs (policy premiums and direct external costs, if any) to keep the policy in force shall be capitalized. Under the fair value method, an investor shall recognize the initial investment at the purchase price. In subsequent periods, the investor shall re-measure the investment at fair value in its entirety at each reporting period and shall recognize the change in fair value in current period income net of premiums paid. The Company uses the fair value method to account for all investments in life settlements.

The Company recognizes the difference between the policy benefits received and carrying values of the respective life insurance policy when an insured event has occurred and the Company determines that settlement and ultimate collection of the policy benefits is realizable and reasonably assured. Revenue from a transaction must meet both criteria in order to be recognized. The Company recognizes these realized gains (revenue) from life settlement contracts upon one of the two following events:

1)           Receipt of mortality notice or verified obituary of insured

2)           Sale of policy and filing of change of ownership forms and receipt of payment

Deposits and initial direct costs advanced on policies to be purchased, but not yet settled, are recorded as other assets until policy ownership has been transferred to the Company.

Deferred financing and issuance costs – Financing costs incurred to obtain financing under the revolving credit facility have been capitalized and are amortized using the straight-line method over the term of the revolving credit facility. Amortization of deferred financing costs related to the revolving credit facility was $58,000 for the three months ended September 30, 2012 and 2011. Amortization of deferred financing costs related to the revolving credit facility was $175,000 for each of the nine months ended September 30, 2012 and 2011 and is included in interest expense in the statement of operations. The expected amortization expense is $58,000 and $97,000 for the three months ending December 31, 2012 and the year ending December 31, 2013, respectively.

The Series I Secured note obligations, as described in note 7, are reported net of issuance costs, sales commissions and other direct expenses, which are amortized using the interest method over the term of the borrowings. The renewable secured debentures, as described in note 8, are reported net of issuance costs, sales commissions, and other direct expenses, which are amortized using the interest method over the term of the borrowings.

The Series A convertible, redeemable preferred stock, as described in note 10, is reported net of issuance costs, sales commissions, and other direct expenses. The discount is amortized directly to equity using the interest method over the three year redemption period to the redemption amount.

Earnings (loss) per share – The Company converted from a limited liability company into a corporation effective June 10, 2011, and as a result of this change all member units were converted into common stock. The earnings (loss) per share has been restated to reflect the equivalent common stock per share amounts as of the earliest period reported. Basic per share earnings (loss) is calculated using the weighted average number of shares outstanding during the period. Diluted earnings per share is calculated based on the potential dilutive impact, if any, of the Company’s preferred stock and outstanding warrants. The Company has 831,909 warrants and 5,009,225 shares of Convertible Redeemable Preferred Stock (equivalent common shares if Convertible Redeemable Preferred Stock were converted into common stock) outstanding as of September 30, 2012. The Convertible Redeemable Preferred Stock and warrants are anti-dilutive for the three and nine months ended September 30, 2012 and 2011.

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GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Recently adopted pronouncements – In May 2011, the FASB issued ASU No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS,” which amends disclosure requirements related to categorization within the fair value hierarchy. This update results in common principles and requirements for measuring fair value and disclosing information about fair value measurements in accordance with GAAP and International Financial Reporting Standards. The guidance became effective January 1, 2012. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

Other pronouncements issued by the FASB with future effective dates are either not applicable or are not expected to be significant to the Company.

( 2 )       Restrictions on cash

The Company is required by its lenders to maintain collection and escrow accounts. These accounts are used to fund the acquisition, pay annual premiums of insurance policies, pay interest and other charges under its revolving credit facility, and collect policy benefits. DZ Bank AG, as agent for Autobahn Funding Company, LLC, the lender for the revolving credit facility as described in note 6, authorizes the disbursements from these accounts. At September 30, 2012 and December 31, 2011 there was a balance of $1,424,000, and $4,794,000, respectively, maintained in these restricted cash accounts.

( 3 )      Investment in life insurance policies

The life insurance policies (Level 3 financial instruments) are valued based on unobservable inputs that are significant to the overall fair value measurement. Changes in the fair value of these instruments are recorded in gain or loss on life insurance policies in the consolidated statements of operations (net of the cash premiums paid on the policies). The fair value is determined on a discounted cash flow basis that incorporates life expectancy assumptions.  Life expectancy reports have been obtained from widely accepted life expectancy providers. The discount rate incorporates current information about market interest rates, the credit exposure to the insurance company that issued the life insurance policy and our estimate of the risk premium an investor in the policy would require. As a result of management’s analysis, discount rates of 13.29% and 13.41% were applied to the portfolio as of September 30, 2012 and December 31, 2011, respectively.

A summary of the Company’s life insurance policies accounted for under the fair value method and their estimated maturity dates, based on remaining life expectancy is as follows:

	As of September 30, 2012						As of December 31, 2011
Years Ending December 31,	Number of Contracts		Estimated Fair Value		Face Value		Number of Contracts		Estimated Fair Value		Face Value
2012		-	$	-	$	-		-	$	-	$	-
2013		-		-		-		-		-		-
2014		-		-		-		1		535,000		1,000,000
2015		5		2,868,000		5,329,000		5		4,636,000		9,329,000
2016		11		12,936,000		28,885,000		10		12,930,000		34,835,000
2017		28		26,627,000		67,748,000		29		24,144,000		71,998,000
2018		33		24,361,000		73,008,000		34		23,500,000		81,858,000
Thereafter		119		81,037,000		340,692,000		96		56,424,000		277,385,000
Totals		196	$	147,829,000	$	515,662,000		175	$	122,169,000	$	476,405,000

The Company recognized $494,000 of policy benefit income during the nine months period ended September 30, 2011. The Company received cash from policy benefits of $4,500,000 in April 2012, resulting in a gain of $4,083,000.

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GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Reconciliation of gain on life settlements:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Change in fair value	$	8,881,000		$	7,526,000		$	18,249,000		$	23,736,000
Premiums and other annual fees		(4,093,000	)		(4,163,000	)		(12,074,000	)		(10,079,000	)
Policy maturities		-			494,000			4,083,000			494,000
Gain on life settlements, net	$	4,788,000		$	3,857,000		$	10,258,000		$	14,151,000

The estimated expected premium payments to maintain the above life insurance policies in force for the next five years, assuming no mortalities, are as follows:

Years Ending December 31,
Three months ending December 31, 2012	$	4,190,000
2013		16,831,000
2014		18,050,000
2015		19,438,000
2016		21,051,000
	$	79,560,000

Management anticipates funding the estimated premium payments as noted above with proceeds from the DZ Bank revolving credit facility and through additional debt and equity financing as well as from cash proceeds from maturities of life insurance policies. The proceeds of these capital sources are also intended to be used for the purchase, financing, and maintenance of additional life insurance policies.

( 4 )       Fair value definition and hierarchy

ASC 820 establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring assets and liabilities at fair value. Market price observability is affected by a number of factors, including the type of investment, the characteristics specific to the investment and the state of the marketplace including the existence and transparency of transactions between market participants. Assets and liabilities with readily available active quoted prices or for which fair value can be measured from actively quoted prices in an orderly market generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. ASC 820 establishes a three-level valuation hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

The hierarchy is broken down into three levels based on the observability of inputs as follows:

● Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.  Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

● Level 2 - Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

- 10 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

● 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 the investment 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.

Life insurance policies represent financial instruments recorded at fair value on a recurring basis. The following table reconciles the beginning and ending fair value of the Company’s Level 3 investments in life insurance policies for the following periods:

	Three month ended September 30,					Nine months ended September 30,
	2012		2011			2012			2011
Beginning balance	$	133,848,000	$	108,480,000		$	122,169,000		$	82,718,000
Purchases		5,100,000		5,594,000			7,827,000			10,844,000
Maturities (cost basis)		-		(344,000	)		(416,000	)		(344,000	)
Net change in fair value		8,881,000		3,363,000			18,249,000			23,875,000
Ending balance (September 30)	$	147,829,000	$	117,093,000		$	147,829,000		$	117,093,000

The fair value of a portfolio of life insurance policies is based on information available to the Company at the reporting date. Fair value is based upon a discounted cash flow model that incorporates life expectancy assumptions.  Life expectancy reports are obtained from independent, third-party widely accepted life expectancy providers at policy acquisition. The life expectancy values of each policy holder, as determined at policy acquisition, are rolled down monthly for the passage of time by the MAPS actuarial software the Company uses for ongoing valuation of its portfolio of life insurance policies.  The discount rate incorporates current information about market interest rates, the credit exposure to the insurance company that issued the life insurance policy and management’s estimate of the risk premium an investor in the portfolio of life insurance policies would require.

The fair value of life insurance policies is estimated using present value calculations of estimated cash flows based on the data specific to each individual life insurance policy. The following summarizes inputs utilized in estimating the fair value of the portfolio of life insurance policies:

	As of  September 30,			As of December 31,
	2012			2011
Weighted average age of insured		81.2			80.9
Weighted average life expectancy, months*		88.1			93.6
Average face amount per policy	$	2,630,927		$	2,722,315
Discount rate		13.29	%		13.41	%
* Standard life expectancy as adjusted for insured’s specific circumstances.

- 11 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

These assumptions are, by their nature, inherently uncertain and the effect of changes in estimates may be significant. The techniques used in estimating the present value of estimated cash flows are derived from valuation techniques generally used in the industry that include inputs for the asset that are not based on observable market data. The extent to which the fair value could reasonable vary in the near term has been quantified by evaluating the effect of changes in significant underlying assumptions used to estimate the fair value. If the life expectancies were increased or decreased by 4 months on each outstanding policy and the discount factors were increased or decreased by 1% while all other variables are held constant, the fair value of the investment in life insurance policies would increase or (decrease) by the  amounts summarized below:

	Change in life expectancy
	plus 4 months				minus  4 months
Investment in life policies
September 30, 2012		$	(10,936,000	)		$	11,241,000
December 31, 2011		$	(9,660,000	)		$	9,951,000
	Change in discount rate
	plus 1%				minus 1%
Investment in life policies
September 30, 2012		$	(7,367,000	)		$	7,992,000
December 31, 2011		$	(6,665,000	)		$	7,254,000

Carrying value of receivables, prepaid expenses, accounts payable and accrued expenses approximate fair value due to their short term maturities and low credit risk. The estimated fair value of the Company’s Series I Secured notes payable is approximately $40,492,000 based on a weighted average market interest rate of 7.3%. The Company began issuing Renewable Secured Debentures in the first quarter of 2012. The current interest rates on the Renewable Secured Debentures approximate market rates. The carrying value of the revolving credit facility reflects interest charged at the commercial paper rate plus an applicable margin. The margin represents our credit risk, and the strength of the portfolio of life insurance policies collateralizing the debt. Management believes this margin has not changed over time.  The overall rate reflects market, and the carrying value of the revolver approximates fair value.

The Company has issued warrants to purchase common stock in connection with the issuance of its preferred stock. The fair value measurements associated with the warrants, measured at issuance represent level 3 instrument.

Month issued	Warrants issued		Fair value per share		Risk free rate			Volatility
12/31/11		137,874	$	0.11		0.42	%		25.25	%
03/31/12		76,260	$	0.26		0.38	%		36.20	%
06/30/12		323,681	$	0.58		0.41	%		47.36	%
07/31/12		289,093	$	0.58		0.41	%		47.36	%
09/30/12		5,000	$	0.36		0.31	%		40.49	%
		831,908

The Company has not changed its methodology in estimating fair value from prior periods.

( 5 )       Notes receivable from related parties

Notes receivable from related parties consisted of various unsecured notes receivable. These notes were due from shareholders of the Company, with interest rates ranging from 4.2% to 5%, payable annually and were paid in full July 27, 2011. Interest income from related parties totaled $24,000 during the nine months ended September 30, 2011. As a part of the Company’s compensation plan effective January 1, 2011, interest income earned on these notes were treated as guaranteed payments to the members and are included in employee compensation and benefits in the statement of operations for the nine months ended September 30, 2011. On July 27, 2011, the Company paid dividends to the shareholders in the amount of their respective note receivable balances. They immediately repaid their balance due on each note and the related accrued interest in full.

- 12 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

As of September 30, 2012, and December 31, 2011, the Company had receivables totaling $5,000,000 due from an affiliate, Opportunity Finance, LLC, that were fully reserved. Opportunity Finance ceased operations in 2008.

( 6 )       Credit facilities

Revolving credit facility – Autobahn Funding Company LLC

On July 15, 2008, DLP II and United Lending entered into a revolving credit facility pursuant to a Credit and Security Agreement (Agreement) with Autobahn Funding Company LLC (Autobahn), providing the Company with a maximum borrowing amount of $100,000,000. Autobahn is a commercial paper conduit that issues commercial paper to investors in order to provide funding to DLP II and United Lending. DZ Bank AG acts as the agent for Autobahn. The Agreement expires on July 15, 2013.  The amount outstanding under this facility as of September 30, 2012 and December 31, 2011, was $66,000,000 and $60,000,000, respectively.

The Agreement requires DLP II or United Lending to pay, on a monthly basis, interest at the commercial paper rate plus an applicable margin, as defined in the Agreement. The effective rate was 2.13% and 2.25% at September 30, 2012 and December 31, 2011, respectively.  The weighted average effective interest rate (excluding the unused line fee) was 2.17% and 2.15% for the nine months ended September 30, 2012 and 2011, respectively, and 2.15% and 2.17% for the three months ended September 30, 2012 and 2011, respectively.  The Agreement also requires payment of an unused line fee on the unfunded amount under the revolving credit facility. The note is secured by substantially all of DLP II and United Lending assets which consist primarily of life settlement policies.

The Agreement has certain financial and nonfinancial covenants. The Company is in compliance with these covenants at September 30, 2012. The Agreement generally prohibits the Company from:

● changing its corporate name, offices, and jurisdiction of incorporation

● changing any deposit accounts or payment instructions to insurers;

● changing any operating policies and practices such that it would be reasonably likely to adversely affect the collectability of any asset in any material respect;

● merging or consolidating with, or selling all or substantially all of its assets to, any third party;

● selling any collateral or creating or permitting to exist any adverse claim upon any collateral;

● engaging in any other business or activity than that contemplated by the Agreement;

● incurring or guaranteeing any debt for borrowed money;

● amending the Company’s certificate of incorporation or bylaws;making any loans or advances to, investments in, or paying any dividends to, any person unless both before and after any such loan, advance, investment or dividend there exists no actual event of default, potential event of default or termination event;

● removing an independent director on the board of directors except for cause or with the consent of the lender; or

● making payment on or issuing any subsidiary secured notes or debentures, or amending any agreements respecting such notes or debentures, if an event of default, potential event of default or termination event exists or would arise from any such action.

In addition, the Company has agreed to maintain (i) a positive consolidated net income (as defined and calculated under the Agreement) for each complete fiscal year and (ii) a tangible net worth (again, as defined and calculated under the Agreement) of not less than $5 million. Consolidated net income and tangible net worth for nine months ended September 30, 2012, as calculated under the agreement, was $2,078,000 and $48,014,000 respectively.

Advances under the Agreement are subject to a borrowing base formula, which limits the availability of advances on the borrowing base calculation based on attributes of policies pledged to the facility. Over-concentration of policies by insurance carrier, and over-concentration of policies by insurance carriers with ratings below a AA- rating are the two primary factors with the potential of limiting availability of funds on the facility. Total funds available for additional borrowings under the borrowing base formula criteria at September 30, 2012 and December 31, 2011, were $12,276,000 and $7,691,000 respectively.

- 13 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Holdings is not obligated under this credit facility to guarantee loan or interest payments to Autobahn: however, Holdings is obligated under a performance guaranty to provide servicing for policies held by DLP II.

Lending agreement with affiliate

The Company entered into an Investment Agreement with an affiliate Insurance Strategies Fund, LLC (ISF) on September 3, 2009.  Under the terms of this agreement, ISF will provide working capital loans to the Company for general working capital needs and expenses.  The Company does not expect to take working capital loans under this agreement during the foreseeable future.

( 7 )       Series I Secured notes payable

Series I Secured notes payable have been issued in conjunction with the GWG Series I Secured notes private placement memorandum dated August 25, 2009 (last revised November 15, 2010). On June 14, 2011 the Company closed the offering to additional investors, however, existing investors may elect to continue advancing amounts outstanding upon maturity subject to the Company’s option. Series I Secured notes have maturity dates ranging from six months to seven years with fixed interest rates varying from 7.0% to 9.55% depending on the term of the note. Interest is payable monthly, quarterly, annually or at maturity depending on the terms of the note. At September 30, 2012 and December 31, 2011 the weighted average interest rates of Series I Secured notes were 8.20%, and 8.04% respectively. The notes are secured by assets of GWG Life. The principal amount outstanding under these Series I Secured notes was $40,025,000 and $49,332,000 at September 30, 2012, and December 31, 2011, respectively.  The difference between the amount outstanding on the Series I Secured notes and the carrying amount on the consolidated balance sheet is due to netting of unamortized deferred issuance costs. Overall, interest expense includes amortization of deferred financing and issuance costs of $947,000 and $1,374,000 for the nine months ended September 30, 2012 and 2011, respectively, and $200,000 and $594,000 for the three months ended September 30, 2012 and 2011, respectively. Future expected amortization of deferred financing costs is $803,000.

On November 15, 2010, the owners pledged their ownership interests in the Company to the Series I Trust as security for advances under the Series I Trust arrangement.

The use of proceeds from the issuances of Series I Secured notes was limited to the following: (1) payment of commissions of Series I Secured note sales, (2) purchase life insurance policies, (3) pay premiums of life insurance policies, (4) pay principal and interest to Senior Liquidity Provider (DZ Bank), (5) pay portfolio or note operating fees or costs, (6) pay trustee (Wells Fargo Bank, N.A.), (7) pay servicer and collateral fees, (8) pay principal and interest on Series I Secured notes, (9) make distributions to equity holders for tax liability related to portfolio, (10) purchase interest rate caps, swaps, or hedging instruments, (11) pay GWG Series I Trustee fees, and (12) Pay offering expenses.

On November 1, 2011, GWG entered into a Third Amended and Restated Note Issuance and Security Agreement with Lord Securities Corporation after receiving majority approval from the holders of Series I Secured Notes. Among other things, the amended and restated agreement modified the use of proceeds and certain provisions relating to the distribution of collections and subordination of cash flow. Under the amended and restated agreement, GWG is no longer restricted as to its use of proceeds or subject to restrictions on certain distributions of collections and subordination of cash flows.

- 14 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Future maturities of Series I Secured notes payable at September 30, 2012 are as follows:

Years Ending December 31,
2012	$	6,112,000
2013		15,380,000
2014		8,437,000
2015		4,102,000
2016		1,155,000
Thereafter		4,839,000
	$	40,025,000

( 8 )       Renewable secured debentures

The Company has registered with the Securities and Exchange Commission, effective January 2012, the offer and sale of $250,000,000 of secured debentures. Renewable Secured Debentures have maturity dates ranging from six months to seven years with fixed interest rates varying from 4.75% to 9.50% depending on the term of the note. Interest is payable monthly, annually or at maturity depending on the terms of the debenture. At September 30, 2012, the weighted average interest rate of Renewable Secured Debentures was 7.58%. The debentures are secured by assets of GWG Life and GWG Holdings. The amount outstanding under these Renewable Secured Debentures was $32,685,000 at September 30, 2012. The difference between the amount outstanding on the Renewable Secured Debentures and the carrying amount on the consolidated balance sheet is due to netting of unamortized deferred issuance costs and cash receipts for new issuances in process at September 30, 2012. Amortization of deferred issuance costs was $135,000 and $182,000 for the three and nine months ended September 30, 2012, respectively. Future expected amortization of deferred financing costs is $1,580,000. Subsequent to September 30, 2012, the Company has issued approximately an additional $9,348,000 in principal amount of these secured debentures.

The use of proceeds from the issuances of Renewable Secured Debentures is limited to the following: (1) payment of commissions on sales of Renewable Secured Debentures, (2) payment of offering expenses, (3) purchase of life insurance policies, (4) Payment of premiums on life insurance policies, (5) payment of principal and interest on Renewable Secured Debentures, (6) payment of portfolio operations expenses, and (7) for general working capital.

Future maturities of Renewable Secured Debentures at September 30, 2012 are as follows:

Years Ending December 31,
2012	$	1,208,000
2013		5,931,000
2014		6,009,000
2015		9,510,000
2016		917,000
Thereafter		9,110,000
	$	32,685,000

The Company entered into an Indenture effective October 19, 2011 with Holdings as obligor, GWG Life as guarantor, and Bank of Utah as trustee for the benefit of the debenture holders.  The Indenture has certain financial and nonfinancial covenants.  The Company is in compliance with these covenants at September 30, 2012.

( 9 )       Income taxes

The Company was a pass through entity for federal income tax purposes through June 10, 2011. No income tax provision has been included through that date in these consolidated financial statements as income or loss of the Company was required to be reported by the respective members on their income tax returns. Subsequent to the Company’s conversion to a corporation from a limited liability company, the Company will file and pay taxes based upon its reported income. In 2012 there is a significant permanent difference between income before income taxes and taxable income. This permanent difference results from the inclusion of convertible redeemable preferred stock as an interest expense, however such dividends are not deductable for income tax reporting purposes. The dividends charged to interest expense were $675,000 and $1,654,000 for the three and nine months ended September 30, 2012, respectively.

The most significant temporary differences between GAAP net income and tax net income are the treatment of interest costs and revenue recognition on the portfolio of life insurance policies.

- 15 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

( 10 )     Convertible, redeemable preferred stock

The Company began offering 3,333,333 shares of convertible redeemable preferred stock (Series A preferred stock) for sale to accredited investors in a private placement on July 31, 2011. The offering of Series A preferred stock concluded on September 2, 2012 and resulted in 3,279,000 shares being sold for gross consideration of  $24,591,000. As of September 30, 2012, 60,000 shares were issued as a result of conversion of dividends into shares of Series A preferred stock for gross consideration of $425,000.  The Series A preferred stock was sold at an offering price of $7.50 per share. Series A preferred stock has a preferred yield of 10% per annum, and each share has the right to convert into 1.5 shares of the Company’s common stock. The Company may elect to automatically convert the Series A preferred stock to common stock as described below. Series A preferred shareholders received three-year warrants to purchase, at an exercise price per share of $6.25, one share of common stock for every 20 shares of Series A preferred stock purchased.  The warrants are exercisable immediately. In the Certificate of Designations for the Series A preferred stock dated July 31, 2011, the Company has agreed to permit preferred shareholders to sell their shares back to the Company for the stated value of $7.50 per share, plus accrued dividends, according to the following schedule:

● Up to 33% of the holder’s unredeemed shares one year after issuance:

● Up to 66% of the holder’s unredeemed shares two years after issuance; and

● Up to 100% of the holder’s unredeemed shares three years after issuance.

The Company’s obligation to redeem Series A preferred shares will terminate upon the Company completing a registration of its common stock with the SEC. The Company may redeem the Series A preferred shares at a price equal to 110% of their liquidation preference ($7.50 per share) at any time after December 15, 2012.

At the election of the Company, the Series A preferred shares may be automatically converted into the common stock of the Company in the event of either (1) a registered offering of the Company’s common stock with the SEC aggregating gross proceeds of at least $5.0 million at a price equal to or greater than $5.50 per share of common stock, or (2) the consent of shareholders holding at least a majority of the then-outstanding shares of Series A preferred stock. As of September 30, 2012, the Company had issued 3,339,000 preferred shares resulting in gross consideration of $25,016,000 (including cash proceeds, conversion of Series I Secured notes and accrued interest on Series I notes, and preferred dividends). The Company incurred Series A preferred stock issuance costs of $2,838,000, of which $440,000 and $1,214,000 was amortized to additional paid in capital during the three and nine months ended September 30, 2012, respectively, resulting in a net preferred stock capital balance of $23,392,000.

The Company determined that the grant date fair value of the outstanding warrants attached to the Series A preferred stock was $170,000 and $377,000 for warrants issued through the three and nine month periods ending September 30, 2012 and $22,000 for warrants issued through December 31, 2011. The Company may redeem outstanding warrants prior to their expiration, at a price of $0.01 per share upon 30 days written notice to the investors at any time after (i) the Company has completed a registration of its common stock with the SEC and (ii) the volume of weighted average sale price per share of common stock equals or exceeds $7.00 per share for ten consecutive trading days ending on the third business day prior to proper notice of such redemption. Total warrants outstanding as of September 30, 2012, were 831,909 with a weighted average remaining life of 2.59 years. Total warrants outstanding at December 31, 2011, were 139,417 with a weighted average remaining life of 2.76 years.

Dividends on the preferred stock may be paid in either cash or additional shares of preferred stock at the election of the holder and approval of the Company. The dividends are reported as an expense and included in the caption interest expense in the consolidated statements of operations.

- 16 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The Company declared and accrued dividends of $675,000 and $1,654,000 for the three and nine months ended September 30, 2012, respectively. Cash dividends of $906,000 were paid on or before October 13, 2012. 58,296 shares of Series A preferred stock were issued in lieu of cash dividends, pursuant to a board resolution declaring the dividend. The shares issued in lieu of cash dividends were issued at $7.00 per share.

( 11 )     Commitments

The Company entered into an office lease with U.S. Bank National Association as the landlord. The lease was effective April 22, 2012 with a term through August 31, 2015. The lease is for 8,881 square feet of office space located at 220 South Sixth Street, Minneapolis, Minnesota. The Company is obligated to pay base rent plus common area maintenance and a share of the building operating costs. Minimum lease payments under the lease are as follows:

2012 (remaining)	$	18,318
2013	$	74,752
2014	$	78,452
2015	$	53,288
Total	$	224,810

( 12 )    Contingencies

Litigation - In the normal course of business, the Company is involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings would not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Contingency matter – Opportunity Finance, LLC, owned by Jon Sabes and Steven Sabes, is subject to litigation clawback claims by the bankruptcy trustee for third-party matters for payments that may have been deemed preference payments. In addition, Jon Sabes and Steven Sabes are subject to litigation clawback claims by the bankruptcy trustee for third-party matters for payments received from Opportunity Finance that may have been deemed preference payments. If the parties are unsuccessful in defending against these claims, their equity ownership in the Company may be sold or transferred to other parties to satisfy such claims. In addition, the Company loaned $1,000,000 to Opportunity Finance, LLC, and was repaid in full plus interest of $177,000. This investment amount may also be subject to clawback claims by the bankruptcy court. These matters may also distract management and reduce the time and attention that they are able to devote to the Company’s operations.

( 13 )    Guarantees of secured debentures

Holdings has registered with the Securities and Exchange Commission the offer and sale $250,000,000 of secured debentures as described in note 8. The secured debentures are secured by the assets of Holdings as described in note 8 and a pledge of all the common stock by the largest shareholders. Obligations under the debentures are guaranteed by Holding’s subsidiary GWG Life. This guarantee involves the grant of a security interest in all the assets of GWG Life. GWG Life is a wholly owned subsidiary of Holdings and the payment of principal and interest on the secured debentures is fully and unconditionally guaranteed by GWG Life. The majority of the Company’s life insurance policies are held by DLP II, a wholly owned subsidiary of GWG Life, however, the policies held by DLP II are not collateral for the debenture obligations as such policies are collateral for the credit facility.

The condensed consolidating financial statements are presented in lieu of separate financial statements and other related disclosures of the subsidiary guarantors and issuer because management does not believe that separate financial statements and related disclosures would be material to investors. There are currently no significant restrictions on the ability of Holdings or GWG Life , the guarantor subsidiary, to obtain funds from its subsidiaries by dividend or loan, except as follows. DLP II is a borrower under a credit agreement with Autobahn, with DZ Bank AG as agent, as described in note 3. The significant majority of insurance policies owned by the Company are subject to a collateral arrangement with DZ Bank AG described in notes 3 and 6. Under this arrangement, collection and escrow accounts are used to fund purchases and premiums of the insurance policies and to pay interest and other charges under its revolving credit facility. DZ Bank AG and Autobahn must authorize all disbursements from these accounts, including any distributions to GWG Life. Distributions are limited to an amount that would result in the borrowers (GWG DLP Funding II, LLC, GWG Life Settlements, LLC, and GWG Holdings, Inc) realizing an annualized rate of return on the equity funded amount for such assets of not more than 18%, as determined by DZ Bank AG. After such amount is reached, the credit agreement requires that excess funds be used for repayments of borrowings before any additional distributions may be made.

- 17 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The following represents condensed consolidating financial information as of September 30, 2012 and December 31, 2011, with respect to the financial position, and for the three and nine months ended September 30, 2012 and 2011 with respect to results of operations and cash flows of Holdings and its subsidiaries. The parent column presents the financial information of Holdings, the primary obligor of the secured debentures. The guarantor subsidiary column presents the financial information of GWG Life, the guarantor subsidiary of the secured debentures, presenting its investment in DLP II and Trust under the equity method. The non-guarantor subsidiaries column presents the financial information of all non-guarantor subsidiaries including DLP II and Trust.

Condensed Consolidating Balance Sheets

September 30, 2012	Parent				Guarantor Sub			Non-Guarantor Sub			Eliminations				Consolidated
A S S E T S
Cash and cash equivalents		$	16,325,020			$	1,939,119		$	-		$	-			$	18,264,139
Restricted cash			-				26,000			1,398,466			-				1,424,466
Investment in life settlements, at fair value			-				-			147,828,800			-				147,828,800
Other assets			52,982				175,340			656,309			-				884,631
Investment in subsidiaries			43,175,407				83,480,002			-			(126,655,409	)			-
TOTAL ASSETS		$	59,553,409			$	85,620,461		$	149,883,575		$	(126,655,409	)		$	168,402,036
L I A B I L I T I E S  &  O W N E R S'  E Q U I T Y  (D E F I C I T)
LIABILITIES
Revolving credit facility		$	-			$	-		$	66,000,000		$	-			$	66,000,000
Series I Secured notes payable			-				39,221,704			-			-				39,221,704
Secured renewable debentures			32,112,270				-			-			-				32,112,270
Interest			443,120				2,296,506			131,274			-				2,870,900
Accounts payable and accrued expenses			1,043,857				1,004,476			194,667			-				2,243,000
Deferred taxes			4,411,929				-			-			-				4,411,929
TOTAL LIABILITIES			38,011,176				42,522,686			66,325,941			-				146,859,803
CONVERTIBLE, REDEEMABLE PREFERRED STOCK			23,391,533				-			-			-				23,391,533
EQUITY (DEFICIT)
Member capital			-				43,097,775			83,557,634			(126,655,409	)			-
Common stock			9,989				-			-			-				9.989
Additional paid-in capital			7,335,887				-			-			-				7,335,887
Accumulated deficit			(9,195,176	)			-			-			-				(9,195,176	)
TOTAL EQUITY (DEFICIT)			(1,849,300	)			43,097,775			83,557,634			(126,655,409	)			(1,849,300	)
TOTAL LIABILITIES AND EQUITY (DEFICIT)		$	59,553,409			$	85,620,461		$	149,883,575		$	(126,655,409	)		$	168,402,036

- 18 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Condensed Consolidating Balance Sheets (continued)

December 31, 2011	Parent				Guarantor Sub			Non-Guarantor Sub			Eliminations				Consolidated
A S S E T S
Cash and cash equivalents		$	1,746,456			$	131,893		$	-		$	-			$	1,878,349
Restricted cash			-				822,227			3,972,075			-				4,794,302
Investment in life settlements, at fair value			-				4,876,389			117,292,135			-				122,168,524
Other assets			34,817				170,346			342,937			-				548,100
Investment in subsidiaries			17,026,465				61,326,724			-			(78,353,189	)			-
TOTAL ASSETS		$	18,807,738			$	67,327,579		$	121,607,147		$	(78,353,189	)		$	129,389,275
L I A B I L I T I E S & O W N E R S' E Q U I T Y (D E F I C I T)
LIABILITIES
Revolving credit facility		$	-			$	-		$	60,000,000		$	-			$	60,000,000
Series I Secured notes payable			-				48,179,271			-			-				48,179,271
Interest			-				1,779,796			108,039			-				1,887,835
Accounts payable and accrued expenses			889,676				507,015			7,416			-				1,404,107
Deferred taxes			4,308,217				-			-			-				4,308,217
TOTAL LIABILITIES			5,197,893				50,466,082			60,115,455			-				115,779,430
CONVERTIBLE, REDEEMABLE PREFERRED STOCK			12,661,276				-			-			-				12,661,276
EQUITY (DEFICIT)
Member capital			-				16,861,497			61,491,692			(78,353,189	)			-
Common stock			9,989				-			-			-				9,989
Additional paid-in capital			8,169,303				-			-			-				8,169,303
Accumulated deficit			(7,230,723	)			-			-			-				(7,230,723	)
TOTAL EQUITY (DEFICIT)			948,569				16,861,497			61,491,692			(78,353,189	)			948,569
TOTAL LIABILITIES AND EQUITY (DEFICIT)		$	18,807,738			$	67,327,579		$	121,607,147		$	(78,353,189	)		$	129,389,275

- 19 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Condensed Consolidating Statements of Operations

For the nine months ended September 30, 2012	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Contract servicing fees	$	-		$	1,184,627		$	-	$	(1,184,627	)	$	-
Gain on life settlements, net		-			-			10,257,537		-			10,257,537
Interest and other income		8,650			222,863			42,734		(219,671	)		54,576
TOTAL REVENUE		8,650			1,407,490			10,300,271		(1,404,298	)		10,312,113
EXPENSES
Origination and servicing fees		-			-			1,184,627		(1,184,627	)		-
Employee compensation and benefits		-			1,862,469			-		-			1,862,469
Legal and professional fees		851,954			86,927			13,170		-			952,051
Interest expense		2,555,271			3,770,808			1,295,098		-			7,621,177
Other expenses		703,373			996,284			257,171		(219,671	)		1,737,157
TOTAL EXPENSES		4,110,598			6,716,488			2,750,066		(1,404,298	)		12,172,854
INCOME (LOSS) BEFORE EQUITY IN LOSS OF SUBSIDIARIES		(4,101,948	)		(5,308,998	)		7,550,205		-			(1,860,741	)
EQUITY IN LOSS OF SUBSIDIARY		2,241,207			7,637,541			-		(9,878,748	)		-
NET INCOME (LOSS) BEFORE INCOME TAXES		(1,860,741	)		2,328,543			7,550,205		(9,878,748	)		(1,860,741	)
INCOME TAX EXPENSE		103,712			-			-		-			103,712
NET INCOME (LOSS)	$	(1,964,453	)	$	2,328,543		$	7,550,205	$	(9,878,748	)	$	(1,964,453	)

For the nine months ended September 30, 2011	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Contract servicing fees	$	-		$	2,409,825		$	-	$	(2,409,825	)	$	-
Gain on life settlements, net		-			7,240			14,144,000		-			14,151,240
Interest and other income		3,488			34,171			3,591		-			41,250
TOTAL REVENUE		3,488			2,451,236			14,147,591		(2,409,825	)		14,192,490
EXPENSES
Origination and servicing fees		-			6,000			2,403,825		(2,409,825	)		-
Employee compensation and benefits		-			1,403,844			-		-			1,403,844
Legal and professional fees		297,865			296,365			3,000		-			597,230
Interest expense		49,369			5,079,971			1,012,561		-			6,141,901
Investment banking services		3,595,027			-			-		-			3,595,027
Other expenses		186,815			719,593			38,001		-			944,409
TOTAL EXPENSES		4,129,076			7,505,773			3,457,387		(2,409,825	)		12,682,411
INCOME (LOSS) BEFORE EQUITY IN LOSS OF SUBSIDIARIES		(4,125,588	)		(5,054,537	)		10,690,204		-			1,510,079
EQUITY IN LOSS OF SUBSIDIARY		5,635,667			10,777,541			-		(16,413,208	)		-
NET INCOME  BEFORE INCOME TAXES		1,510,079			5,723,004			10,690,204		(16,413,208	)		1,510,079
INCOME TAX EXPENSE		2,363,851								-			2,363,851
NET INCOME (LOSS)	$	(853,772	)	$	5,723,004		$	10,690,204	$	(16,413,208	)	$	(853,772	)

- 20 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

For the three months ended September 30, 2012	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Contract servicing fees	$	-		$	746,377		$	-	$	(746,377	)	$	-
Gain on life settlements, net		-			(229,277	)		5,017,568		-			4,788,291
Interest and other income		5,601			219,670			81		(219,671	)		5,681
TOTAL REVENUE		5,601			736,770			5,017,649		(966,048	)		4,793,972
EXPENSES
Origination and servicing fees		-			6,500			739,877		(746,377	)		-
Employee compensation and benefits		-			745,386			-		-			745,386
Legal and professional fees		196,354			41,124			13,170		-			250,648
Interest expense		1,287,059			1,074,260			441,866		-			2,803,185
Other expenses		169,274			292,730			232,171		(219,671	)		474,505
TOTAL EXPENSES		1,652,687			2,160,000			1,427,084		(966,048	)		4,273,723
INCOME (LOSS) BEFORE EQUITY IN LOSS OF SUBSIDIARIES		(1,647,086	)		(1,423,230	)		3,590,565		-			520,249
EQUITY IN LOSS OF SUBSIDIARY		2,167,335			3,619,677			-		(5,787,012	)		-
NET INCOME BEFORE INCOME TAXES		520,249			2,196,447			3,590,565		(5,787,012	)		520,249
INCOME TAX EXPENSE		633,572			-			-		-			633,572
NET INCOME (LOSS)	$	(113,323	)	$	2,196,447		$	3,590,565	$	(5,787,012	)	$	(113,323	)

For the three months ended September 30, 2011	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Contract servicing fees	$	-		$	409,900		$	-	$	(409,900	)	$	-
Gain on life settlements, net		-			52,567			3,804,564		-			3,857,131
Interest and other income		3,488			5,787			5					9,280
TOTAL REVENUE		3,488			468,254			3,804,569		(409,900	)		3,866,411
EXPENSES
Origination and servicing fees		-			-			409,900		(409,900	)		-
Employee compensation and benefits		-			461,824			-		-			461,824
Legal and professional fees		219,958			66,723			-		-			286,681
Interest expense		49,369			2,409,814			371,506		-			2,830,689
Investment banking services		3,595,027			-			-		-			3,595,027
Other expenses		139,100			224,291			12,501		-			375,892
TOTAL EXPENSES		4,003,454			3,162,652			793,907		(409,900	)		7,550,113
INCOME (LOSS) BEFORE EQUITY IN LOSS OF SUBSIDIARIES		(3,999,966	)		(2,694,398	)		3,010,662		-			(3,683,702	)
EQUITY IN LOSS OF SUBSIDIARY		316,264			3,039,774			-		(3,356,038	)		-
NET INCOME (LOSS) BEFORE INCOME TAXES		(3,683,702	)		345,376			3,010,662		(3,356,038	)		(3,683,702	)
INCOME TAX EXPENSE		(1,417,649	)		-			-		-			(1,417,649	)
NET INCOME (LOSS)	$	(2,266,053	)	$	345,376		$	3,010,662	$	(3,356,038	)	$	(2,266,053	)

- 21 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Condensed Consolidating Statements of Cash Flows

For the nine months ended September 30, 2012	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(1,964,453	)	$	2,328,543		$	7,550,205		$	(9,878,748	)	$	(1,964,453	)
Adjustments to reconcile net income (loss) to cash:
(Equity) loss of subsidiaries		(2,241,206	)		(7,637,542	)		-			9,878,748			-
(Gain) loss on life settlements		-			999,677			(20,871,468	)		-			(19,871,791	)
Amortization of deferred financing and issuance costs		182,410			946,813			174,672			-			1,303,895
Deferred income taxes		103,712			-			-			-			103,712
Accrued convertible, redeemable preferred stock dividends		636,069			-			-			-			636,069
(Increase) decrease in operating assets:
Other assets		(19,717,082	)		(20,256,072	)		(146,874	)		41,061,553			941,525
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		334,182			1,092,292			24,484			-			1,450,958
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(22,666,368	)		(22,526,289	)		(13,268,981	)		41,061,553			(17,400,085	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(7,986,570	)		-			(7,983,570	)
Proceeds from settlement of life settlements		-			-			416,665			-			416,665
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES		-			-			(7,566,905	)		-			(7,566,905	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from revolving credit facility		-			-			6,000,000			-			6,000,000
Proceeds from issuance of Series I Secured notes payable		-			50,000			-			-			50,000
Payments for redemption of Series I Secured notes payable		-			(5,311,989	)		-			-			(5,311,989	)
Proceeds from issuance of debentures		33,635,657			-			-			-			33,635,657
Payments for issuance of debentures		(1,627,467	)		-			-			-			(1,627,467	)
Proceeds (payments) from restricted cash		-			796,227			2,573,610			-			3,369,837
Issuance of member capital		-			28,799,277			12,262,276			(41,061,553	)		-
Issuance of preferred stock		6,287,375			-			-			-			6,287,375
Payments for issuance of preferred stock		(1,050,633	)		-			-			-			(1,050,633	)
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES		37,244,932			24,333,515			20,835,886			(41,061,553	)		41,352,780
NET INCREASE IN CASH AND CASH EQUIVALENTS		14,578,564			1,807,226			-			-			16,385,790
CASH AND CASH EQUIVALENTS
BEGINNING OF THE YEAR		1,746,456			131,893			-			-			1,878,349
END OF THE YEAR	$	16,325,020		$	1,939,119		$	-		$	-		$	18,264,139

- 22 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Consolidating Statements of Cash Flows (continued)

For the three months ended September 30, 2012	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(113,323	)	$	2,196,447		$	3,590,565		$	(5,787,012	)	$	(113,323	)
Adjustments to reconcile net income (loss) to cash:
(Equity) loss of subsidiaries		(2,167,335	)		(3,619,677	)		-			5,787,012			-
(Gain) loss on life settlements		-			-			(8,881,542	)		-			(8,881,542	)
Amortization of deferred financing and issuance costs		135,788			200,426			58,224			-			394,438
Deferred income taxes		633,572			-			-			-			633,572
Accrued convertible, redeemable preferred stock dividends		215,059			-			-			-			215,059
(Increase) decrease in operating assets:
Other assets		(10,792,184	)		(9,512,249	)		-			20,188,672			(115,761	)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		(272,808	)		1,053,205			11,428			-			791,825
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(12,361,231	)		(9,681,848	)		(5,221,325	)		20,188,672			(7,075,732	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(5,361,540	)		-			(5,361,540	)
Proceeds from settlement of life settlements		-			-			-			-			-
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES		-			-			(5,361,540	)		-			(5,361,540	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from revolving credit facility		-			-			-			-			-
Proceeds from issuance of Series I Secured notes payable		-			-			-			-			-
Payments for redemption of Series I Secured notes payable		-			(1,843,032	)		-			-			(1,843,032	)
Proceeds from issuance of debentures		17,878,571			-			-			-			17,878,571
Payments for issuance of debentures		(914,880	)		-			-			-			(914,880	)
Proceeds (payments) from restricted cash		-			(26,000	)		3,453,198			-			3,427,198
Issuance of member capital		-			13,059,005			7,129,667			(20,188,672	)		-
Issuance of preferred stock		500,000			-			-			-			500,000
Payments for issuance of preferred stock		558,729			-			-			-			558,729
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES		18,022,420			11,189,973			10,582,865			(20,188,672	)		19,606,586
NET INCREASE IN CASH AND CASH EQUIVALENTS		5,661,189			1,508,125			-			-			7,169,314
CASH AND CASH EQUIVALENTS
BEGINNING OF THE QUARTER		10,663,831			430,994			-			-			11,094,825
END OF THE QUARTER	$	16,325,020		$	1,939,119		$	-		$	-		$	18,264,139

- 23 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Consolidating Statements of Cash Flows (continued)

For the nine months ended September 30, 2011	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(853,772	)	$	5,723,004		$	10,690,204		$	(16,413,208	)	$	(853,772	)
Adjustments to reconcile net income (loss) to cash:
(Gain) on life settlements		-			(337,788	)		(23,537,267	)		-			(23,875,055	)
Amortization of deferred financing and issuance costs		-			1,374,401			174,672			-			1,549,073
Investment banking services		3,595,027			-			-						3,595,027
Deferred income taxes		2,363,851			-			-			-			2,363,851
Convertible, redeemable preferred stock dividends payable		44,669			-			-			-			44,669
(Increase) decrease in operating assets:
Other assets		(2,889,356	)		(15,912,784	)		(859,099	)		18,674,893			(986,346	)
Increase (decrease) in operating liabilities:
Accrued expenses		504,995			(3,344,913	)		4,469,773			(2,261,685	)		(631,830	)
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES		2,765,414			(12,498,080	)		(9,061,717	)		-			(18,794,383	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			(12,000	)		(10,488,756	)		-			(10,500,756	)
NET CASH FLOWS USED IN  INVESTING ACTIVITIES		-			(12,000	)		(10,488,756	)		-			(10,500,756	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from revolving credit facility		-			-			18,599,549			-			18,599,549
Proceeds from issuance of Series I Secured notes payable		-			8,126,034			-			-			8,126,034
Payments for redemption of Series I Secured notes payable		-			(1,006,680	)		-			-			(1,006,680	)
Proceeds (payments) from restricted cash		-			3,039,582			(617,464	)		-			2,422,118
Issuance of common stock		4,973			-			-			-			4,973
Issuance of preferred stock		1,670,010			-			-			-			1,670,010
Payments for issuance of preferred stock		(956,851	)		-			-			-			(956,851	)
Proceeds from notes receivable from related parties		-			2,306,068			-			-			2,306,068
Common stock dividends		(2,306,068	)		-			-			-			(2,306,068	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		(1,587,936	)		12,465,004			17,982,085			-			28,859,153
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		1,177,478			(45,076	)		(1,568,388	)		-			(435,986	)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE YEAR		-			189,842			1,568,388			-			1,758,230
END OF THE YEAR	$	1,177,478		$	144,766		$	-		$	-		$	1,322,244

- 24 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Consolidating Statements of Cash Flows (continued)

For the three months ended September 30, 2011	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(2,266,053	)	$	345,376		$	3,010,662		$	(3,356,038	)	$	(2,266,053	)
Adjustments to reconcile net income (loss) to cash:
(Gain) on life settlements		-			(165,915	)		(7,070,547	)		-			(7,236,462	)
Amortization of deferred financing and issuance costs		-			1,374,401			58,224			-			1,432,625
Investment banking services		3,595,027			-			-			-			3,595,027
Deferred income taxes		(1,415,149	)		-			-			-			(1,415,149	)
Convertible, redeemable preferred stock dividends payable		44,669			-			-			-			44,669
(Increase) decrease in operating assets:
Other assets		2,461,049			(910,657	)		(473,860	)		(1,510,873	)		(434,341	)
Increase (decrease) in operating liabilities:
Accrued expenses		279,040			(3,585,432	)		(1,997,506	)		4,866,911			(436,987	)
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES		2,698,583			(2,942,227	)		(6,473,027	)		-			(6,716,671	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			4,150			(1,381,176	)		-			(1,377,026	)
NET CASH FLOWS USED IN  INVESTING ACTIVITIES		-			4,150			(1,381,176	)		-			(1,377,026	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from revolving credit facility		-			-			7,510,001			-			7,510,001
Proceeds from issuance of Series I Secured notes payable		-			(3,216,821	)		-			-			(3,216,821	)
Payments for redemption of Series I Secured notes payable		-			3,280,899			-			-			3,280,899
Proceeds (payments) from restricted cash		-			430,358			344,202			-			774,560
Issuance of common stock		4,973			-			-			-			4,973
Issuance of preferred stock		1,670,010			-			-			-			1,670,010
Payments for issuance of preferred stock		(956,851	)		-			-			-			(956,851	)
Proceeds from notes receivable from related parties		-			2,306,068			-			-			2,306,068
Common stock dividends		(2.306.068	)		-			-			-			(2,306,068	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		(1,587,936	)		2,800,504			7,854,203			-			9,066,771
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		1,110,647			(137,573	)		-			-			973,074
CASH AND CASH EQUIVALENTS
BEGINNING OF THE QUARTER		66,831			282,339			-			-			349,170
END OF THE QUARTER	$	1,177,478		$	144,766		$	-		$	-		$	1,322,244

- 25 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

( 14 )     Concentration

GWG purchases life insurance policies written by life insurance companies having investment grade ratings by independent rating agencies.  As a result there may be certain concentrations of contracts with life insurance companies.  The following summarizes the face value of insurance contracts with specific life insurance companies exceeding 10% of the total face value held by the Company.

	September 30,		December 31,
	2012		2011
Life insurance company	%		%
Company A		17.27		17.43
Company B		13.38		15.06
Company C		12.06		12.53
Company D		*		10.09

*  - percentage does not exceed 10% of the total face value.

The following summarizes the number of insurance contracts held in specific states exceeding 10% of the total face value held by the Company:

	September 30,		December 31,
	2012		2011
State of residence	%		%
California		29.59		31.43
New York		12.76		13.71
Florida		12.76		11.43

- 26 -

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion in conjunction with the condensed consolidated financial statements and accompanying notes and the information contained in other sections of this report. This discussion and analysis is based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. The statements in this discussion and analysis concerning expectations regarding our future performance, liquidity and capital resources, as well as other non-historical statements in this discussion and analysis, are forward-looking statements. See “Forward-Looking Statements” below. These forward-looking statements are subject to numerous risks and uncertainties.  Our actual results could differ materially from those suggested or implied by any forward-looking statements.

Overview

We are engaged in the emerging secondary market for life insurance policies. We acquire life insurance policies in the secondary market from policy owners desiring to sell their policies at a discount to the face value of the insurance benefit. Once we purchase a policy, we continue paying the policy premiums in order to ultimately collect the face value of the insurance benefit. We generally hold the individual policies to maturity, in order to ultimately collect the policy’s face value upon the insured’s mortality. Our strategy is to build a profitable and large (greater than 300 policies) portfolio of policies that is diversified in terms of insurance carriers and the medical conditions of insureds. We believe that diversification among insurers and medical conditions will lower our overall risk exposure, and that a larger number of individual policies (diversification in overall number) will provide our portfolio with greater actuarial stability.

In the first nine months of 2012, we recognized $4,083,000 of revenue from the receipt of $4,500,000 in policy benefits. In addition, we recognized revenue from the change in fair value of our life insurance policies, net of premiums and carrying costs, of $6,175,000. Interest expense, including amortization of the deferred financing costs, was $7,621,000 for the nine months ended September 30, 2012, and selling, general and administrative expenses for the nine months ended September 30, 2012 were $4,552,000.  Income tax expense for the nine months ended September 30, 2012 was $104,000. Our net loss for the nine months ended September 30, 2012 was ($1,964,000).

Our portfolio of life insurance policies as of September 30, 2012 is summarized and set forth below:

Life Insurance Portfolio Summary

Total portfolio face value of policy benefits		$	515,662,000
Average face value per policy		$	2,631,000
Average face value per insured life		$	2,849,000
Average age of insured (yrs) *			81.2
Average life expectancy estimate (yrs) *			7.33
Total number of policies			196
Demographics	65% Males; 35% Females
Number of smokers	No insureds are smokers
Largest policy as % of total portfolio			1.94	%
Average policy as % of total portfolio			0.51	%
Average Annual Premium as % of face value			3.19	%

*  Averages presented in the table are weighted averages.

Critical Accounting Policies

There were no changes in our critical accounting policies during the quarter ended September 30, 2012.

At the end of the reporting period, we revalued the life insurance policies using our valuation model in order to update our estimate of fair value for investments in policies held on our balance sheet. This includes reviewing our assumptions for discount rates and life expectancies as well as incorporating current information for premium payments and the passage of time. The table below provides the discount rate used for the fair value of the life insurance policies for the period ending:

September 30, 2012	September 30, 2011
13.29%	13.39%

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The Company engaged a third party, Model Actuarial Pricing Systems (MAPS), to prepare a third-party valuation of our life settlement portfolio. MAPS owns and maintains the portfolio pricing software used by the Company. MAPS processed policy data, future premium data, life expectancy data, and other actuarial information supplied by the Company to calculate a net present value for our portfolio using the specified discount rate of 13.29%. MAPS independently calculated the net present value of our portfolio of 196 policies to be $147,829,000, which is the same fair value estimate used by the Company on the balance sheet as of September 30, 2012, and furnished the Company with a letter documenting its calculation. A copy of such letter is filed as Exhibit 99 to this report.

JOBS Act

On April 5, 2012, the Jumpstart Our Business Startups Act of 2012, or JOBS Act, was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933 for complying with new or revised accounting standards. This means that an “emerging growth company” can make an election to delay the adoption of certain accounting standards until those standards would apply to private companies. We have elected to delay such adoption of new or revised accounting standards and, as a result, we may not comply with new or revised accounting standards at the same time as other public reporting companies that are not “emerging growth companies.” This exemption will apply for a period of five years following our first sale of common equity securities under an effective registration statement or until we no longer qualify as an “emerging growth company” as defined under the JOBS Act, whichever is earlier.

Deferred Income Taxes

FASB ASC 740, Income Taxes, requires the Company to recognize deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is established for any portion of deferred tax assets that is not considered more likely than not to be realized.

The Company has provided a valuation allowance against the deferred tax asset related to a note receivable because it believes that, when realized for tax purposes, it will result in a capital loss that will not be utilized because the Company has no expectation of generating a capital gain within the applicable carry-forward period. Therefore, the Company does not believe that it is more likely than not that the deferred tax asset will be realized.

A valuation allowance is required to be recognized to reduce deferred tax assets to an amount that is more likely than not to be realized.  Realization of deferred tax assets depends upon having sufficient past or future taxable income in periods to which the deductible temporary differences are expected to be recovered or within any applicable carryback or carryforward periods. The Company believes that it is more likely than not that it will be able to realize all of its deferred tax assets other than that which is expected to result in a capital loss.

Principal Revenue and Expense Items

We earn revenues from two primary sources as described below.

Policy Benefits Realized.  We recognize and record revenues for cash amounts received for value in excess of carrying value upon the receipt of the face value of the policy benefits paid upon the mortality of an insured. Revenue is recognized and recorded on the mortality date when collection is reasonably assured. We generally collect the face value of the life insurance policy from the insurance company within 45 days of the insured’s mortality.

Change in Fair Value of Life Insurance Policies.  We have elected to carry our investments in life insurance policies at fair value in accordance with ASC 325-30, Investments in Life Insurance Contracts. Accordingly, we value our investments in life insurance policies each reporting period in accordance with the fair value principles discussed herein, which includes the expected payment of premiums for future periods.

Our main components of expense are summarized below.

Selling, General and Administrative Expenses.  We recognize and record expenses incurred in the operations of the purchasing and servicing of life insurance policies.  These expenses include legal, salaries, and sales and marketing expenditures.

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Interest Expense.  We recognize and record interest expenses associated with the costs of financing our life insurance portfolio for the current period.  These expenses include interest paid to our senior lender under our revolving credit facility, as well as all interest paid on our debentures and other outstanding indebtedness such as our subsidiary secured notes and dividends on preferred stock.  When we issue long-term indebtedness, we amortize the costs associated with such indebtedness over the outstanding term of the financing, and classify it as interest expense.

Results of Operations—Three and Nine Months Ended September 30, 2012 Compared to Three and Nine Months Ended September 30, 2011

The following is our analysis of the results of operations for the periods indicated below.  This analysis should be read in conjunction with our condensed consolidated financial statements and related notes.

Revenue. Revenue recognized from the receipt of policy benefits was $4,083,000 during the nine months ended September 30, 2012. Revenue recognized from the receipt of policy benefits was $494,000 during the three and nine months ended September 30, 2011.  Revenue recognized from the change in fair value of our life insurance policies, net of premiums and carrying costs, was $4,788,000 for the third quarter of 2012 and $6,175,000 for the first nine months of 2012. The change in fair value related to new policies acquired during the three and nine month periods ended September 30, 2012 was $3,410,000 and $5,042,000 respectively. Revenue recognized from the change in fair value of our life insurance policies, net of premiums and carrying costs, was $3,579,000 for the first nine months of 2011.  The change in fair value related to new policies acquired during the three and nine month periods ended September 30, 2011 was $1,066,000 and $10,097,000 respectively. In each case, the increases in fair value were due to changes in the discount rates we use to calculate the net present value of cash flows expected from our portfolio of life insurance policies, change in fair value of policies acquired during the period, and aging of the policies. 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 portfolio would require. The discount rate used to estimate the fair value of the life insurance policies we own was 13.29% as of September 30, 2012, compared to 13.39% for the same date in 2011. The carrying value of policies acquired during each quarterly reporting period are adjusted to their current value using the fair value discount rate applied to the portfolio as of that reporting date.

Expenses. Interest expense, including amortization of the deferred financing costs, was $2,803,000 for the third quarter of 2012 and $7,621,000 for the nine months ended September 30, 2012, $2,831,000 for the third quarter of 2011 and $6,142,000 for the nine months ended September 30, 2011. Year to date interest expense for the first nine months of 2012 has increased $1,479,000 compared to the same period in 2011. The increase in interest expense was an increase in dividend expense from $45,000 for the nine months ended September 30, 2011, compared to $1,654,000 for the same period in 2012.  Selling, general, and administrative expenses were $1,391,000, and $1,122,000 for the third quarter of 2012 and 2011, respectively; an increase of $269,000. Selling, general, and administrative expenses were $4,552,000, and $6,541,000 for the first nine months of 2012 and 2011, respectively; a decrease of $1,989,000.  This decrease is mostly due to $3,595,000 one time investment banking fee paid in the third quarter of 2011 less increase in compensation, printing, travel and marketing costs during 2012.

Income Tax Expense. The Company was a pass-through entity for federal income tax purposes through June 10, 2011. As a result, no income tax provision has been included in these consolidated financial statements through June 10, 2011, as the related income or loss of the Company was required to be reported by the respective members on their income tax returns. The Company, as permitted under Delaware state law, changed its legal structure from a limited liability company to a corporation effective June 10, 2011. Since the conversion, the Company reports its income or loss on its own tax returns and is responsible for any related taxes.

Income tax expense was $104,000 for the nine months ended September 30, 2012. The effective tax rate for the nine months ended September 30, 2012, was 5.6%, compared to a pro-forma rate of 39.3% for the nine months ended September 30, 2011. In 2012 there is a significant permanent difference between income before income taxes and taxable income. This permanent difference results from the inclusion of convertible redeemable preferred stock dividends as an interest expense, however the dividends are not deductable for income tax reporting purposes. The dividends charged to interest expense were $675,000 and $1,654,000 for the three and nine months ended September 30, 2012, respectively. Excluding the impact of the dividends and other permanent differences, the effective tax rate for the three and nine months ended September 30, 2012 would have been 39.0% and 40.4% respectively.

The most significant temporary difference between GAAP net income and tax net income are the treatment of interest costs. premium payments and revenue recognition on the portfolio of life insurance policies.

Liquidity and Capital Resources

Historically, we have funded our operational expenditures for the management of our business primarily through origination fees derived from the purchase of life insurance policies, and we have funded the acquisition, servicing and financing of our life insurance policy portfolio through various forms of debt financing.

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The intercompany origination fee we charge is generally one to four percent of the face value of a life insurance policy’s benefit and is charged and received by us when we acquire the related policy.  The origination fee we charge is calculated into the total purchase price we pay for a life insurance policy, but is a separate transaction that is not netted against the purchase price we pay to a seller of an insurance policy. During the nine months ended September 30, 2012, we generated cash flows of $1,185,000 from origination fees. Profit from intra-company origination fees for life insurance policies retained by the Company are eliminated from our consolidated statements of operations. As such, the origination fees collected under our life insurance policy financing arrangements are reflected in our consolidated statements of cash flows as cash flows from financing activities as they are paid in the form of borrowings used to finance the acquisition. Our revolving bank line allows GWG DLP Funding II to borrow the funds necessary to pay origination fees to GWG Life Settlements, LLC. Our borrowing agreements allow us to use net proceeds of the renewable secured debentures for policy acquisition, which includes origination fees. If the policy acquisition is not financed, no fees are included in the consolidated cash flows.  See “—Cash Flows” below for further information. We determine the purchase price of life insurance policies in accordance with ASC 325-30, Investments in Insurance Contracts, using the fair value method. Under the fair value method, the initial investment is recorded at the transaction price.  Since the origination fees are paid from a wholly owned subsidiary to the parent company, these fees are not included in the transaction price for our GAAP financial statements. For further discussion on our accounting policies for life settlements, please refer to note 1 to our consolidated financial statements.

We finance our business through a combination of policy benefit revenues, origination fees, equity offerings, debt offerings, and a credit facility. We use our debt offerings and credit facility primarily for policy acquisition, policy servicing and portfolio related financing expenditures.

As of September 30, 2012, we had approximately $30.6 million in combined available cash and available borrowing base surplus capacity under our revolving credit facility for the purpose of purchasing additional life insurance policies, paying premiums on existing policies, paying portfolio servicing expenses, and paying principal and interest on our outstanding financing obligations.

In September 2012, we concluded a Series A preferred stock offering, receiving $24.6 million in subscriptions for our Series A preferred stock. These subscriptions consisted of $13.8 million in conversions of outstanding Series I subsidiary secured notes and $10.8 million of new investments. We have used the proceeds from the sale of our Series A preferred stock, together with the origination fees we received to purchase and finance our life insurance policies and fund our operational expenditures.

In June 2011, we registered a $250.0 million debt offering (“Renewable Secured Debentures”) with the SEC which became effective on January 31, 2012. As of September 30, 2012, we had received $32.7 million in subscriptions for our Renewable Secured Debentures. Subsequent to September 30, 2012, we received approximately an additional $9.3 million in subscriptions for our Renewable Secured Debentures.  Additionally, our wholly owned subsidiary, GWG Life Settlements, LLC, or GWG Life, issued Series I secured notes (referred to as “Series I subsidiary secured notes”) beginning in November 2009 on a private placement basis to accredited investors only. As of September 30, 2012, we had approximately $40.0 million in principal amount of Series I subsidiary secured notes outstanding.  The Renewable Secured Debentures and Series I subsidiary secured notes are secured by all our assets, and are subordinate to our revolving credit facility with Autobahn/DZ Bank.  The Renewable Secured Debentures and Series I subsidiary secured notes are pari-pasu with respect our assets pursuant to an inter-creditor agreement. (see notes 7 and 8 to our consolidated financial statements).

We maintain a $100 million revolving credit facility with Autobahn/DZ Bank through our wholly owned subsidiary GWG DLP Funding II, or DLP Funding II. As of September 30, 2012, we had $66.0 million outstanding under the revolving credit facility and maintained an available borrowing base surplus $12.28 million. (see note 6 to our consolidated financial statements).

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We expect to meet our ongoing operational capital needs through a combination of origination fees, unsecured working capital loans, and proceeds from financing transactions. We expect to meet our policy acquisition, servicing, and financing capital needs principally from the receipt of insurance benefit payments on our portfolio of life insurance policies, net proceeds from our offering of Renewable Secured Debentures, and from our revolving credit facility. Because we only receive origination fees when we purchase a policy, our receipt of those fees is contingent upon our consummation of policy purchases, which is, in turn, contingent upon our receipt of external funding. Despite recent adverse capital market conditions, including a prolonged credit crisis, we demonstrated continued access to credit and financing markets.  Furthermore, we expect to begin receiving insurance benefit payments on our portfolio of life insurance policies as the average age of the insureds increase and mortality events occur over time—beginning in 2015 and steadily increasing until 2018. As a result of the foregoing, we estimate that our liquidity and capital resources are sufficient for our current and projected financial needs. Nevertheless, if we are unable to continue our debenture offering for any reason, and we are unable to obtain capital from other sources, we expect that our business would be materially and adversely affected as we are staffed and organized to support a larger portfolio of life insurance policies than we currently own. In addition, our business would be materially and adversely affected if we did not receive the policy benefits we forecast and if holders of our subsidiary secured notes failed to renew those notes with the frequency we have historically experienced. In such a case, we could be forced to sell our investments in life insurance policies, in order to service or satisfy our debt-related obligations and continue to pay policy premiums.

Capital expenditures have historically not been material and we do not anticipate making material capital expenditures in 2012 or beyond.

Debt Financings Summary

We had the following outstanding debt balances as of September 30, 2012:

Issuer/Borrower	Principal Amount Outstanding at September 30, 2012		Weighted Average Interest Rate
GWG Holdings, Inc. - Renewable Secured Debentures	$	32,685,000		7.58	%
GWG Life Settlements, LLC -Series I Notes, secured		40,025,000		8.20	%
GWG DLP Funding II, LLC - Revolving credit facility		66,000,000		2.13	%
Total	$	138,710,000		5.16	%

Our total credit facility and other indebtedness balance as of September 30, 2012 was $138,710,000. The total outstanding face amount under our subsidiary secured notes outstanding at September 30, 2012 was $40,025,000, less unamortized selling costs of $803,000, resulting in a carrying amount of $39,222,000.  The total outstanding face amount of Renewable Secured Debentures outstanding at September 30, 2012 was $32,685,000 plus $1,007,000 of unpapered receipts, less unamortized selling costs of $1,580,000, resulting in a carrying amount of $32,112,000. Financing was used to purchase and maintain our portfolio of life insurance policies. The fair value of our investments in life insurance policies of $147,829,000 plus our cash balance of $18,264,000 and our restricted cash balance of $1,424,000, totaled $167,517,000, representing an excess of portfolio assets over secured indebtedness of $28,807,000 at September 30, 2012. The renewable secured debentures and Series I secured notes are secured by all our assets, and are subordinate to our revolving credit facility with Autobahn/DZ Bank.  The renewable secured debentures and Series I secured notes are pari passu with respect to shared collateral pursuant to an inter-creditor agreement.

Cash Flows

The payment of premiums and servicing costs to maintain life insurance policies represents our most significant requirement for cash disbursement. When a policy is purchased, we are able to calculate the minimum premium payments required to maintain the policy in-force. Over time as the insured ages, premium payments will increase; however, the probability of actually needing to pay the premiums decreases since mortality becomes more likely. These scheduled premiums and associated probabilities are factored into our expected internal rate of return and cash-flow modeling. Beyond premiums, we incur policy servicing costs, including annual trustee and tracking costs, and debt servicing costs, including principal and interest payments. Until we receive proceeds from the policy benefits, we intend to pay these costs from our credit facility and through the issuance of debt. We presently expect that by 2015, the cash inflows from the receipt of policy benefits will exceed the premium obligations on the remaining life insurance policies held within the portfolio.  However, because our revolving credit facility matures on July 15, 2013, we believe we will need to refinance our revolving credit facility, either through renewal or replacement, when it comes due.  Pending the due date or refinancing of our revolving credit facility, we expect that proceeds from our life insurance policies will first be used to satisfy our obligations under that facility, as required by the revolving loan agreement. We expect to begin servicing and paying down our outstanding indebtedness from these cash flows when we receive payments from the policy benefits.  See “Business—Portfolio Management.”

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The amount of payments that we will be required to make over the next five years to cover the payment of premiums and servicing costs to maintain life insurance policies is set forth in the table below.

Year	Premiums And Servicing
2012	$	4,425,000
2013		17,066,000
2014		18,285,000
2015		19,673,000
2016		21,286,000
Total	$	80,735,000

The significant majority of insurance policies owned by us are subject to a collateral arrangement with the agent to our revolving credit lender, as described in note 6 to the condensed consolidated financial statements. Under this arrangement, collection and escrow accounts are used to fund purchases and premiums of the insurance policies and to pay interest and other charges under our revolving credit facility. The lender and its agent 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 (GWG DLP Funding II, LLC, GWG Life Settlements, LLC, and GWG Holdings, Inc) realizing an annualized rate of return on the equity funded amount for such assets of not more than 18%, as determined by the agent. After such amount is reached, the credit agreement requires that excess funds be used to fund repayments or a reserve account in a certain amount before any additional distributions may be made. In the future, these arrangements may restrict the cash flows available for payment of principal and interest on our debt obligations.

Inflation

Changes in inflation do not necessarily correlate with changes in interest rates. We presently do not foresee any material impact of inflation on our results of operations in the periods presented in our condensed consolidated financial statements.

Off-Balance Sheet Arrangements

Operating Lease - The Company entered into an office lease with U.S. Bank National Association as the landlord. The lease was effective April 22, 2012 with a term through August 31, 2015. The lease is for 8,881 square feet of office space located at 220 South Sixth Street, Minneapolis, Minnesota. The Company is obligated to pay base rent plus common area maintenance and a share of the building operating costs. Minimum lease payments under the lease are as follows:

2012 (remaining)	$	18,318
2013	$	74,752
2014	$	78,452
2015	$	53,288
Total	$	224,810

Credit Risk

We review the credit risk associated with our portfolio of life insurance policies when estimating its fair value. In evaluating the policies’ credit risk we consider insurance company solvency, credit risk indicators, economic conditions, on­going credit evaluations, and company positions. We attempt to manage our credit risk related to life insurance policies typically by purchasing policies issued only from companies with an investment grade credit rating by either Standard & Poor’s, Moody’s, or A.M. Best Company.  As of September 30, 2012, 91.33% of our life insurance policies were issued by companies rated “A” or better by Standard & Poor’s. Our overall credit risk is subject to rapid changes that may be unforeseen and could result in immediate increased losses and material adjustments to the fair value of our portfolio of life insurance policies.

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Interest Rate Risk

Our credit facility is floating-rate financing. In addition, our ability to offer interest rates that attract capital (including in the offer and sale of renewable secured debentures) is generally impacted by prevailing interest rates. Furthermore, while our other indebtedness provides us with fixed-rate financing, our debt coverage ratio is calculated in relation to our total cost of financing. Therefore, fluctuations in interest rates impact our business by increasing our borrowing costs, and reducing availability under our debt financing arrangements. Furthermore, we calculate our portfolio earnings based upon the spread generated between the return on our life insurance portfolio and the cost of our financing. As a result, increases in interest rates will reduce the earnings we expect to achieve from our investments in life insurance policies.

Non-GAAP Financial Measures

We use non-GAAP financial measures when evaluating our financial results, for planning and forecasting purposes, and for maintaining compliance with covenants contained in our borrowing agreements. Non-GAAP financial measures disclosed by management are provided as additional information to investors in order to provide them with an alternative method for assessing our financial condition and operating results. These non-GAAP financial measures are not in accordance with GAAP and may be different from non-GAAP measures used by other companies, including other companies within our industry.  This presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for comparable amounts prepared in accordance with GAAP. See the notes to our consolidated financial statements and our audited financial statements contained within our Special Financial Report on Form 10-K.

We have elected to carry our investments in life insurance policies at fair value in accordance with ASC 325-30, Investments in Life Insurance Contracts. Accordingly, we value our investments in life insurance policies at the conclusion of each reporting period in accordance with GAAP fair value accounting principles.  In addition to GAAP, we are required to report non-GAAP financial measures to Autobahn/DZ Bank under certain financial covenants made to that lender under our revolving credit facility. As indicated above, we also use non-GAAP financial reporting to manage and evaluate the financial performance of our business.

GAAP-based fair value requires us to mark-to-market our investments in life insurance policies, which by its nature, is based upon a Level 3 analysis based on inputs that are unobservable.  As a result, this accounting treatment imports financial market volatility and subjective inputs into our financial reporting. We believe this type of accounting reporting is at odds with one of the key attractions for purchasing life insurance policies: The non-correlated nature of the returns to be derived from such policies. Therefore, in contrast to a GAAP-based fair valuation, we seek to measure the accrual of the actuarial gain occurring within life insurance policies at their expected internal rate of return based on statistical mortality probabilities for an insured (using primarily the insured’s age, sex and smoking status). The expected internal rate of return tracks actuarial gain occurring within the policies according to a mortality table as the insureds’ ageincreases.  By comparing the actuarial gain accruing within our life insurance policies against our costs during the same period, we can estimate, manage and evaluate the overall financial profitability of our business without regard to mark-to-market volatility. We use this information to balance our life insurance policy purchasing and manage our capital structure, including the issuance of debt and utilization of our other sources of capital, and to monitor our compliance with borrowing covenants. We believe that these non-GAAP financial measures provide information that is useful for investors to understand period-over-period operating results separate and apart from fair value items that may, or could, have a disproportionately positive or negative impact on results in any particular period.

Our revolving credit facility requires us to maintain an “excess spread,” which is the difference between (i) the weighted average of our expected internal rate of return of our portfolio of life insurance policies and (ii) the weighted average of our credit facility’s interest rate. In addition, our credit facility requires us to maintain a “tangible net worth” and “positive net income” each of which are calculated on an adjusted non-GAAP basis on the method described above, without regard to GAAP-based fair value measures.

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Adjusted Non-GAAP Net Income.  Our credit facility requires us to maintain a positive net income calculated on an adjusted non-GAAP basis. We calculate the adjusted net income by recognizing the  actuarial gain accruing within our life insurance policies at the expected internal rate of return of the policies we own without regard to fair value.  We net this actuarial gain against our costs during the same period to calculate our net income on a non-GAAP basis.

	Three Months Ended							Nine Months Ended
	September 30, 2012				September 30, 2011			September 30, 2012			September 30, 2011
GAAP net income		$	(113,000	)	$	(2,266,000	)	$	(1,964,000	)		$	(854,000	)
Unrealized fair value gain (1)			(8,882,000	)		(3,363,000	)		(18,249,000	)			(13,657,000	)
Adjusted cost basis increase (2)			6,475,000			2,541,000			17,784,000				6,947,000
Accrual of unrealized actuarial gain (3)			4,598,000			3,655,000			12,437,000				9,515,000
Total adjusted non-GAAP income (4)		$	2,078,000		$	567,000		$	10,008,000			$	1,951,000

(1) Reversal of unrealized fair value gain of life insurance policies for current period.

(2) Adjusted cost basis is increased to include those acquisition and servicing expenses which are not capitalized by GAAP.

(3) Accrual of actuarial gain at expected internal rate of return based on investment cost basis for the period.

(4) We must maintain a positive consolidated net income, calculated on a non-GAAP basis, to maintain compliance with our revolving credit facility with DZ Bank/Autobahn.

Below is a full non-GAAP statement of operations in the form that we prepare and use internally to assess our performance, and that we provide to Autobahn/DZ Bank in satisfaction of certain covenants under our revolving credit facility.

Non-GAAP statement of operations:

	Three Months Ended				Nine Months Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
Income
Investments in life settlement contracts (Unrealized)		4,598,000		3,655,000		12,437,000		9,515,000
Investments in life settlement contracts (Realized)		-		494,000		4,083,000		494,000
Origination fees and other income		654,000		419,000		1,142,000		2,445,000
Total Income		5,252,000		4,568,000		17,662,000		12,454,000
Expenses
Operations		1,572,000		3,390,000		6,246,000		5,312,000
Facility, Series I Notes and debentures marketing and deferred financing costs		394,000		596,000		1,304,000		1,379,000
Total Expenses		1,966,000		3,986,000		7,550,000		6,691,000
Net income before tax		3,286,000		582,000		10,112,000		5,763,000
Income tax expense		1,208,000		15,000		104,000		3,812,000
Net Income (loss)		2,078,000		567,000		10,008,000		1,951,000
Income per share
Basic	$	0.21	$	0.06	$	1.00	$	0.21
Diluted	$	0.13	$	0.06	$	0.68	$	0.21
Weighted average shares outstanding
Basic		9,989,000		9,870,750		9,989,000		9,293,440
Diluted		15,728,143		9,986,554		14,681,388		9,332,410

Adjusted Non-GAAP Tangible Net Worth.  Our revolving credit facility requires us to maintain a tangible net worth in excess of $5 million calculated on an adjusted non-GAAP basis.  We calculate the adjusted tangible net worth by recognizing the actuarial gain accruing within our life insurance policies at the expected internal rate of return of the policies we own without regard to fair value.  We net this actuarial gain against our costs during the same period to calculate our tangible net worth on a non-GAAP basis.

	As of September 30, 2012			As of December 31, 2011
GAAP net worth (1)	$	21,542,000		$	13,610,000
Less intangible assets		(2,601,000	)		(1,648,000	)
GAAP tangible net worth		18,941,000			11,962,000
Unrealized fair value gain (2)		(65,799,000	)		(24,960,000	)
Adjusted cost basis increase (3)		59,385,000			19,298,000
Accrual of unrealized actuarial gain (4)		35,487,000			23,050,000
Total adjusted non-GAAP tangible net worth (5)	$	48,014,000		$	29,350,000

(1) Includes termination of redeemable member’s interest prior to corporate conversion and preferred stock classified as temporary equity.

(2) Reversal of cumulative unrealized fair value gain or loss of life insurance policies.

(3) Adjusted cost basis is increased by acquisition and servicing expenses which are not capitalized under GAAP.

(4) Accrual of cumulative actuarial gain at expected internal rate of return based on investment cost basis.

(5) We must maintain a total adjusted non-GAAP tangible net worth of $5 million to maintain compliance with our revolving credit facility with DZ Bank/Autobahn.

- 34 -

Excess Spread. Our revolving credit facility requires us to maintain a 2.00% “excess spread” between our weighted-average expected internal rate of return of our portfolio of life insurance policies and the credit facility’s interest rate. A presentation of our excess spread and our total excess spread is set forth below. Management uses the “total excess spread” to gauge expected profitability of our investments, and uses the “excess spread” to monitor compliance with our borrowing

	As of September 30, 2012			As of December 31, 2011
Weighted-average expected IRR (1)		13.94	%		14.06	%
Weighted-average revolving credit facility interest rate (2)		2.13	%		2.25	%
Excess spread (3)		11.81	%		11.81	%
Total weighted-average interest rate on indebtedness for borrowed money (4)		5.16	%		4.86	%
Total excess spread		8.78	%		9.20	%

(1) This represents the weighted-average expected internal rate of return of the life insurance policies as of the measurement date based upon our investment cost basis of the insurance policies and the expected cash flows from the life insurance portfolio. Our investment cost basis is calculated as our cash investment in the life insurance policies, without regard to GAAP-based fair value measurements, and is set forth below:

	As of September 30, 2012			As of December 31, 2011
GAAP fair value	$	147,829,000		$	122,169,000
Unrealized fair value gain (A)		(65,799,000	)		(24,960,000	)
Adjusted cost basis increase (B)		59,385,000			19,298,000
Investment cost basis (C)	$	141,415,000		$	116,507,000

(A)	This represents the reversal of cumulative unrealized GAAP fair value gain of life insurance policies.
(B)	Adjusted cost basis is increased to include those acquisition and servicing expenses that are not capitalized by GAAP.
(C)	This is the full cash investment cost basis in life insurance policies from which our expected internal rate of return is calculated.
(2)	This is the weighted-average revolving credit relating to our revolving credit facility interest rate as of the measurement date.
(3)	We must maintain an excess spread of 2.00% relating to our revolving credit facility to maintain compliance under such facility.
(4)	Represents the weighted-average interest rate paid on all outstanding indebtedness as of measurement date, determined as follows:

Outstanding Indebtedness	As of September 30, 2012		As of December 31, 2011
Revolving credit facility	$	66,000,000	$	60,000,000
Subsidiary secured notes		40,025,000		49,332,000
Renewable secured debentures		32,685,000		-
Total	$	138,710,000	$	109,332,000

Interest Rates on Indebtedness:
Revolving credit facility	2.13	%	2.25	%
Subsidiary secured notes	8.20	%	8.04	%
Renewable secured debentures	7.58	%	N/A
Weighted-average interest rates on indebtedness	5.16	%	4.86	%

- 35 -

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance the objectives of the control system are met.

As of September 30, 2012, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of our disclosure controls and procedures as such term is defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded our disclosure controls and procedures are effective as of September 30, 2012.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.  OTHER INFORMATION

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Unregistered Sales of Equity Securities

From January 1, 2012 through September 30, 2012, the Company sold 1,419,939 shares of Series A preferred stock for an aggregate of $10,649,542 (i.e., $7.50 per share), and issued related three-year warrants to purchase up to 831,908 shares of Company common stock at an exercise price of $6.25 per share. Of this aggregate purchase price, $6,287,375 was received in cash and $4,362,167 was received upon surrender of earlier issued Series I subsidiary secured notes (including principal and interest). In addition, 58,267 shares of Series A preferred stock were issued as stock dividends. The Company paid aggregate placement commissions of approximately $1,050,632 and issued warrants to brokers valued at approximately $340,328 in connection with the sale of the Series A preferred stock. The Company offered and sold the Series A preferred stock solely to accredited investors and, as a result, offered and sold these securities in reliance on the exemption available under Rule 506 and Section 4(5) of the Securities Act of 1933.

Use of Proceeds

Our Form S-1 registration statement relating to our offer and sale of “Renewable Secured Debentures” (File Nos. 333-174887 and 333-174887-01) was declared effective by the SEC on January 31, 2012, and our offering of debentures commenced on such date. The debentures are secured in part by a guarantee from our subsidiary GWG Life and an associated grant of a security interest in substantially all of the assets of GWG Life, which guarantee was also registered as a security under the referenced registration statement. Arque Capital Ltd. serves as our managing broker-dealer and underwriter for the offering.

The registration statement covers up to $250 million in principal amount of debentures. From January 31, 2012 through September 30, 2012, we sold a total of $32,684,529 in principal amount of debentures, and incurred associated underwriting commissions, and expenses paid or payable to underwriters in the amount of $1,762,424 of which $182,410 was amortized. We have an un-papered receipt of $1,007,755 resulting in net proceeds of $32,112,270. None of the payments for offering expenses were directly or indirectly made to directors or officers (or their associates) of the Company, affiliates of the Company, or to persons owning 10% or more of any class of equity securities of the Company.

- 36 -

The net proceeds from the offering were used by the Company to acquire additional life insurance policies, as indicated in the prospectus for the offering. No net proceeds were used for direct or indirect payments to directors or officers (or their associates) of the Company, affiliates of the Company, or to persons owning 10% or more of any class of equity securities of the Company.

ITEM 6. EXHIBITS

Exhibit
31.1	Section 302 Certification of the Chief Executive Officer (filed herewith).
31.2	Section 302 Certification of the Chief Financial Officer (filed herewith).
32.1	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
99.1	Letter from Model Actuarial Pricing Systems, dated October 12, 2012 (filed herewith).

- 37 -

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	GWG HOLDINGS, INC.
Date:  November 14, 2012	By:	/s/ Jon R. Sabes
		Chief Executive Officer

Date:  November 14, 2012	By:	/s/ Jon Gangelhoff
		Chief Financial Officer

- 38 -

EX-31.1

Exhibit 31.1

SECTION 302 CERTIFICATION

I, Jon R. Sabes, certify that:

1. I have reviewed this quarterly report on Form 10-Q of GWG 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 subsidiaries, 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 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.

Date:  November 14, 2012	/s/ Jon R. Sabes
	Chief Executive Officer

EX-31.2

Exhibit 31.2

SECTION 302 CERTIFICATION

I, Jon Gangelhoff, certify that:

1. I have reviewed this quarterly report on Form 10-Q of GWG 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 subsidiaries, 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 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.

Date:  November 14, 2012	/s/ Jon Gangelhoff
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of GWG Holdings, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jon R. Sabes, Chief Executive Officer of the Company, and I, Jon Gangelhoff, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities 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 Company.

/s/ Jon R. Sabes     

Jon R. Sabes

Chief Executive Officer

November 14, 2012 

/s/ Jon Gangelhoff

Jon Gangelhoff

Chief Financial Officer

November 14, 2012 

EX-99.1

Exhibit 99.1

October 12, 2012

Steven Sabes

Chief Operating Officer

GWG Life

220 South Sixth Street, Suite 1200 Minneapolis, MN 55402

Steven:

You have asked that we prepare a quarterly valuation of a GWG portfolio of life insurance settlements. The valuations were prepared under the assumptions described below, which you provided in phone conversations and e-mails. We utilized the policy portfolio data you provided to project potential cash flows monthly following the 9/30/2012 valuation date, based on the premiums and other values in the policy records provided.

Data Reliance

In preparing these valuations, we relied upon:

●   Policy Data – We have relied on the portfolio file as provided to us by GWG Life. We assume that this file and the policy data contained in it was prepared accurately and reflects current company supported product performance. The 9/30/2012 file contained 196 policies with total face amounts of $515,661,619. This was a net increase of 11 policies and $26,406,538 in face amount over the 6/30/2012 portfolio file. The 6/30/2012 file contained 185 policies with total face amounts of $489,255,081.

●   Future Premiums Data – We have relied on GWG Life’s data regarding the future premiums to be paid on each policy. It is our understanding that GWG Life uses the MAPS software package along with data gathered from the actual premium payments to the life insurance carriers for each policy for projecting future minimum premium streams.

●   Life Expectancy, Values, plus any adjustments – We have relied on the life expectancy values provided by GWG Life. It is our understanding that GWG Life obtained these LE values using the following industry experts: 21st Services, AVS Underwriting, Fasano Associates, and/or ISC Services.

Results

Using the assumptions stated below, we calculated the net present values as of the valuation dates using the specified discount rates of 13.29% and 5.16%. These results will be e-mailed to you in the Excel reports generated, including a Portfolio Summary and List of Policies, from the MAPS Portfolio valuation model.

	GWG Portfolio as of 9/30/2012
Number of Policies:		196
Total Net Death Benefit:	$	515,661,619
Discount Rate:		13.29	%		5.16	%		12.00	%		15.00	%
Expected Net Present Value:	$	147,828,800		$	238,703,101		$	158,265,401		$	135,575,488
Stochastic Analysis - 10,000 Scenarios
95%ile Net Present Value:	$	125,627,479		$	215,619,778		$	135,744,544		$	113,702,088
95% CTE Net Present Value:	$	119,628,028		$	209,139,984		$	129,723,676		$	107,847,498

Model Actuarial Pricing Systems, LP

1

The Expected Net Present Value is the probabilistic average value of the portfolio. These values are calculated actuarially; assuming that the amount of premiums paid and death benefits received are proportional to the probabilities of survival. Since death will occur at an unknown discrete point in time, the actual return for a policy, and a portfolio of policies, may vary significantly from the Expected Value.

The Stochastic analysis can return information about the range of values that might be achieved along with probabilities that the results might be better or worse than the Expected or a specified level. The Stochastic analysis creates random scenarios where a discrete date of death is independently projected for each life based on its mortality curve. The net present value of the portfolio for each scenario is calculated as the present value of projected death benefits minus the present value of projected premiums. The scenarios are ranked by value. The 95th Percentile Net Present Value is the portfolio value exceeded by 95% of the stochastic scenarios. The 95% CTE is the Contingent Tail Expectation for the 95th percentile, and is the average of the 5% of scenarios with the lowest net present value.

The valuations (1) do not include premiums paid before the valuation date, and (2) assume that the insured remains alive at the valuation date. The valuations also assume that the policy COIs and policy expense charges remain at current levels in the future. If these charges are increased, the projected values would decrease. The above values do not consider any federal income or other taxes.

Summary of MAPS Model Settings and Assumptions

We used the following assumptions as discussed with you:

●  Insurance Policy Characteristics: Per portfolio data file as provided.

●  Policy Issue Date: Per portfolio data file as provided.

●  Insured Date of Birth and Gender: Per portfolio data file as provided.

●  Extended Death Benefit After Policy Maturity Age: Per portfolio data file as provided.

●          Optimized Premium Levels and Timing: Monthly premiums unadjusted per the portfolio data file as provided.

●          Per Policy and Portfolio Administrative Expenses: None, per the portfolio data file as provided.

●          Collection of Death Benefit Delay: 0 months, with 0.00% statutory interest credited.

●  Mortality: 2008 VBT Select & Ultimate Primary tables, by Age, Sex, and Tobacco Use.

●  Age Basis: Age Nearest Birthday.

●  Mortality Improvement: None.

●          Life Expectancy: One blended LE and corresponding UW effective date per life in the portfolio data file as provided.

●         Adjustment Applied to Stated LE: None.

●         Improvement Used by Underwriters: No.

●         Valuation Discount Interest Rates: 13.29% and 5.16% as specified, plus 12%, 15%.

●         Number of Stochastic Scenarios: 10,000.

●         Stochastic Random Seed input: “1234567”

●         Stochastic Percentile Ranks and Contingent Tail Expectations: 95%, with additional reporting at 75%, 85%, 90%, 97%, and 99%.

Model Actuarial Pricing Systems, LP

2

Notice on Mortality and Volatility

Parties engaged in life settlements commonly obtain and use "life expectancies" in their considerations. While life expectancies are provided for individuals, they are developed from expected patterns of mortality of large groups of similar individuals. No one knows exactly when any one individual will die, nor is a life expectancy intended to suggest the time until death will be near the life expectancy. Any one individual may live much longer than his or her estimated life expectancy or that projected by applying a mortality rating to any particular mortality table. Even for a large group of lives, the actual mortality for the group may be less than expected for a variety of reasons (such as improvements in medical technology, unanticipated general mortality improvement, or misestimation of the life expectancy). Stochastic simulation and sensitivity testing can help to quantify these risks, but such tests should not be interpreted as a guarantee of any particular financial outcome. Investors will earn less than expected on the policy of any individual who lives longer than his life expectancy.

Background

Model Actuarial Pricing Systems, LP is a subsidiary of Cantor Fitzgerald (a leading global financial services firm) providing life settlement software and services worldwide to a variety of customers including life settlement brokers, providers, consultants and investors.

Since its inception in late 1990’s, the MAPS Single Policy Valuation Model, developed by Milliman, Inc., has been the industry standard life settlement valuation model for both single life and joint life insurance contracts. Incorporating sophisticated analysis and valuation algorithms, the MAPS Model transformed the life settlements industry by providing actuarially correct valuation of the premium and death benefit cash flows associated with a life settlement transaction.

I am an Associate of the Society of Actuaries, and a Member of the American Academy of Actuaries. I have extensive experience in testing and verifying the MAPS model, as well as using it for client valuation projects. Prior to my employment with MAPS, I worked for a US life insurance company supervising the actuarial department’s policy valuation and financial reporting processes.

Very truly yours,

/s/ Jonathan Close

Jonathan Close, ASA, MAAA

Actuary

Model Actuarial Pricing Systems, LP

3

XML

Credit Facilities (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011	Jul. 15, 2008
Credit Facilities (Textual)
Maximum borrowing amount under line of credit facility						$ 100,000,000
Expiry date of line of credit			Jul. 15, 2013
Amount outstanding under line of credit facility	66,000,000		66,000,000		60,000,000
Effetive rate of interest	2.13%		2.13%		2.25%
Weighted average effective interest rate	2.17%	2.15%	2.15%	2.17%
Minimum tangible net worth to be maintained by company			5,000,000
Consolidated net income under credit and security agreement			2,078,000
Consolidated tangible net worth under credit and security agreement			48,014,000
Total funds available for additional borrowings under the borrowing base formula criteria	$ 12,276,000		$ 12,276,000		$ 7,691,000

XML

Concentration (Details Textual)	9 Months Ended
	Sep. 30, 2012
Concentration (Textual)
Description of insurance contracts with specific life insurance companies and contracts held in specific states	Exceed 10% of the total face value

XML

Guarantees of Secured Debentures (Details) (USD $)	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Dec. 31, 2010
ASSETS
Cash and cash equivalents	$ 18,264,139	$ 11,094,825	$ 1,878,349	$ 1,322,244	$ 349,170	$ 1,758,230
Restricted cash	1,424,466		4,794,302
Investment in life settlements, at fair value	147,828,800		122,168,524
Other assets	884,631		548,100
Investment in subsidiaries
TOTAL ASSETS	168,402,036		129,389,275
LIABILITIES
Revolving credit facility	66,000,000		60,000,000
Series I Secured notes payable	39,221,704		48,179,271
Renewable secured debentures	32,112,270
Interest	2,870,900		1,887,835
Accounts payable and accrued expenses	2,243,000		1,404,107
Deferred taxes	4,411,929		4,308,217
TOTAL LIABILITIES	146,859,803		115,779,430
CONVERTIBLE, REDEEMABLE PREFERRED STOCK	23,391,533		12,661,276
EQUITY (DEFICIT)
Member capital
Common stock	9.989		9,989
Additional paid-in capital	7,335,887		8,169,303
Accumulated deficit	(9,195,176)		(7,230,723)
TOTAL EQUITY (DEFICIT)	(1,849,300)		948,569
TOTAL LIABILITIES & EQUITY (DEFICIT)	168,402,036		129,389,275
Parent [Member]
ASSETS
Cash and cash equivalents	16,325,020	10,663,831	1,746,456	1,177,478	66,831
Restricted cash
Investment in life settlements, at fair value
Other assets	52,982		34,817
Investment in subsidiaries	43,175,407		17,026,465
TOTAL ASSETS	59,553,409		18,807,738
LIABILITIES
Revolving credit facility
Series I Secured notes payable
Renewable secured debentures	32,112,270
Interest	443,120
Accounts payable and accrued expenses	1,043,857		889,676
Deferred taxes	4,411,929		4,308,217
TOTAL LIABILITIES	38,011,176		5,197,893
CONVERTIBLE, REDEEMABLE PREFERRED STOCK	23,391,533		12,661,276
EQUITY (DEFICIT)
Member capital
Common stock	9,989		9,989
Additional paid-in capital	7,335,887		8,169,303
Accumulated deficit	(9,195,176)		(7,230,723)
TOTAL EQUITY (DEFICIT)	(1,849,300)		948,569
TOTAL LIABILITIES & EQUITY (DEFICIT)	59,553,409		18,807,738
Guarantor Sub [Member]
ASSETS
Cash and cash equivalents	1,939,119	430,994	131,893	144,766	282,339	189,842
Restricted cash	26,000		822,227
Investment in life settlements, at fair value			4,876,389
Other assets	175,340		170,346
Investment in subsidiaries	83,480,002		61,326,724
TOTAL ASSETS	85,620,461		67,327,579
LIABILITIES
Revolving credit facility
Series I Secured notes payable	39,221,704		48,179,271
Renewable secured debentures
Interest	2,296,506		1,779,796
Accounts payable and accrued expenses	1,004,476		507,015
Deferred taxes
TOTAL LIABILITIES	42,522,686		50,466,082
CONVERTIBLE, REDEEMABLE PREFERRED STOCK
EQUITY (DEFICIT)
Member capital	43,097,775		16,861,497
Common stock
Additional paid-in capital
Accumulated deficit
TOTAL EQUITY (DEFICIT)	43,097,775		16,861,497
TOTAL LIABILITIES & EQUITY (DEFICIT)	85,620,461		67,327,579
Non-Guarantor Sub [Member]
ASSETS
Cash and cash equivalents						1,568,388
Restricted cash	1,398,466		3,972,075
Investment in life settlements, at fair value	147,828,800		117,292,135
Other assets	656,309		342,937
Investment in subsidiaries
TOTAL ASSETS	149,883,575		121,607,147
LIABILITIES
Revolving credit facility	66,000,000		60,000,000
Series I Secured notes payable
Renewable secured debentures
Interest	131,274		108,039
Accounts payable and accrued expenses	194,667		7,416
Deferred taxes
TOTAL LIABILITIES	66,325,941		60,115,455
CONVERTIBLE, REDEEMABLE PREFERRED STOCK
EQUITY (DEFICIT)
Member capital	83,557,634		61,491,692
Common stock
Additional paid-in capital
Accumulated deficit
TOTAL EQUITY (DEFICIT)	83,557,634		61,491,692
TOTAL LIABILITIES & EQUITY (DEFICIT)	149,883,575		121,607,147
Eliminations [Member]
ASSETS
Cash and cash equivalents
Restricted cash
Investment in life settlements, at fair value
Other assets
Investment in subsidiaries	(126,655,409)		(78,353,189)
TOTAL ASSETS	(126,655,409)		(78,353,189)
LIABILITIES
Revolving credit facility
Series I Secured notes payable
Renewable secured debentures
Interest
Accounts payable and accrued expenses
Deferred taxes
TOTAL LIABILITIES
CONVERTIBLE, REDEEMABLE PREFERRED STOCK
EQUITY (DEFICIT)
Member capital	(126,655,409)		(78,353,189)
Common stock
Additional paid-in capital
Accumulated deficit
TOTAL EQUITY (DEFICIT)	(126,655,409)		(78,353,189)
TOTAL LIABILITIES & EQUITY (DEFICIT)	$ (126,655,409)		$ (78,353,189)

XML

Commitments (Details) (USD $)	9 Months Ended
	Sep. 30, 2012 sqft
Minimum lease payments under the lease
2012 (remaining)	$ 18,318
2013	74,752
2014	78,452
2015	53,288
Total	$ 224,810
Commitments (Textual)
Lease expiration date	Aug. 31, 2015
Office space in square feet	8,881

XML

Investment in Life Insurance Policies (Details Textual) (USD $)	1 Months Ended	3 Months Ended	9 Months Ended		12 Months Ended
	Apr. 30, 2012	Sep. 30, 2012	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Investment in Life Insurance Policies (Textual)
Discount rate applied to portfolio			13.29%		13.41%
Benefit recognized from insurance policy				$ 494,000
Cash from life insurance policy benefits	4,500,000		416,665
Gain from csah received on insurance policy	$ 4,083,000

XML

Commitments (Tables)

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies [Abstract]

Minimum lease payments under the lease

2012 (remaining)	$	18,318
2013	$	74,752
2014	$	78,452
2015	$	53,288
Total	$	224,810

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Guarantees of Secured Debentures (Details 2) (USD $)	1 Months Ended	3 Months Ended		9 Months Ended
	Apr. 30, 2012	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		$ (113,323)	$ (2,266,053)	$ (1,964,453)	$ (853,772)
Adjustments to reconcile net income (loss) to cash:
(Equity) loss of subsidiaries
Gain on life settlements		(8,881,542)	(7,236,462)	(19,871,791)	(23,875,055)
Amortization of deferred financing and issuance costs		394,438	1,432,625	1,303,895	1,549,073
Investment banking services			3,595,027		3,595,027
Deferred income taxes		633,572	(1,415,149)	103,712	2,363,851
Accrued convertible, redeemable preferred stock dividends		215,059	44,669	636,069	44,669
(Increase) decrease in operating assets:
Other assets		(115,761)	(434,341)	941,525	(986,346)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		791,825	(436,987)	1,450,958	(631,830)
Accrued expenses			(436,987)		(631,830)
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(7,075,732)	(6,716,671)	(17,400,085)	(18,794,383)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		(5,361,540)	(1,377,026)	(7,983,570)	(10,500,756)
Proceeds from settlement of life settlements	4,500,000			416,665
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES		(5,361,540)	(1,377,026)	(7,566,905)	(10,500,756)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from revolving credit facility			7,510,001	6,000,000	18,599,549
Proceeds from issuance of Series I Secured notes payable			(3,216,821)	50,000	8,126,034
Payments for redemption of Series I Secured notes payable		(1,843,032)	3,280,899	(5,311,989)	(1,006,680)
Proceeds from issuance of debentures		17,878,571		33,635,657
Payments for issuance of debentures		(914,880)		(1,627,467)
Proceeds (payments) from restricted cash		3,427,198	774,560	3,369,837	2,422,118
Issuance of member capital
Proceeds from issuance of common stock			4,973	5.0	4,973
Issuance of convertible, redeemable preferred stock		500,000	1,670,010	6,287,375	1,670,010
Payments of issuance cost for convertible, redeemable preferred stock		558,729	(956,851)	(1,050,633)	(956,851)
Proceeds from notes receivable from related parties			2,306,068		2,306,068
Common stock dividends			(2,306,068)		(2,306,068)
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES		19,606,586	9,066,771	41,352,780	28,859,153
NET INCREASE IN CASH AND CASH EQUIVALENTS		7,169,314	973,074	16,385,790	(435,986)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE QUARTER		11,094,825	349,170	1,878,349	1,758,230
END OF THE QUARTER		18,264,139	1,322,244	18,264,139	1,322,244
Parent [Member]
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		(113,323)	(2,266,053)	(1,964,453)	(853,772)
Adjustments to reconcile net income (loss) to cash:
(Equity) loss of subsidiaries		(2,167,335)		(2,241,206)
Gain on life settlements
Amortization of deferred financing and issuance costs		135,788		182,410
Investment banking services			3,595,027		3,595,027
Deferred income taxes		633,572	(1,415,149)	103,712	2,363,851
Accrued convertible, redeemable preferred stock dividends		215,059	44,669	636,069	44,669
(Increase) decrease in operating assets:
Other assets		(10,792,184)	2,461,049	(19,717,082)	(2,889,356)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		272,808		334,182
Accrued expenses			279,040		504,995
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(12,361,231)	2,698,583	(22,666,368)	2,765,414
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements
Proceeds from settlement of life settlements
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from revolving credit facility
Proceeds from issuance of Series I Secured notes payable
Payments for redemption of Series I Secured notes payable
Proceeds from issuance of debentures		17,878,571		33,635,657
Payments for issuance of debentures		(914,880)		(1,627,467)
Proceeds (payments) from restricted cash
Issuance of member capital
Proceeds from issuance of common stock			4,973		4,973
Issuance of convertible, redeemable preferred stock		500,000	1,670,010	6,287,375	1,670,010
Payments of issuance cost for convertible, redeemable preferred stock		558,729	(956,851)	(1,050,633)	(956,851)
Proceeds from notes receivable from related parties
Common stock dividends			(2,306,068)		(2,306,068)
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES		18,022,420	(1,587,936)	37,244,932	(1,587,936)
NET INCREASE IN CASH AND CASH EQUIVALENTS		5,661,189	1,110,647	14,578,564	1,177,478
CASH AND CASH EQUIVALENTS
BEGINNING OF THE QUARTER		10,663,831	66,831	1,746,456
END OF THE QUARTER		16,325,020	1,177,478	16,325,020	1,177,478
Guarantor Sub [Member]
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		2,196,447	345,376	2,328,543	5,723,004
Adjustments to reconcile net income (loss) to cash:
(Equity) loss of subsidiaries		(3,619,677)		(7,637,542)
Gain on life settlements			(165,915)	999,677	(337,788)
Amortization of deferred financing and issuance costs		200,426	1,374,401	946,813	1,374,401
Investment banking services
Deferred income taxes
Accrued convertible, redeemable preferred stock dividends
(Increase) decrease in operating assets:
Other assets		(9,512,249)	(910,657)	(20,256,072)	(15,912,784)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		1,053,205		1,092,292
Accrued expenses			(3,585,432)		(3,344,913)
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(9,681,848)	(2,942,227)	(22,526,289)	(12,498,080)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements			4,150		(12,000)
Proceeds from settlement of life settlements
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES			4,150		(12,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from revolving credit facility
Proceeds from issuance of Series I Secured notes payable			(3,216,821)	50,000	8,126,034
Payments for redemption of Series I Secured notes payable		(1,843,032)	3,280,899	(5,311,989)	(1,006,680)
Proceeds from issuance of debentures
Payments for issuance of debentures
Proceeds (payments) from restricted cash		(26,000)	430,358	796,227	3,039,582
Issuance of member capital		13,059,005		28,799,277
Proceeds from issuance of common stock
Issuance of convertible, redeemable preferred stock
Payments of issuance cost for convertible, redeemable preferred stock
Proceeds from notes receivable from related parties			2,306,068		2,306,068
Common stock dividends
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES		11,189,973	2,800,504	24,333,515	12,465,004
NET INCREASE IN CASH AND CASH EQUIVALENTS		1,508,125	(137,573)	1,807,226	(45,076)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE QUARTER		430,994	282,339	131,893	189,842
END OF THE QUARTER		1,939,119	144,766	1,939,119	144,766
Non-Guarantor Sub [Member]
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		3,590,565	3,010,662	7,550,205	10,690,204
Adjustments to reconcile net income (loss) to cash:
(Equity) loss of subsidiaries
Gain on life settlements		(8,881,542)	(7,070,547)	(20,871,468)	(23,537,267)
Amortization of deferred financing and issuance costs		58,224	58,224	174,672	174,672
Investment banking services
Deferred income taxes
Accrued convertible, redeemable preferred stock dividends
(Increase) decrease in operating assets:
Other assets			(473,860)	(146,874)	(859,099)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		11,428		24,484
Accrued expenses			(1,997,506)		4,469,773
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(5,221,325)	(6,473,027)	(13,268,981)	(9,061,717)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		(5,361,540)	(1,381,176)	(7,986,570)	(10,488,756)
Proceeds from settlement of life settlements				416,665
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES		(5,361,540)	(1,381,176)	(7,566,905)	(10,488,756)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from revolving credit facility			7,510,001	6,000,000	18,599,549
Proceeds from issuance of Series I Secured notes payable
Payments for redemption of Series I Secured notes payable
Proceeds from issuance of debentures
Payments for issuance of debentures
Proceeds (payments) from restricted cash		3,453,198	344,202	2,573,610	(617,464)
Issuance of member capital		7,129,667		12,262,276
Proceeds from issuance of common stock
Issuance of convertible, redeemable preferred stock
Payments of issuance cost for convertible, redeemable preferred stock
Proceeds from notes receivable from related parties
Common stock dividends
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES		10,582,865	7,854,203	20,835,886	17,982,085
NET INCREASE IN CASH AND CASH EQUIVALENTS					(1,568,388)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE QUARTER					1,568,388
END OF THE QUARTER
Eliminations [Member]
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		(5,787,012)	(3,356,038)	(9,878,748)	(16,413,208)
Adjustments to reconcile net income (loss) to cash:
(Equity) loss of subsidiaries		5,787,012		9,878,748
Gain on life settlements
Amortization of deferred financing and issuance costs
Investment banking services
Deferred income taxes
Accrued convertible, redeemable preferred stock dividends
(Increase) decrease in operating assets:
Other assets		20,188,672	(1,510,873)	41,061,553	18,674,893
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses
Accrued expenses			4,866,911		(2,261,685)
NET CASH FLOWS USED IN OPERATING ACTIVITIES		20,188,672		41,061,553
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements
Proceeds from settlement of life settlements
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from revolving credit facility
Proceeds from issuance of Series I Secured notes payable
Payments for redemption of Series I Secured notes payable
Proceeds from issuance of debentures
Payments for issuance of debentures
Proceeds (payments) from restricted cash
Issuance of member capital		(20,188,672)		(41,061,553)
Proceeds from issuance of common stock
Issuance of convertible, redeemable preferred stock
Payments of issuance cost for convertible, redeemable preferred stock
Proceeds from notes receivable from related parties
Common stock dividends
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES		(20,188,672)		(41,061,553)
NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
BEGINNING OF THE QUARTER
END OF THE QUARTER

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Renewable Secured Debentures (Details) (Secured Debentures [Member], USD $)	Sep. 30, 2012
Secured Debentures [Member]
Future maturities of renewable secured debentures
2012	$ 1,208,000
2013	5,931,000
2014	6,009,000
2015	9,510,000
2016	917,000
Thereafter	9,110,000
Total	$ 32,685,000

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Fair Value Definition and Hierarchy (Details 3) (USD $)	9 Months Ended
	Sep. 30, 2012
Fair Value Definition and Hierarchy (Textual)
Increase decrease in life expectancy	4 months
Increase decrease in discount rate	1.00%
Estimated fair value of Series I Secured notes payable	$ 40,492,000
Weighted average market interest rate of Secured notes payable	7.30%
Level 3 [Member]
Warrants Level 3 instruments and measured at fair value upon issuance
Warrants issued	831,908
Warrants Issued One [Member] | Level 3 [Member]
Warrants Level 3 instruments and measured at fair value upon issuance
Warrants issued date	Dec. 31, 2011
Warrants issued	137,874
Fair value per share	$ 0.11
Risk free rate	0.42%
Volatility rate	25.25%
Warrants Issued Two [Member] | Level 3 [Member]
Warrants Level 3 instruments and measured at fair value upon issuance
Warrants issued date	Mar. 31, 2012
Warrants issued	76,260
Fair value per share	$ 0.26
Risk free rate	0.38%
Volatility rate	36.20%
Warrants Issued Three [Member] | Level 3 [Member]
Warrants Level 3 instruments and measured at fair value upon issuance
Warrants issued date	Jun. 30, 2012
Warrants issued	323,681
Fair value per share	$ 0.58
Risk free rate	0.41%
Volatility rate	47.36%
Warrants Issued Four [Member] | Level 3 [Member]
Warrants Level 3 instruments and measured at fair value upon issuance
Warrants issued date	Jul. 31, 2012
Warrants issued	289,093
Fair value per share	$ 0.58
Risk free rate	0.41%
Volatility rate	47.36%
Warrants Issued Five [Member] | Level 3 [Member]
Warrants Level 3 instruments and measured at fair value upon issuance
Warrants issued date	Sep. 30, 2012
Warrants issued	5,000
Fair value per share	$ 0.36
Risk free rate	0.31%
Volatility rate	40.49%

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Concentration (Details)	Sep. 30, 2012	Dec. 31, 2011
Company A [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	17.27%	17.43%
Company B [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	13.38%	15.06%
Company C [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	12.06%	12.53%
Company D [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		10.09%
Company D [Member] | Maximum [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%

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Contingencies (Details) (USD $)	9 Months Ended
	Sep. 30, 2012
Contingencies (Textual)
Loaned to Opportunity Finance, LLC	$ 1,000,000
Interest payment	$ 177,000

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Fair Value Definition and Hierarchy

9 Months Ended

Sep. 30, 2012

Fair Value Definition and Hierarchy [Abstract]

Fair value definition and hierarchy

( 4 )       Fair value definition and hierarchy

ASC 820 establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring assets and liabilities at fair value. Market price observability is affected by a number of factors, including the type of investment, the characteristics specific to the investment and the state of the marketplace including the existence and transparency of transactions between market participants. Assets and liabilities with readily available active quoted prices or for which fair value can be measured from actively quoted prices in an orderly market generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. ASC 820 establishes a three-level valuation hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

The hierarchy is broken down into three levels based on the observability of inputs as follows:

● Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.  Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

● Level 2 - Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

● Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The availability of observable inputs can vary by types of assets and liabilities and is affected by a wide variety of factors, including, for example, whether the investment 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.

Life insurance policies represent financial instruments recorded at fair value on a recurring basis. The following table reconciles the beginning and ending fair value of the Company’s Level 3 investments in life insurance policies for the following periods:

	Three month ended September 30,					Nine months ended September 30,
	2012		2011			2012			2011
Beginning balance	$	133,848,000	$	108,480,000		$	122,169,000		$	82,718,000
Purchases		5,100,000		5,594,000			7,827,000			10,844,000
Maturities (cost basis)		-		(344,000	)		(416,000	)		(344,000	)
Net change in fair value		8,881,000		3,363,000			18,249,000			23,875,000
Ending balance (September 30)	$	147,829,000	$	117,093,000		$	147,829,000		$	117,093,000

The fair value of a portfolio of life insurance policies is based on information available to the Company at the reporting date. Fair value is based upon a discounted cash flow model that incorporates life expectancy assumptions.  Life expectancy reports are obtained from independent, third-party widely accepted life expectancy providers at policy acquisition. The life expectancy values of each policy holder, as determined at policy acquisition, are rolled down monthly for the passage of time by the MAPS actuarial software the Company uses for ongoing valuation of its portfolio of life insurance policies.  The discount rate incorporates current information about market interest rates, the credit exposure to the insurance company that issued the life insurance policy and management’s estimate of the risk premium an investor in the portfolio of life insurance policies would require.

The fair value of life insurance policies is estimated using present value calculations of estimated cash flows based on the data specific to each individual life insurance policy. The following summarizes inputs utilized in estimating the fair value of the portfolio of life insurance policies:

	As of  September 30,			As of December 31,
	2012			2011
Weighted average age of insured		81.2			80.9
Weighted average life expectancy, months*		88.1			93.6
Average face amount per policy	$	2,630,927		$	2,722,315
Discount rate		13.29	%		13.41	%
* Standard life expectancy as adjusted for insured’s specific circumstances.

These assumptions are, by their nature, inherently uncertain and the effect of changes in estimates may be significant. The techniques used in estimating the present value of estimated cash flows are derived from valuation techniques generally used in the industry that include inputs for the asset that are not based on observable market data. The extent to which the fair value could reasonable vary in the near term has been quantified by evaluating the effect of changes in significant underlying assumptions used to estimate the fair value. If the life expectancies were increased or decreased by 4 months on each outstanding policy and the discount factors were increased or decreased by 1% while all other variables are held constant, the fair value of the investment in life insurance policies would increase or (decrease) by the  amounts summarized below:

	Change in life expectancy
	plus 4 months				minus  4 months
Investment in life policies
September 30, 2012		$	(10,936,000	)		$	11,241,000
December 31, 2011		$	(9,660,000	)		$	9,951,000
	Change in discount rate
	plus 1%				minus 1%
Investment in life policies
September 30, 2012		$	(7,367,000	)		$	7,992,000
December 31, 2011		$	(6,665,000	)		$	7,254,000

Carrying value of receivables, prepaid expenses, accounts payable and accrued expenses approximate fair value due to their short term maturities and low credit risk. The estimated fair value of the Company’s Series I Secured notes payable is approximately $40,492,000 based on a weighted average market interest rate of 7.3%. The Company began issuing Renewable Secured Debentures in the first quarter of 2012. The current interest rates on the Renewable Secured Debentures approximate market rates. The carrying value of the revolving credit facility reflects interest charged at the commercial paper rate plus an applicable margin. The margin represents our credit risk, and the strength of the portfolio of life insurance policies collateralizing the debt. Management believes this margin has not changed over time.  The overall rate reflects market, and the carrying value of the revolver approximates fair value.

The Company has issued warrants to purchase common stock in connection with the issuance of its preferred stock. The fair value measurements associated with the warrants, measured at issuance represent level 3 instrument.

Month issued	Warrants issued		Fair value per share		Risk free rate			Volatility
12/31/11		137,874	$	0.11		0.42	%		25.25	%
03/31/12		76,260	$	0.26		0.38	%		36.20	%
06/30/12		323,681	$	0.58		0.41	%		47.36	%
07/31/12		289,093	$	0.58		0.41	%		47.36	%
09/30/12		5,000	$	0.36		0.31	%		40.49	%
		831,908

The Company has not changed its methodology in estimating fair value from prior periods.

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Renewable Secured Debentures (Details Textual) (USD $)	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012
Renewable Secured Debentures (Textual)
Interest rates, minimum		4.20%
Interest rates, maximum		5.00%
Weighted average interest rate on debentures	7.30%	7.30%
Secured Debentures [Member]
Renewable Secured Debentures (Textual)
Debentures offer for sale	$ 250,000,000	$ 250,000,000
Maturity period of debentures, Minimum		6 months
Maturity period of debentures, Maximum		7 years
Interest rates, minimum		4.75%
Interest rates, maximum		9.50%
Description of interest payment		Interest is payable monthly, annually or at maturity depending on the terms of the debenture
Weighted average interest rate on debentures	7.58%	7.58%
Amount outstanding under Renewable Secured Debentures	32,685,000	32,685,000
Amortization of deferred issuance costs	135,000	182,000
Future expected amortization of deferred financing costs		1,580,000
Principal amount of additional secured debentures		$ 9,348,000
Conditions for proceed from issuance of debenture		(1) payment of commissions on sales of Renewable Secured Debentures, (2) payment of offering expenses, (3) purchase of life insurance policies, (4) Payment of premiums on life insurance policies, (5) payment of principal and interest on Renewable Secured Debentures, (6) payment of portfolio operations expenses, and (7) for general working capital

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Restrictions on Cash (Details) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Restrictions on Cash (Textual)
Restricted cash	$ 1,424,000	$ 4,794,000

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Nature of Business and Summary of Significant Accounting Policies (Details) (USD $)	1 Months Ended			3 Months Ended		9 Months Ended				1 Months Ended		9 Months Ended
	Aug. 31, 2011	Jul. 31, 2011	Jun. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011	Jun. 10, 2011	Sep. 30, 2012 Series A 10 % convertible Preferred Stock [Member]	Jul. 31, 2011 Series A 10 % convertible Preferred Stock [Member]	Sep. 30, 2012 Series A 10 % convertible Preferred Stock [Member]
Nature of Business and Summary of Significant Accounting Policies (Textual)
Convertible redeemable preferred shares offered for sale											3,333,333
Series A preferred stock shares issued in conversion of dividends												60,000
Dividend rate of convertible redeemable preferred stock											10.00%
Offering price of series A preferred stock											$ 7.50
Convertible redeemable preferred shares sold for cash										3,279,000
Common stock, shares authorized				210,000,000		210,000,000		210,000,000	210,000,000
Common stock, par value				$ 0.001		$ 0.001		$ 0.001	$ 0.001
Preferred Stock, Shares Authorized									40,000,000
Preferred Stock, Par Value Per Share									$ 0.001
Member units converted in to common stock			4,500,000
Forward stock split	Two-for-one
Total overallotment shares		666,667
New shares issued						3,339,000
Total offering shares		4,000,000
Amortization of deferred financing costs				$ 58,000	$ 58,000	$ 175,000	$ 175,000
Future amortization of Financing cost for three months ending December 31, 2012				58,000		58,000
Future amortization of Financing cost for year ending December 31, 2013				$ 97,000		$ 97,000
Redemption Period for amortization of discount related to financing cost						3 years
Warrants outstanding				831,909		831,909
Convertible redeemable preferred stock, outstanding				5,009,225		5,009,225

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Income Taxes (Details) (USD $)	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012
Income Taxes (Textual)
Dividends charged to interest expense	$ 675,000	$ 1,654,000

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Investment in Life Insurance Policies (Details) (USD $)	Sep. 30, 2012 Contract	Dec. 31, 2011 Contract
Summary of life insurance policies, under the fair value method and estimated maturity dates organized by expected mortality date
Number of Contracts, 2012
Number of Contracts, 2013
Number of Contracts, 2014		1
Number of Contracts, 2015	5	5
Number of Contracts, 2016	11	10
Number of Contracts, 2017	28	29
Number of Contracts, 2018	33	34
Number of Contracts, Thereafter	119	96
Life Settlement Contracts, Number of Contracts, Total	196	175
Estimated Fair Value, 2012
Estimated Fair Value, 2013
Estimated Fair Value, 2014		535,000
Estimated Fair Value, 2015	2,868,000	4,636,000
Estimated Fair Value, 2016	12,936,000	12,930,000
Estimated Fair Value, 2017	26,627,000	24,144,000
Estimated Fair Value, 2018	24,361,000	23,500,000
Estimated Fair Value, Thereafter	81,037,000	56,424,000
Life Settlement Contracts, Estimated Fair Value, Total	147,829,000	122,169,000
Face Value, 2012
Face Value, 2013
Face Value, 2014		1,000,000
Face Value, 2015	5,329,000	9,329,000
Face Value, 2016	28,885,000	34,835,000
Face Value, 2017	67,748,000	71,998,000
Face Value, 2018	73,008,000	81,858,000
Face Value, Thereafter	340,692,000	277,385,000
Life Settlement Contracts, Face Value, Total	$ 515,662,000	$ 476,405,000

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Investment in Life Insurance Policies (Details 1) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Reconciliation of gain on life settlements
Change in fair value	$ 8,881,000	$ 7,526,000	$ 18,249,000	$ 23,736,000
Premiums and other annual fees	(4,093,000)	(4,163,000)	(12,074,000)	(10,079,000)
Policy maturities		494,000	4,083,000	494,000
Gain on life settlements, net	$ 4,788,000	$ 3,857,000	$ 10,258,000	$ 14,151,000

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Investment in Life Insurance Policies

9 Months Ended

Sep. 30, 2012

Investment In Life Insurance Policies [Abstract]

Investment in life insurance policies

( 3 )      Investment in life insurance policies

The life insurance policies (Level 3 financial instruments) are valued based on unobservable inputs that are significant to the overall fair value measurement. Changes in the fair value of these instruments are recorded in gain or loss on life insurance policies in the consolidated statements of operations (net of the cash premiums paid on the policies). The fair value is determined on a discounted cash flow basis that incorporates life expectancy assumptions.  Life expectancy reports have been obtained from widely accepted life expectancy providers. The discount rate incorporates current information about market interest rates, the credit exposure to the insurance company that issued the life insurance policy and our estimate of the risk premium an investor in the policy would require. As a result of management’s analysis, discount rates of 13.29% and 13.41% were applied to the portfolio as of September 30, 2012 and December 31, 2011, respectively.

A summary of the Company’s life insurance policies accounted for under the fair value method and their estimated maturity dates, based on remaining life expectancy is as follows:

	As of September 30, 2012						As of December 31, 2011
Years Ending December 31,	Number of Contracts		Estimated Fair Value		Face Value		Number of Contracts		Estimated Fair Value		Face Value
2012		-	$	-	$	-		-	$	-	$	-
2013		-		-		-		-		-		-
2014		-		-		-		1		535,000		1,000,000
2015		5		2,868,000		5,329,000		5		4,636,000		9,329,000
2016		11		12,936,000		28,885,000		10		12,930,000		34,835,000
2017		28		26,627,000		67,748,000		29		24,144,000		71,998,000
2018		33		24,361,000		73,008,000		34		23,500,000		81,858,000
Thereafter		119		81,037,000		340,692,000		96		56,424,000		277,385,000
Totals		196	$	147,829,000	$	515,662,000		175	$	122,169,000	$	476,405,000

The Company recognized $494,000 of policy benefit income during the nine months period ended September 30, 2011. The Company received cash from policy benefits of $4,500,000 in April 2012, resulting in a gain of $4,083,000.

Reconciliation of gain on life settlements:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Change in fair value	$	8,881,000		$	7,526,000		$	18,249,000		$	23,736,000
Premiums and other annual fees		(4,093,000	)		(4,163,000	)		(12,074,000	)		(10,079,000	)
Policy maturities		-			494,000			4,083,000			494,000
Gain on life settlements, net	$	4,788,000		$	3,857,000		$	10,258,000		$	14,151,000

The estimated expected premium payments to maintain the above life insurance policies in force for the next five years, assuming no mortalities, are as follows:

Years Ending December 31,
Three months ending December 31, 2012	$	4,190,000
2013		16,831,000
2014		18,050,000
2015		19,438,000
2016		21,051,000
	$	79,560,000

Management anticipates funding the estimated premium payments as noted above with proceeds from the DZ Bank revolving credit facility and through additional debt and equity financing as well as from cash proceeds from maturities of life insurance policies. The proceeds of these capital sources are also intended to be used for the purchase, financing, and maintenance of additional life insurance policies.

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Investment in Life Insurance Policies (Details 2) (USD $)	Sep. 30, 2012
Estimated expected premium payments to maintain the above life insurance policies assuming no mortalities
Three months ending December 31, 2012	$ 4,190,000
2013	16,831,000
2014	18,050,000
2015	19,438,000
2016	21,051,000
Estimated expected premium payments	$ 79,560,000

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Series I Secured Notes Payable (Details) (Series I Secured Notes Payable [Member], USD $)	Sep. 30, 2012
Series I Secured Notes Payable [Member]
Future maturities of secured notes payable
2012	$ 6,112,000
2013	15,380,000
2014	8,437,000
2015	4,102,000
2016	1,155,000
Thereafter	4,839,000
Total	$ 40,025,000

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Concentration (Details 1)	Sep. 30, 2012	Dec. 31, 2011
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	29.59%	31.43%
New York [Member]
Summary of the number of insurance contracts held in specific states exceeding 10% of the total face value held by the Company
Percentage of insurance contracts held in specific states	12.76%	13.71%
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	12.76%	11.43%

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Condensed Consolidated Balance Sheets (USD $)	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Dec. 31, 2010
ASSETS
Cash and cash equivalents	$ 18,264,139	$ 11,094,825	$ 1,878,349	$ 1,322,244	$ 349,170	$ 1,758,230
Restricted cash	1,424,466		4,794,302
Investment in life settlements, at fair value	147,828,800		122,168,524
Other assets	884,631		548,100
TOTAL ASSETS	168,402,036		129,389,275
LIABILITIES
Revolving credit facility	66,000,000		60,000,000
Series I Secured notes payable	39,221,704		48,179,271
Renewable secured debentures	32,112,270
Interest payable	2,870,900		1,887,835
Accounts payable and accrued expenses	2,243,000		1,404,107
Deferred taxes, net	4,411,929		4,308,217
TOTAL LIABILITIES	146,859,803		115,779,430
CONVERTIBLE, REDEEMABLE PREFERRED STOCK (par value $0.001; shares authorized 40,000,000; shares issued and outstanding 3,339,484 and 1,881,329; liquidation preference of $25,046,000 (unaudited) and $14,110,000, respectively)	23,391,533		12,661,276
EQUITY (DEFICIT)
Common stock (par value $0.001: shares authorized 210,000,000; shares issued and outstanding is 9,989,000 on both September 30, 2012 (unaudited) and December 31, 2011)	9.989		9,989
Additional paid-in capital	7,335,887		8,169,303
Accumulated deficit	(9,195,176)		(7,230,723)
TOTAL EQUITY (DEFICIT)	(1,849,300)		948,569
TOTAL LIABILITIES & EQUITY (DEFICIT)	$ 168,402,036		$ 129,389,275

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Convertible, Redeemable Preferred Stock (Details) (USD $)	3 Months Ended		9 Months Ended		12 Months Ended	1 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011	Sep. 30, 2012 Series A 10 % convertible Preferred Stock [Member]	Jul. 31, 2011 Series A 10 % convertible Preferred Stock [Member]	Sep. 30, 2012 Series A 10 % convertible Preferred Stock [Member]
Convertible, Redeemable Preferred Stock (Textual)
Series A preferred stock shares sold for cash						3,279,000
Series A preferred stock shares issued in conversion of dividends								60,000
Convertible redeemable preferred shares offered for sale							3,333,333
Series A preferred stock value issued in conversion of dividends								$ 425,000
Offering price of series A preferred stock							$ 7.50
Consideration received on sale of Series A preferred stock						24,591,000
Series A preferred stock, Dividend rate							10.00%
Conversion term for series A preferred stock							Each share shall have the right to convert into 1.5 shares of the Company''s common stock
Maturity period of warrant			3 years
Exercise price of warrants			$ 6.25
Conversion of Series A preferred stock into common stock, description			One share of common stock for every 20 shares of Series A preferred stock purchased
Redemption price of preferred shares			Stated value of $7.50 per share, plus accrued dividends
Percentage of unredeemed shares redeemed one year after issuance			33.00%
Percentage of unredeemed shares redeemed two year after issuance			66.00%
Percentage of unredeemed shares redeemed three year after issuance			100.00%
Redemption price of shares			The Company may redeem the shares at a price equal to 110% of their liquidation preference ($7.50 per share) at any time after December 15, 2012.
Preferred stock, liquidation preference per share	$ 7.50		$ 7.50
Issuance of common stock		4,973	5.0	4,973
Minimum offering price of common stock			$ 5.50
Preferred Stock, Shares Issued	3,339,000		3,339,000
Proceeds from issuance of convertible preferred stock			25,016,000
Series A preferred stock issuance costs	2,838,000		2,838,000
Amortization of stock issuance costs	440,000		1,214,000
Net preferred stock capital balance	23,392,000		23,392,000
Fair value of outstanding warrants attached to Series A preferred stock	170,000		377,000
Proceeds from issuance of warrants					22,000
Term of redemption of warrants prior to expiration			The Company may redeem outstanding warrants prior to their expiration, at a price of $0.01 per share upon 30 days written notice to the investors at any time after (i) the Company has completed a registration of its common stock with the SEC and (ii) the volume of weighted average sale price per share of common stock equals or exceeds $7.00 per share for ten consecutive trading days ending on the third business day prior to proper notice of such redemption.
Warrant outstanding	831,909		831,909		139,417
Weighted average remaining life of warrants outstanding			2 years 7 months 2 days		2 years 9 months 4 days
Declared and accrued dividends	675,000		1,654,000
Dividends paid in cash			$ 906,000
Cash dividend rate, per share			$ 7.00
Preferre stock issued in lieu of cash dividend	58,296		58,296

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Nature of Business and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2012

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. (Holdings) (previously GWG Holdings, LLC) and Subsidiaries, located in Minneapolis, Minnesota, facilitates the purchase of life insurance policies for its own investment portfolio through its wholly owned subsidiary, GWG Life Settlements, LLC (GWG Life), and its subsidiaries, GWG Trust (Trust), GWG DLP Funding II, LLC (DLP II) and its wholly owned subsidiary, GWG DLP Master Trust II (the Trust II). Holdings converted from a limited liability company into a corporation effective June 10, 2011 and as a result of this change all member units were converted into common stock. Holdings and its subsidiaries finance the acquisition of life insurance policies and pay policy premiums through funds available on its line of credit and proceeds from other debt and equity securities as well as from revenues from maturities of life insurance policies.  GWG Broker Services, LLC (Broker Services) a wholly owned subsidiary was formed to earn fees for brokering policy transactions between market participants. GWG Member, LLC a wholly owned subsidiary formed November 2010 to facilitate the acquisition of policies, has not commenced operations as of September 30, 2012. The entities were legally organized in Delaware and are collectively referred herein to as GWG, or the Company.

Basis of presentation - The condensed consolidated balance sheet as of September 30, 2012, the condensed consolidated statements of operations for the three months and nine months ended September 30, 2012 and 2011, and the condensed consolidated statements of cash flows for the three months and nine months ended September 30, 2012 and 2011, and the related information presented in these notes, have been prepared by management in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, without audit. To the extent that information and notes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements are contained in or are consistent with the consolidated audited financial statements presented in the Company’s Form 10-K for the year ended December 31, 2011, such information and notes have not been duplicated herein. In the opinion of management, all adjustments considered necessary for a fair presentation of results have been included. The condensed consolidated balance sheet at December 31, 2011 was derived from the audited consolidated financial statements as of that date. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Special Financial Report on Form 10-K for the year ended December 31, 2011.

Use of estimates - The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The most significant estimates with regard to these consolidated financial statements relate to (1) the determination of the assumptions used in estimating the fair value of the investment in life insurance policies, and (2) the valuation of deferred tax assets.

Operating agreement – Effective June 10, 2011, the Company filed a certificate of conversion from a limited liability company into a corporation, registered in the state of Delaware. With this conversion, the Company is authorized to issue 210,000,000 shares of common stock, par value $.001, and 40,000,000 shares of preferred stock, par value $.001. In connection with the conversion, the outstanding member units were converted to 4,500,000 shares of common stock (prior to giving effect to the August 9, 2011 two-for-one forward stock split discussed below). Common stock dividends distributed subsequent to the conversion will be recorded as a reduction of paid in capital until the Company reflects accumulated positive earnings.

On July 31, 2011, the Company began a private placement offering for the sale of up to 3,333,333 shares of Series A 10% convertible, redeemable preferred stock at an offering price of $7.50 per share.  The offering of Series A concluded on September 2, 2012, and resulted in the sale of 3,279,000 shares of Series A and issuance of an additional 60,000 shares as dividends in-kind to shareholders (see note 10). The Company provided for an overallotment of 666,667 shares, allowing for total offering of 4,000,000 shares. As of September 30, 2012 we have issued 3,339,000 shares.

On August 9, 2011 the Company filed an amendment to its certificate of incorporation to effect a two-for-one forward stock split of its common stock. Unless otherwise noted, all share amounts contained in these consolidated financial statements are post-split share amounts determined after giving effect to the forward stock split.

Life settlements - ASC 325-30, Investments in Insurance Contracts, allows an investor the election to account for its investments in life settlements using either the investment method or the fair value method. The election shall be made on an instrument-by-instrument basis and is irrevocable. Under the investment method, an investor shall recognize the initial investment at the purchase price plus all initial direct costs. Continuing costs (policy premiums and direct external costs, if any) to keep the policy in force shall be capitalized. Under the fair value method, an investor shall recognize the initial investment at the purchase price. In subsequent periods, the investor shall re-measure the investment at fair value in its entirety at each reporting period and shall recognize the change in fair value in current period income net of premiums paid. The Company uses the fair value method to account for all investments in life settlements.

The Company recognizes the difference between the policy benefits received and carrying values of the respective life insurance policy when an insured event has occurred and the Company determines that settlement and ultimate collection of the policy benefits is realizable and reasonably assured. Revenue from a transaction must meet both criteria in order to be recognized. The Company recognizes these realized gains (revenue) from life settlement contracts upon one of the two following events:

1)           Receipt of mortality notice or verified obituary of insured

2)           Sale of policy and filing of change of ownership forms and receipt of payment

Deposits and initial direct costs advanced on policies to be purchased, but not yet settled, are recorded as other assets until policy ownership has been transferred to the Company.

Deferred financing and issuance costs – Financing costs incurred to obtain financing under the revolving credit facility have been capitalized and are amortized using the straight-line method over the term of the revolving credit facility. Amortization of deferred financing costs related to the revolving credit facility was $58,000 for the three months ended September 30, 2012 and 2011. Amortization of deferred financing costs related to the revolving credit facility was $175,000 for each of the nine months ended September 30, 2012 and 2011 and is included in interest expense in the statement of operations. The expected amortization expense is $58,000 and $97,000 for the three months ending December 31, 2012 and the year ending December 31, 2013, respectively.

The Series I Secured note obligations, as described in note 7, are reported net of issuance costs, sales commissions and other direct expenses, which are amortized using the interest method over the term of the borrowings. The renewable secured debentures, as described in note 8, are reported net of issuance costs, sales commissions, and other direct expenses, which are amortized using the interest method over the term of the borrowings.

The Series A convertible, redeemable preferred stock, as described in note 10, is reported net of issuance costs, sales commissions, and other direct expenses. The discount is amortized directly to equity using the interest method over the three year redemption period to the redemption amount.

Earnings (loss) per share – The Company converted from a limited liability company into a corporation effective June 10, 2011, and as a result of this change all member units were converted into common stock. The earnings (loss) per share has been restated to reflect the equivalent common stock per share amounts as of the earliest period reported. Basic per share earnings (loss) is calculated using the weighted average number of shares outstanding during the period. Diluted earnings per share is calculated based on the potential dilutive impact, if any, of the Company’s preferred stock and outstanding warrants. The Company has 831,909 warrants and 5,009,225 shares of Convertible Redeemable Preferred Stock (equivalent common shares if Convertible Redeemable Preferred Stock were converted into common stock) outstanding as of September 30, 2012. The Convertible Redeemable Preferred Stock and warrants are anti-dilutive for the three and nine months ended September 30, 2012 and 2011.

Recently adopted pronouncements – In May 2011, the FASB issued ASU No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS,” which amends disclosure requirements related to categorization within the fair value hierarchy. This update results in common principles and requirements for measuring fair value and disclosing information about fair value measurements in accordance with GAAP and International Financial Reporting Standards. The guidance became effective January 1, 2012. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

Other pronouncements issued by the FASB with future effective dates are either not applicable or are not expected to be significant to the Company.

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Fair Value Definition and Hierarchy (Details 1) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Summary of inputs utilized in estimating the fair value
Discount rate	13.29%	13.41%
Life Insurance [Member]
Summary of inputs utilized in estimating the fair value
Weighted average age of insured	81 years 2 months 12 days	80 years 10 months 24 days
Weighted average life expectancy, months*	88 months 3 days	93 months 18 days
Average face amount per policy	2,630,927	2,722,315
Discount rate	13.29%	13.41%

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Fair Value Definition and Hierarchy (Tables)

9 Months Ended

Sep. 30, 2012

Fair Value Definition and Hierarchy [Abstract]

Reconcilliation of investments in life insurance policies

	Three month ended September 30,					Nine months ended September 30,
	2012		2011			2012			2011
Beginning balance	$	133,848,000	$	108,480,000		$	122,169,000		$	82,718,000
Purchases		5,100,000		5,594,000			7,827,000			10,844,000
Maturities (cost basis)		-		(344,000	)		(416,000	)		(344,000	)
Net change in fair value		8,881,000		3,363,000			18,249,000			23,875,000
Ending balance (September 30)	$	147,829,000	$	117,093,000		$	147,829,000		$	117,093,000

Summary of inputs utilized in estimating the fair value

	As of  September 30,			As of December 31,
	2012			2011
Weighted average age of insured		81.2			80.9
Weighted average life expectancy, months*		88.1			93.6
Average face amount per policy	$	2,630,927		$	2,722,315
Discount rate		13.29	%		13.41	%

Fair value sensitivity analysis on the investment in life insurance policies

	Change in life expectancy
	plus 4 months				minus  4 months
Investment in life policies
September 30, 2012		$	(10,936,000	)		$	11,241,000
December 31, 2011		$	(9,660,000	)		$	9,951,000
	Change in discount rate
	plus 1%				minus 1%
Investment in life policies
September 30, 2012		$	(7,367,000	)		$	7,992,000
December 31, 2011		$	(6,665,000	)		$	7,254,000

Warrants Level 3 instruments and measured at fair value upon issuance

Month issued	Warrants issued		Fair value per share		Risk free rate			Volatility
12/31/11		137,874	$	0.11		0.42	%		25.25	%
03/31/12		76,260	$	0.26		0.38	%		36.20	%
06/30/12		323,681	$	0.58		0.41	%		47.36	%
07/31/12		289,093	$	0.58		0.41	%		47.36	%
09/30/12		5,000	$	0.36		0.31	%		40.49	%
		831,908

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Fair Value Definition and Hierarchy (Details 2) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Plus 4 Months [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life policies	$ (10,936,000)	$ (9,660,000)
Minus 4 Months [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life policies	11,241,000	9,951,000
Plus 1% [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life policies	(7,367,000)	(6,665,000)
minus 1% [Member]
Fair value sensitivity analysis on the investment in life insurance policies
Investment in life policies	$ 7,992,000	$ 7,254,000

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Renewable Secured Debentures (Tables)

9 Months Ended

Sep. 30, 2012

Series I Secured Notes Payable and Renewable Secured Debentures [Abstract]

Future maturities of renewable secured debentures

Years Ending December 31,
2012	$	1,208,000
2013		5,931,000
2014		6,009,000
2015		9,510,000
2016		917,000
Thereafter		9,110,000
	$	32,685,000

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Restrictions on Cash

9 Months Ended

Sep. 30, 2012

Restrictions On Cash [Abstract]

Restrictions on cash

( 2 )       Restrictions on cash

The Company is required by its lenders to maintain collection and escrow accounts. These accounts are used to fund the acquisition, pay annual premiums of insurance policies, pay interest and other charges under its revolving credit facility, and collect policy benefits. DZ Bank AG, as agent for Autobahn Funding Company, LLC, the lender for the revolving credit facility as described in note 6, authorizes the disbursements from these accounts. At September 30, 2012 and December 31, 2011 there was a balance of $1,424,000, and $4,794,000, respectively, maintained in these restricted cash accounts.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Condensed Consolidated Balance Sheets [Abstract]
CONVERTIBLE, REDEEMABLE PREFERRED STOCK, par value	$ 0.001	$ 0.001
CONVERTIBLE, REDEEMABLE PREFERRED STOCK, shares authorized	40,000,000	40,000,000
CONVERTIBLE, REDEEMABLE PREFERRED STOCK, shares issued	3,339,484	1,881,329
CONVERTIBLE, REDEEMABLE PREFERRED STOCK, shares outstanding	3,339,484	1,881,329
CONVERTIBLE, REDEEMABLE PREFERRED STOCK, liquidation preference	$ 25,046,000	$ 14,110,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	210,000,000	210,000,000
Common stock, shares issued	9,989,000	9,989,000
Common stock, shares outstanding	9,989,000	9,989,000

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Contingencies

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies [Abstract]

Contingencies

( 12 )    Contingencies

Litigation - In the normal course of business, the Company is involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings would not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Contingency matter – Opportunity Finance, LLC, owned by Jon Sabes and Steven Sabes, is subject to litigation clawback claims by the bankruptcy trustee for third-party matters for payments that may have been deemed preference payments. In addition, Jon Sabes and Steven Sabes are subject to litigation clawback claims by the bankruptcy trustee for third-party matters for payments received from Opportunity Finance that may have been deemed preference payments. If the parties are unsuccessful in defending against these claims, their equity ownership in the Company may be sold or transferred to other parties to satisfy such claims. In addition, the Company loaned $1,000,000 to Opportunity Finance, LLC, and was repaid in full plus interest of $177,000. This investment amount may also be subject to clawback claims by the bankruptcy court. These matters may also distract management and reduce the time and attention that they are able to devote to the Company’s operations.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Nov. 14, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	GWG Holdings, Inc.
Entity Central Index Key	0001522690
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		9,989,000

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Guarantees of Secured Debentures

9 Months Ended

Sep. 30, 2012

Guarantees Of Secured Debentures [Abstract]

Guarantees of secured debentures

( 13 )    Guarantees of secured debentures

Holdings has registered with the Securities and Exchange Commission the offer and sale $250,000,000 of secured debentures as described in note 8. The secured debentures are secured by the assets of Holdings as described in note 8 and a pledge of all the common stock by the largest shareholders. Obligations under the debentures are guaranteed by Holding’s subsidiary GWG Life. This guarantee involves the grant of a security interest in all the assets of GWG Life. GWG Life is a wholly owned subsidiary of Holdings and the payment of principal and interest on the secured debentures is fully and unconditionally guaranteed by GWG Life. The majority of the Company’s life insurance policies are held by DLP II, a wholly owned subsidiary of GWG Life, however, the policies held by DLP II are not collateral for the debenture obligations as such policies are collateral for the credit facility.

The condensed consolidating financial statements are presented in lieu of separate financial statements and other related disclosures of the subsidiary guarantors and issuer because management does not believe that separate financial statements and related disclosures would be material to investors. There are currently no significant restrictions on the ability of Holdings or GWG Life , the guarantor subsidiary, to obtain funds from its subsidiaries by dividend or loan, except as follows. DLP II is a borrower under a credit agreement with Autobahn, with DZ Bank AG as agent, as described in note 3. The significant majority of insurance policies owned by the Company are subject to a collateral arrangement with DZ Bank AG described in notes 3 and 6. Under this arrangement, collection and escrow accounts are used to fund purchases and premiums of the insurance policies and to pay interest and other charges under its revolving credit facility. DZ Bank AG and Autobahn must authorize all disbursements from these accounts, including any distributions to GWG Life. Distributions are limited to an amount that would result in the borrowers (GWG DLP Funding II, LLC, GWG Life Settlements, LLC, and GWG Holdings, Inc) realizing an annualized rate of return on the equity funded amount for such assets of not more than 18%, as determined by DZ Bank AG. After such amount is reached, the credit agreement requires that excess funds be used for repayments of borrowings before any additional distributions may be made.

The following represents condensed consolidating financial information as of September 30, 2012 and December 31, 2011, with respect to the financial position, and for the three and nine months ended September 30, 2012 and 2011 with respect to results of operations and cash flows of Holdings and its subsidiaries. The parent column presents the financial information of Holdings, the primary obligor of the secured debentures. The guarantor subsidiary column presents the financial information of GWG Life, the guarantor subsidiary of the secured debentures, presenting its investment in DLP II and Trust under the equity method. The non-guarantor subsidiaries column presents the financial information of all non-guarantor subsidiaries including DLP II and Trust.

Condensed Consolidating Balance Sheets

September 30, 2012	Parent				Guarantor Sub			Non-Guarantor Sub			Eliminations				Consolidated
A S S E T S
Cash and cash equivalents		$	16,325,020			$	1,939,119		$	-		$	-			$	18,264,139
Restricted cash			-				26,000			1,398,466			-				1,424,466
Investment in life settlements, at fair value			-				-			147,828,800			-				147,828,800
Other assets			52,982				175,340			656,309			-				884,631
Investment in subsidiaries			43,175,407				83,480,002			-			(126,655,409	)			-
TOTAL ASSETS		$	59,553,409			$	85,620,461		$	149,883,575		$	(126,655,409	)		$	168,402,036
L I A B I L I T I E S  &  O W N E R S'  E Q U I T Y  (D E F I C I T)
LIABILITIES
Revolving credit facility		$	-			$	-		$	66,000,000		$	-			$	66,000,000
Series I Secured notes payable			-				39,221,704			-			-				39,221,704
Secured renewable debentures			32,112,270				-			-			-				32,112,270
Interest			443,120				2,296,506			131,274			-				2,870,900
Accounts payable and accrued expenses			1,043,857				1,004,476			194,667			-				2,243,000
Deferred taxes			4,411,929				-			-			-				4,411,929
TOTAL LIABILITIES			38,011,176				42,522,686			66,325,941			-				146,859,803
CONVERTIBLE, REDEEMABLE PREFERRED STOCK			23,391,533				-			-			-				23,391,533
EQUITY (DEFICIT)
Member capital			-				43,097,775			83,557,634			(126,655,409	)			-
Common stock			9,989				-			-			-				9.989
Additional paid-in capital			7,335,887				-			-			-				7,335,887
Accumulated deficit			(9,195,176	)			-			-			-				(9,195,176	)
TOTAL EQUITY (DEFICIT)			(1,849,300	)			43,097,775			83,557,634			(126,655,409	)			(1,849,300	)
TOTAL LIABILITIES AND EQUITY (DEFICIT)		$	59,553,409			$	85,620,461		$	149,883,575		$	(126,655,409	)		$	168,402,036

December 31, 2011	Parent				Guarantor Sub			Non-Guarantor Sub			Eliminations				Consolidated
A S S E T S
Cash and cash equivalents		$	1,746,456			$	131,893		$	-		$	-			$	1,878,349
Restricted cash			-				822,227			3,972,075			-				4,794,302
Investment in life settlements, at fair value			-				4,876,389			117,292,135			-				122,168,524
Other assets			34,817				170,346			342,937			-				548,100
Investment in subsidiaries			17,026,465				61,326,724			-			(78,353,189	)			-
TOTAL ASSETS		$	18,807,738			$	67,327,579		$	121,607,147		$	(78,353,189	)		$	129,389,275
L I A B I L I T I E S & O W N E R S' E Q U I T Y (D E F I C I T)
LIABILITIES
Revolving credit facility		$	-			$	-		$	60,000,000		$	-			$	60,000,000
Series I Secured notes payable			-				48,179,271			-			-				48,179,271
Interest			-				1,779,796			108,039			-				1,887,835
Accounts payable and accrued expenses			889,676				507,015			7,416			-				1,404,107
Deferred taxes			4,308,217				-			-			-				4,308,217
TOTAL LIABILITIES			5,197,893				50,466,082			60,115,455			-				115,779,430
CONVERTIBLE, REDEEMABLE PREFERRED STOCK			12,661,276				-			-			-				12,661,276
EQUITY (DEFICIT)
Member capital			-				16,861,497			61,491,692			(78,353,189	)			-
Common stock			9,989				-			-			-				9,989
Additional paid-in capital			8,169,303				-			-			-				8,169,303
Accumulated deficit			(7,230,723	)			-			-			-				(7,230,723	)
TOTAL EQUITY (DEFICIT)			948,569				16,861,497			61,491,692			(78,353,189	)			948,569
TOTAL LIABILITIES AND EQUITY (DEFICIT)		$	18,807,738			$	67,327,579		$	121,607,147		$	(78,353,189	)		$	129,389,275

For the nine months ended September 30, 2012	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Contract servicing fees	$	-		$	1,184,627		$	-	$	(1,184,627	)	$	-
Gain on life settlements, net		-			-			10,257,537		-			10,257,537
Interest and other income		8,650			222,863			42,734		(219,671	)		54,576
TOTAL REVENUE		8,650			1,407,490			10,300,271		(1,404,298	)		10,312,113
EXPENSES
Origination and servicing fees		-			-			1,184,627		(1,184,627	)		-
Employee compensation and benefits		-			1,862,469			-		-			1,862,469
Legal and professional fees		851,954			86,927			13,170		-			952,051
Interest expense		2,555,271			3,770,808			1,295,098		-			7,621,177
Other expenses		703,373			996,284			257,171		(219,671	)		1,737,157
TOTAL EXPENSES		4,110,598			6,716,488			2,750,066		(1,404,298	)		12,172,854
INCOME (LOSS) BEFORE EQUITY IN LOSS OF SUBSIDIARIES		(4,101,948	)		(5,308,998	)		7,550,205		-			(1,860,741	)
EQUITY IN LOSS OF SUBSIDIARY		2,241,207			7,637,541			-		(9,878,748	)		-
NET INCOME (LOSS) BEFORE INCOME TAXES		(1,860,741	)		2,328,543			7,550,205		(9,878,748	)		(1,860,741	)
INCOME TAX EXPENSE		103,712			-			-		-			103,712
NET INCOME (LOSS)	$	(1,964,453	)	$	2,328,543		$	7,550,205	$	(9,878,748	)	$	(1,964,453	)

For the nine months ended September 30, 2011	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Contract servicing fees	$	-		$	2,409,825		$	-	$	(2,409,825	)	$	-
Gain on life settlements, net		-			7,240			14,144,000		-			14,151,240
Interest and other income		3,488			34,171			3,591		-			41,250
TOTAL REVENUE		3,488			2,451,236			14,147,591		(2,409,825	)		14,192,490
EXPENSES
Origination and servicing fees		-			6,000			2,403,825		(2,409,825	)		-
Employee compensation and benefits		-			1,403,844			-		-			1,403,844
Legal and professional fees		297,865			296,365			3,000		-			597,230
Interest expense		49,369			5,079,971			1,012,561		-			6,141,901
Investment banking services		3,595,027			-			-		-			3,595,027
Other expenses		186,815			719,593			38,001		-			944,409
TOTAL EXPENSES		4,129,076			7,505,773			3,457,387		(2,409,825	)		12,682,411
INCOME (LOSS) BEFORE EQUITY IN LOSS OF SUBSIDIARIES		(4,125,588	)		(5,054,537	)		10,690,204		-			1,510,079
EQUITY IN LOSS OF SUBSIDIARY		5,635,667			10,777,541			-		(16,413,208	)		-
NET INCOME  BEFORE INCOME TAXES		1,510,079			5,723,004			10,690,204		(16,413,208	)		1,510,079
INCOME TAX EXPENSE		2,363,851								-			2,363,851
NET INCOME (LOSS)	$	(853,772	)	$	5,723,004		$	10,690,204	$	(16,413,208	)	$	(853,772	)

For the three months ended September 30, 2012	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Contract servicing fees	$	-		$	746,377		$	-	$	(746,377	)	$	-
Gain on life settlements, net		-			(229,277	)		5,017,568		-			4,788,291
Interest and other income		5,601			219,670			81		(219,671	)		5,681
TOTAL REVENUE		5,601			736,770			5,017,649		(966,048	)		4,793,972
EXPENSES
Origination and servicing fees		-			6,500			739,877		(746,377	)		-
Employee compensation and benefits		-			745,386			-		-			745,386
Legal and professional fees		196,354			41,124			13,170		-			250,648
Interest expense		1,287,059			1,074,260			441,866		-			2,803,185
Other expenses		169,274			292,730			232,171		(219,671	)		474,505
TOTAL EXPENSES		1,652,687			2,160,000			1,427,084		(966,048	)		4,273,723
INCOME (LOSS) BEFORE EQUITY IN LOSS OF SUBSIDIARIES		(1,647,086	)		(1,423,230	)		3,590,565		-			520,249
EQUITY IN LOSS OF SUBSIDIARY		2,167,335			3,619,677			-		(5,787,012	)		-
NET INCOME BEFORE INCOME TAXES		520,249			2,196,447			3,590,565		(5,787,012	)		520,249
INCOME TAX EXPENSE		633,572			-			-		-			633,572
NET INCOME (LOSS)	$	(113,323	)	$	2,196,447		$	3,590,565	$	(5,787,012	)	$	(113,323	)

For the three months ended September 30, 2011	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Contract servicing fees	$	-		$	409,900		$	-	$	(409,900	)	$	-
Gain on life settlements, net		-			52,567			3,804,564		-			3,857,131
Interest and other income		3,488			5,787			5					9,280
TOTAL REVENUE		3,488			468,254			3,804,569		(409,900	)		3,866,411
EXPENSES
Origination and servicing fees		-			-			409,900		(409,900	)		-
Employee compensation and benefits		-			461,824			-		-			461,824
Legal and professional fees		219,958			66,723			-		-			286,681
Interest expense		49,369			2,409,814			371,506		-			2,830,689
Investment banking services		3,595,027			-			-		-			3,595,027
Other expenses		139,100			224,291			12,501		-			375,892
TOTAL EXPENSES		4,003,454			3,162,652			793,907		(409,900	)		7,550,113
INCOME (LOSS) BEFORE EQUITY IN LOSS OF SUBSIDIARIES		(3,999,966	)		(2,694,398	)		3,010,662		-			(3,683,702	)
EQUITY IN LOSS OF SUBSIDIARY		316,264			3,039,774			-		(3,356,038	)		-
NET INCOME (LOSS) BEFORE INCOME TAXES		(3,683,702	)		345,376			3,010,662		(3,356,038	)		(3,683,702	)
INCOME TAX EXPENSE		(1,417,649	)		-			-		-			(1,417,649	)
NET INCOME (LOSS)	$	(2,266,053	)	$	345,376		$	3,010,662	$	(3,356,038	)	$	(2,266,053	)

For the nine months ended September 30, 2012	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(1,964,453	)	$	2,328,543		$	7,550,205		$	(9,878,748	)	$	(1,964,453	)
Adjustments to reconcile net income (loss) to cash:
(Equity) loss of subsidiaries		(2,241,206	)		(7,637,542	)		-			9,878,748			-
(Gain) loss on life settlements		-			999,677			(20,871,468	)		-			(19,871,791	)
Amortization of deferred financing and issuance costs		182,410			946,813			174,672			-			1,303,895
Deferred income taxes		103,712			-			-			-			103,712
Accrued convertible, redeemable preferred stock dividends		636,069			-			-			-			636,069
(Increase) decrease in operating assets:
Other assets		(19,717,082	)		(20,256,072	)		(146,874	)		41,061,553			941,525
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		334,182			1,092,292			24,484			-			1,450,958
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(22,666,368	)		(22,526,289	)		(13,268,981	)		41,061,553			(17,400,085	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(7,986,570	)		-			(7,983,570	)
Proceeds from settlement of life settlements		-			-			416,665			-			416,665
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES		-			-			(7,566,905	)		-			(7,566,905	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from revolving credit facility		-			-			6,000,000			-			6,000,000
Proceeds from issuance of Series I Secured notes payable		-			50,000			-			-			50,000
Payments for redemption of Series I Secured notes payable		-			(5,311,989	)		-			-			(5,311,989	)
Proceeds from issuance of debentures		33,635,657			-			-			-			33,635,657
Payments for issuance of debentures		(1,627,467	)		-			-			-			(1,627,467	)
Proceeds (payments) from restricted cash		-			796,227			2,573,610			-			3,369,837
Issuance of member capital		-			28,799,277			12,262,276			(41,061,553	)		-
Issuance of preferred stock		6,287,375			-			-			-			6,287,375
Payments for issuance of preferred stock		(1,050,633	)		-			-			-			(1,050,633	)
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES		37,244,932			24,333,515			20,835,886			(41,061,553	)		41,352,780
NET INCREASE IN CASH AND CASH EQUIVALENTS		14,578,564			1,807,226			-			-			16,385,790
CASH AND CASH EQUIVALENTS
BEGINNING OF THE YEAR		1,746,456			131,893			-			-			1,878,349
END OF THE YEAR	$	16,325,020		$	1,939,119		$	-		$	-		$	18,264,139

For the three months ended September 30, 2012	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(113,323	)	$	2,196,447		$	3,590,565		$	(5,787,012	)	$	(113,323	)
Adjustments to reconcile net income (loss) to cash:
(Equity) loss of subsidiaries		(2,167,335	)		(3,619,677	)		-			5,787,012			-
(Gain) loss on life settlements		-			-			(8,881,542	)		-			(8,881,542	)
Amortization of deferred financing and issuance costs		135,788			200,426			58,224			-			394,438
Deferred income taxes		633,572			-			-			-			633,572
Accrued convertible, redeemable preferred stock dividends		215,059			-			-			-			215,059
(Increase) decrease in operating assets:
Other assets		(10,792,184	)		(9,512,249	)		-			20,188,672			(115,761	)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		(272,808	)		1,053,205			11,428			-			791,825
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(12,361,231	)		(9,681,848	)		(5,221,325	)		20,188,672			(7,075,732	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(5,361,540	)		-			(5,361,540	)
Proceeds from settlement of life settlements		-			-			-			-			-
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES		-			-			(5,361,540	)		-			(5,361,540	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from revolving credit facility		-			-			-			-			-
Proceeds from issuance of Series I Secured notes payable		-			-			-			-			-
Payments for redemption of Series I Secured notes payable		-			(1,843,032	)		-			-			(1,843,032	)
Proceeds from issuance of debentures		17,878,571			-			-			-			17,878,571
Payments for issuance of debentures		(914,880	)		-			-			-			(914,880	)
Proceeds (payments) from restricted cash		-			(26,000	)		3,453,198			-			3,427,198
Issuance of member capital		-			13,059,005			7,129,667			(20,188,672	)		-
Issuance of preferred stock		500,000			-			-			-			500,000
Payments for issuance of preferred stock		558,729			-			-			-			558,729
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES		18,022,420			11,189,973			10,582,865			(20,188,672	)		19,606,586
NET INCREASE IN CASH AND CASH EQUIVALENTS		5,661,189			1,508,125			-			-			7,169,314
CASH AND CASH EQUIVALENTS
BEGINNING OF THE QUARTER		10,663,831			430,994			-			-			11,094,825
END OF THE QUARTER	$	16,325,020		$	1,939,119		$	-		$	-		$	18,264,139

For the nine months ended September 30, 2011	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(853,772	)	$	5,723,004		$	10,690,204		$	(16,413,208	)	$	(853,772	)
Adjustments to reconcile net income (loss) to cash:
(Gain) on life settlements		-			(337,788	)		(23,537,267	)		-			(23,875,055	)
Amortization of deferred financing and issuance costs		-			1,374,401			174,672			-			1,549,073
Investment banking services		3,595,027			-			-						3,595,027
Deferred income taxes		2,363,851			-			-			-			2,363,851
Convertible, redeemable preferred stock dividends payable		44,669			-			-			-			44,669
(Increase) decrease in operating assets:
Other assets		(2,889,356	)		(15,912,784	)		(859,099	)		18,674,893			(986,346	)
Increase (decrease) in operating liabilities:
Accrued expenses		504,995			(3,344,913	)		4,469,773			(2,261,685	)		(631,830	)
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES		2,765,414			(12,498,080	)		(9,061,717	)		-			(18,794,383	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			(12,000	)		(10,488,756	)		-			(10,500,756	)
NET CASH FLOWS USED IN  INVESTING ACTIVITIES		-			(12,000	)		(10,488,756	)		-			(10,500,756	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from revolving credit facility		-			-			18,599,549			-			18,599,549
Proceeds from issuance of Series I Secured notes payable		-			8,126,034			-			-			8,126,034
Payments for redemption of Series I Secured notes payable		-			(1,006,680	)		-			-			(1,006,680	)
Proceeds (payments) from restricted cash		-			3,039,582			(617,464	)		-			2,422,118
Issuance of common stock		4,973			-			-			-			4,973
Issuance of preferred stock		1,670,010			-			-			-			1,670,010
Payments for issuance of preferred stock		(956,851	)		-			-			-			(956,851	)
Proceeds from notes receivable from related parties		-			2,306,068			-			-			2,306,068
Common stock dividends		(2,306,068	)		-			-			-			(2,306,068	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		(1,587,936	)		12,465,004			17,982,085			-			28,859,153
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		1,177,478			(45,076	)		(1,568,388	)		-			(435,986	)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE YEAR		-			189,842			1,568,388			-			1,758,230
END OF THE YEAR	$	1,177,478		$	144,766		$	-		$	-		$	1,322,244

For the three months ended September 30, 2011	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(2,266,053	)	$	345,376		$	3,010,662		$	(3,356,038	)	$	(2,266,053	)
Adjustments to reconcile net income (loss) to cash:
(Gain) on life settlements		-			(165,915	)		(7,070,547	)		-			(7,236,462	)
Amortization of deferred financing and issuance costs		-			1,374,401			58,224			-			1,432,625
Investment banking services		3,595,027			-			-			-			3,595,027
Deferred income taxes		(1,415,149	)		-			-			-			(1,415,149	)
Convertible, redeemable preferred stock dividends payable		44,669			-			-			-			44,669
(Increase) decrease in operating assets:
Other assets		2,461,049			(910,657	)		(473,860	)		(1,510,873	)		(434,341	)
Increase (decrease) in operating liabilities:
Accrued expenses		279,040			(3,585,432	)		(1,997,506	)		4,866,911			(436,987	)
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES		2,698,583			(2,942,227	)		(6,473,027	)		-			(6,716,671	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			4,150			(1,381,176	)		-			(1,377,026	)
NET CASH FLOWS USED IN  INVESTING ACTIVITIES		-			4,150			(1,381,176	)		-			(1,377,026	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from revolving credit facility		-			-			7,510,001			-			7,510,001
Proceeds from issuance of Series I Secured notes payable		-			(3,216,821	)		-			-			(3,216,821	)
Payments for redemption of Series I Secured notes payable		-			3,280,899			-			-			3,280,899
Proceeds (payments) from restricted cash		-			430,358			344,202			-			774,560
Issuance of common stock		4,973			-			-			-			4,973
Issuance of preferred stock		1,670,010			-			-			-			1,670,010
Payments for issuance of preferred stock		(956,851	)		-			-			-			(956,851	)
Proceeds from notes receivable from related parties		-			2,306,068			-			-			2,306,068
Common stock dividends		(2.306.068	)		-			-			-			(2,306,068	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		(1,587,936	)		2,800,504			7,854,203			-			9,066,771
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		1,110,647			(137,573	)		-			-			973,074
CASH AND CASH EQUIVALENTS
BEGINNING OF THE QUARTER		66,831			282,339			-			-			349,170
END OF THE QUARTER	$	1,177,478		$	144,766		$	-		$	-		$	1,322,244

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Condensed Consolidated Statements of Operations (unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
REVENUE
Gain on life settlements, net	$ 4,788,291	$ 3,857,131	$ 10,257,537	$ 14,151,240
Interest and other income	5,681	9,280	54,576	41,250
TOTAL REVENUE	4,793,972	3,866,411	10,312,113	14,192,490
EXPENSES
Employee compensation and benefits	745,386	461,824	1,862,469	1,403,844
Legal and professional fees	250,648	286,681	952,051	597,230
Interest expense	2,803,185	2,830,689	7,621,177	6,141,901
Investment banking services		3,595,027		3,595,027
Other expenses	474,504	375,892	1,737,157	944,409
TOTAL EXPENSES	4,273,723	7,550,113	12,172,854	12,682,411
INCOME (LOSS) BEFORE INCOME TAXES	520,249	(3,683,702)	(1,860,741)	1,510,079
INCOME TAX EXPENSE (BENEFIT)	633,572	(1,417,649)	103,712	2,363,851
NET (LOSS)	(113,323)	(2,266,053)	(1,964,453)	(853,772)
(LOSS) PER SHARE
Basic	$ (0.01)	$ (0.23)	$ (0.20)	$ (0.09)
Diluted	$ (0.01)	$ (0.23)	$ (0.20)	$ (0.09)
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic	9,989,000	9,870,750	9,989,000	9,293,440
Diluted	9,989,000	9,870,750	9,989,000	9,293,440
PROFORMA INFORMATION AS IF THE COMPANY HAD BEEN A CORPORATION DURING THE:
INCOME BEFORE INCOME TAXES		(3,683,702)		1,510,079
INCOME TAX EXPENSE (BENEFIT)		(1,447,695)		595,273
NET INCOME (LOSS)		$ (2,236,007)		$ 914,806
PROFORMA EARNINGS PER SHARE ATTRIBUTABLE TO CONTROLLING INTERESTS
BASIC		$ (0.23)		$ 0.10
FULLY DILUTED		$ (0.23)		$ 0.10
PROFORMA WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC		9,870,750		9,293,440
FULLY DILUTED		9,870,750		9,293,440

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Series I Secured Notes Payable

9 Months Ended

Sep. 30, 2012

Series I Secured Notes Payable and Renewable Secured Debentures [Abstract]

Series I secured notes payable

( 7 )       Series I Secured notes payable

Series I Secured notes payable have been issued in conjunction with the GWG Series I Secured notes private placement memorandum dated August 25, 2009 (last revised November 15, 2010). On June 14, 2011 the Company closed the offering to additional investors, however, existing investors may elect to continue advancing amounts outstanding upon maturity subject to the Company’s option. Series I Secured notes have maturity dates ranging from six months to seven years with fixed interest rates varying from 7.0% to 9.55% depending on the term of the note. Interest is payable monthly, quarterly, annually or at maturity depending on the terms of the note. At September 30, 2012 and December 31, 2011 the weighted average interest rates of Series I Secured notes were 8.20%, and 8.04% respectively. The notes are secured by assets of GWG Life. The principal amount outstanding under these Series I Secured notes was $40,025,000 and $49,332,000 at September 30, 2012, and December 31, 2011, respectively.  The difference between the amount outstanding on the Series I Secured notes and the carrying amount on the consolidated balance sheet is due to netting of unamortized deferred issuance costs. Overall, interest expense includes amortization of deferred financing and issuance costs of $947,000 and $1,374,000 for the nine months ended September 30, 2012 and 2011, respectively, and $200,000 and $594,000 for the three months ended September 30, 2012 and 2011, respectively. Future expected amortization of deferred financing costs is $803,000.

On November 15, 2010, the owners pledged their ownership interests in the Company to the Series I Trust as security for advances under the Series I Trust arrangement.

The use of proceeds from the issuances of Series I Secured notes was limited to the following: (1) payment of commissions of Series I Secured note sales, (2) purchase life insurance policies, (3) pay premiums of life insurance policies, (4) pay principal and interest to Senior Liquidity Provider (DZ Bank), (5) pay portfolio or note operating fees or costs, (6) pay trustee (Wells Fargo Bank, N.A.), (7) pay servicer and collateral fees, (8) pay principal and interest on Series I Secured notes, (9) make distributions to equity holders for tax liability related to portfolio, (10) purchase interest rate caps, swaps, or hedging instruments, (11) pay GWG Series I Trustee fees, and (12) Pay offering expenses.

On November 1, 2011, GWG entered into a Third Amended and Restated Note Issuance and Security Agreement with Lord Securities Corporation after receiving majority approval from the holders of Series I Secured Notes. Among other things, the amended and restated agreement modified the use of proceeds and certain provisions relating to the distribution of collections and subordination of cash flow. Under the amended and restated agreement, GWG is no longer restricted as to its use of proceeds or subject to restrictions on certain distributions of collections and subordination of cash flows.

Future maturities of Series I Secured notes payable at September 30, 2012 are as follows:

Years Ending December 31,
2012	$	6,112,000
2013		15,380,000
2014		8,437,000
2015		4,102,000
2016		1,155,000
Thereafter		4,839,000
	$	40,025,000

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Credit Facilities

9 Months Ended

Sep. 30, 2012

Credit Facilities [Abstract]

Credit facilities

( 6 )       Credit facilities

Revolving credit facility – Autobahn Funding Company LLC

On July 15, 2008, DLP II and United Lending entered into a revolving credit facility pursuant to a Credit and Security Agreement (Agreement) with Autobahn Funding Company LLC (Autobahn), providing the Company with a maximum borrowing amount of $100,000,000. Autobahn is a commercial paper conduit that issues commercial paper to investors in order to provide funding to DLP II and United Lending. DZ Bank AG acts as the agent for Autobahn. The Agreement expires on July 15, 2013.  The amount outstanding under this facility as of September 30, 2012 and December 31, 2011, was $66,000,000 and $60,000,000, respectively.

The Agreement requires DLP II or United Lending to pay, on a monthly basis, interest at the commercial paper rate plus an applicable margin, as defined in the Agreement. The effective rate was 2.13% and 2.25% at September 30, 2012 and December 31, 2011, respectively.  The weighted average effective interest rate (excluding the unused line fee) was 2.17% and 2.15% for the nine months ended September 30, 2012 and 2011, respectively, and 2.15% and 2.17% for the three months ended September 30, 2012 and 2011, respectively.  The Agreement also requires payment of an unused line fee on the unfunded amount under the revolving credit facility. The note is secured by substantially all of DLP II and United Lending assets which consist primarily of life settlement policies.

The Agreement has certain financial and nonfinancial covenants. The Company is in compliance with these covenants at September 30, 2012. The Agreement generally prohibits the Company from:

● changing its corporate name, offices, and jurisdiction of incorporation

● changing any deposit accounts or payment instructions to insurers;

● changing any operating policies and practices such that it would be reasonably likely to adversely affect the collectability of any asset in any material respect;

● merging or consolidating with, or selling all or substantially all of its assets to, any third party;

● selling any collateral or creating or permitting to exist any adverse claim upon any collateral;

● engaging in any other business or activity than that contemplated by the Agreement;

● incurring or guaranteeing any debt for borrowed money;

● amending the Company’s certificate of incorporation or bylaws;making any loans or advances to, investments in, or paying any dividends to, any person unless both before and after any such loan, advance, investment or dividend there exists no actual event of default, potential event of default or termination event;

● removing an independent director on the board of directors except for cause or with the consent of the lender; or

● making payment on or issuing any subsidiary secured notes or debentures, or amending any agreements respecting such notes or debentures, if an event of default, potential event of default or termination event exists or would arise from any such action.

In addition, the Company has agreed to maintain (i) a positive consolidated net income (as defined and calculated under the Agreement) for each complete fiscal year and (ii) a tangible net worth (again, as defined and calculated under the Agreement) of not less than $5 million. Consolidated net income and tangible net worth for nine months ended September 30, 2012, as calculated under the agreement, was $2,078,000 and $48,014,000 respectively.

Advances under the Agreement are subject to a borrowing base formula, which limits the availability of advances on the borrowing base calculation based on attributes of policies pledged to the facility. Over-concentration of policies by insurance carrier, and over-concentration of policies by insurance carriers with ratings below a AA- rating are the two primary factors with the potential of limiting availability of funds on the facility. Total funds available for additional borrowings under the borrowing base formula criteria at September 30, 2012 and December 31, 2011, were $12,276,000 and $7,691,000 respectively.

Holdings is not obligated under this credit facility to guarantee loan or interest payments to Autobahn: however, Holdings is obligated under a performance guaranty to provide servicing for policies held by DLP II.

Lending agreement with affiliate

The Company entered into an Investment Agreement with an affiliate Insurance Strategies Fund, LLC (ISF) on September 3, 2009.  Under the terms of this agreement, ISF will provide working capital loans to the Company for general working capital needs and expenses.  The Company does not expect to take working capital loans under this agreement during the foreseeable future.

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Series I Secured Notes Payable (Tables)

9 Months Ended

Sep. 30, 2012

Series I Secured Notes Payable and Renewable Secured Debentures [Abstract]

Future maturities of secured notes payable

Years Ending December 31,
2012	$	6,112,000
2013		15,380,000
2014		8,437,000
2015		4,102,000
2016		1,155,000
Thereafter		4,839,000
	$	40,025,000

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Concentration

9 Months Ended

Sep. 30, 2012

Concentration [Abstract]

Concentration

( 14 )     Concentration

GWG purchases life insurance policies written by life insurance companies having investment grade ratings by independent rating agencies.  As a result there may be certain concentrations of contracts with life insurance companies.  The following summarizes the face value of insurance contracts with specific life insurance companies exceeding 10% of the total face value held by the Company.

	September 30,		December 31,
	2012		2011
Life insurance company	%		%
Company A		17.27		17.43
Company B		13.38		15.06
Company C		12.06		12.53
Company D		*		10.09

*  - percentage does not exceed 10% of the total face value.

The following summarizes the number of insurance contracts held in specific states exceeding 10% of the total face value held by the Company:

	September 30,		December 31,
	2012		2011
State of residence	%		%
California		29.59		31.43
New York		12.76		13.71
Florida		12.76		11.43

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Convertible, Redeemable Preferred Stock

9 Months Ended

Sep. 30, 2012

Convertible, Redeemable Preferred Stock [Abstract]

Convertible, redeemable preferred stock

( 10 )     Convertible, redeemable preferred stock

The Company began offering 3,333,333 shares of convertible redeemable preferred stock (Series A preferred stock) for sale to accredited investors in a private placement on July 31, 2011. The offering of Series A preferred stock concluded on September 2, 2012 and resulted in 3,279,000 shares being sold for gross consideration of  $24,591,000. As of September 30, 2012, 60,000 shares were issued as a result of conversion of dividends into shares of Series A preferred stock for gross consideration of $425,000.  The Series A preferred stock was sold at an offering price of $7.50 per share. Series A preferred stock has a preferred yield of 10% per annum, and each share has the right to convert into 1.5 shares of the Company’s common stock. The Company may elect to automatically convert the Series A preferred stock to common stock as described below. Series A preferred shareholders received three-year warrants to purchase, at an exercise price per share of $6.25, one share of common stock for every 20 shares of Series A preferred stock purchased.  The warrants are exercisable immediately. In the Certificate of Designations for the Series A preferred stock dated July 31, 2011, the Company has agreed to permit preferred shareholders to sell their shares back to the Company for the stated value of $7.50 per share, plus accrued dividends, according to the following schedule:

● Up to 33% of the holder’s unredeemed shares one year after issuance:

● Up to 66% of the holder’s unredeemed shares two years after issuance; and

● Up to 100% of the holder’s unredeemed shares three years after issuance.

The Company’s obligation to redeem Series A preferred shares will terminate upon the Company completing a registration of its common stock with the SEC. The Company may redeem the Series A preferred shares at a price equal to 110% of their liquidation preference ($7.50 per share) at any time after December 15, 2012.

At the election of the Company, the Series A preferred shares may be automatically converted into the common stock of the Company in the event of either (1) a registered offering of the Company’s common stock with the SEC aggregating gross proceeds of at least $5.0 million at a price equal to or greater than $5.50 per share of common stock, or (2) the consent of shareholders holding at least a majority of the then-outstanding shares of Series A preferred stock. As of September 30, 2012, the Company had issued 3,339,000 preferred shares resulting in gross consideration of $25,016,000 (including cash proceeds, conversion of Series I Secured notes and accrued interest on Series I notes, and preferred dividends). The Company incurred Series A preferred stock issuance costs of $2,838,000, of which $440,000 and $1,214,000 was amortized to additional paid in capital during the three and nine months ended September 30, 2012, respectively, resulting in a net preferred stock capital balance of $23,392,000.

The Company determined that the grant date fair value of the outstanding warrants attached to the Series A preferred stock was $170,000 and $377,000 for warrants issued through the three and nine month periods ending September 30, 2012 and $22,000 for warrants issued through December 31, 2011. The Company may redeem outstanding warrants prior to their expiration, at a price of $0.01 per share upon 30 days written notice to the investors at any time after (i) the Company has completed a registration of its common stock with the SEC and (ii) the volume of weighted average sale price per share of common stock equals or exceeds $7.00 per share for ten consecutive trading days ending on the third business day prior to proper notice of such redemption. Total warrants outstanding as of September 30, 2012, were 831,909 with a weighted average remaining life of 2.59 years. Total warrants outstanding at December 31, 2011, were 139,417 with a weighted average remaining life of 2.76 years.

Dividends on the preferred stock may be paid in either cash or additional shares of preferred stock at the election of the holder and approval of the Company. The dividends are reported as an expense and included in the caption interest expense in the consolidated statements of operations.

The Company declared and accrued dividends of $675,000 and $1,654,000 for the three and nine months ended September 30, 2012, respectively. Cash dividends of $906,000 were paid on or before October 13, 2012. 58,296 shares of Series A preferred stock were issued in lieu of cash dividends, pursuant to a board resolution declaring the dividend. The shares issued in lieu of cash dividends were issued at $7.00 per share.

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Renewable Secured Debentures

9 Months Ended

Sep. 30, 2012

Series I Secured Notes Payable and Renewable Secured Debentures [Abstract]

Renewable secured debentures

( 8 )       Renewable secured debentures

The Company has registered with the Securities and Exchange Commission, effective January 2012, the offer and sale of $250,000,000 of secured debentures. Renewable Secured Debentures have maturity dates ranging from six months to seven years with fixed interest rates varying from 4.75% to 9.50% depending on the term of the note. Interest is payable monthly, annually or at maturity depending on the terms of the debenture. At September 30, 2012, the weighted average interest rate of Renewable Secured Debentures was 7.58%. The debentures are secured by assets of GWG Life and GWG Holdings. The amount outstanding under these Renewable Secured Debentures was $32,685,000 at September 30, 2012. The difference between the amount outstanding on the Renewable Secured Debentures and the carrying amount on the consolidated balance sheet is due to netting of unamortized deferred issuance costs and cash receipts for new issuances in process at September 30, 2012. Amortization of deferred issuance costs was $135,000 and $182,000 for the three and nine months ended September 30, 2012, respectively. Future expected amortization of deferred financing costs is $1,580,000. Subsequent to September 30, 2012, the Company has issued approximately an additional $9,348,000 in principal amount of these secured debentures.

The use of proceeds from the issuances of Renewable Secured Debentures is limited to the following: (1) payment of commissions on sales of Renewable Secured Debentures, (2) payment of offering expenses, (3) purchase of life insurance policies, (4) Payment of premiums on life insurance policies, (5) payment of principal and interest on Renewable Secured Debentures, (6) payment of portfolio operations expenses, and (7) for general working capital.

Future maturities of Renewable Secured Debentures at September 30, 2012 are as follows:

Years Ending December 31,
2012	$	1,208,000
2013		5,931,000
2014		6,009,000
2015		9,510,000
2016		917,000
Thereafter		9,110,000
	$	32,685,000

The Company entered into an Indenture effective October 19, 2011 with Holdings as obligor, GWG Life as guarantor, and Bank of Utah as trustee for the benefit of the debenture holders.  The Indenture has certain financial and nonfinancial covenants.  The Company is in compliance with these covenants at September 30, 2012.

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Income Taxes

9 Months Ended

Sep. 30, 2012

Income Tax [Abstract]

Income taxes

( 9 )       Income taxes

The Company was a pass through entity for federal income tax purposes through June 10, 2011. No income tax provision has been included through that date in these consolidated financial statements as income or loss of the Company was required to be reported by the respective members on their income tax returns. Subsequent to the Company’s conversion to a corporation from a limited liability company, the Company will file and pay taxes based upon its reported income. In 2012 there is a significant permanent difference between income before income taxes and taxable income. This permanent difference results from the inclusion of convertible redeemable preferred stock as an interest expense, however such dividends are not deductable for income tax reporting purposes. The dividends charged to interest expense were $675,000 and $1,654,000 for the three and nine months ended September 30, 2012, respectively.

The most significant temporary differences between GAAP net income and tax net income are the treatment of interest costs and revenue recognition on the portfolio of life insurance policies.

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Commitments

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies [Abstract]

Commitments

( 11 )     Commitments

The Company entered into an office lease with U.S. Bank National Association as the landlord. The lease was effective April 22, 2012 with a term through August 31, 2015. The lease is for 8,881 square feet of office space located at 220 South Sixth Street, Minneapolis, Minnesota. The Company is obligated to pay base rent plus common area maintenance and a share of the building operating costs. Minimum lease payments under the lease are as follows:

2012 (remaining)	$	18,318
2013	$	74,752
2014	$	78,452
2015	$	53,288
Total	$	224,810

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Fair Value Definition and Hierarchy (Details) (Life Insurance [Member], USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Life Insurance [Member]
Reconcilliation of investments in life insurance policies
Beginning balance	$ 133,848,000	$ 108,480,000	$ 122,169,000	$ 82,718,000
Purchases	5,100,000	5,594,000	7,827,000	10,844,000
Maturities (cost basis)		(344,000)	(416,000)	(344,000)
Net change in fair value	8,881,000	3,363,000	18,249,000	23,875,000
Ending balance	$ 147,829,000	$ 117,093,000	$ 147,829,000	$ 117,093,000

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Guarantees of Secured Debentures (Details Textual) (USD $)	9 Months Ended
	Sep. 30, 2012
Guarantees of secured debentures (Textual)
Maximum rate of return on equity fund amount	18.00%
Secured Debentures [Member]
Guarantees of secured debentures (Textual)
Debentures offer for sale	250,000,000

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Investment in Life Insurance Policies (Tables)

9 Months Ended

Sep. 30, 2012

Investment In Life Insurance Policies [Abstract]

Summary of life insurance policies, under the fair value method and estimated maturity dates organized by expected mortality date

	As of September 30, 2012						As of December 31, 2011
Years Ending December 31,	Number of Contracts		Estimated Fair Value		Face Value		Number of Contracts		Estimated Fair Value		Face Value
2012		-	$	-	$	-		-	$	-	$	-
2013		-		-		-		-		-		-
2014		-		-		-		1		535,000		1,000,000
2015		5		2,868,000		5,329,000		5		4,636,000		9,329,000
2016		11		12,936,000		28,885,000		10		12,930,000		34,835,000
2017		28		26,627,000		67,748,000		29		24,144,000		71,998,000
2018		33		24,361,000		73,008,000		34		23,500,000		81,858,000
Thereafter		119		81,037,000		340,692,000		96		56,424,000		277,385,000
Totals		196	$	147,829,000	$	515,662,000		175	$	122,169,000	$	476,405,000

Reconciliation of gain on life settlements

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Change in fair value	$	8,881,000		$	7,526,000		$	18,249,000		$	23,736,000
Premiums and other annual fees		(4,093,000	)		(4,163,000	)		(12,074,000	)		(10,079,000	)
Policy maturities		-			494,000			4,083,000			494,000
Gain on life settlements, net	$	4,788,000		$	3,857,000		$	10,258,000		$	14,151,000

Estimated expected premium payments to maintain the above life insurance policies assuming no mortalities

Years Ending December 31,
Three months ending December 31, 2012	$	4,190,000
2013		16,831,000
2014		18,050,000
2015		19,438,000
2016		21,051,000
	$	79,560,000

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Guarantees of Secured Debentures (Tables)

9 Months Ended

Sep. 30, 2012

Guarantees Of Secured Debentures [Abstract]

Condensed Consolidating Balance Sheets

September 30, 2012	Parent				Guarantor Sub			Non-Guarantor Sub			Eliminations				Consolidated
A S S E T S
Cash and cash equivalents		$	16,325,020			$	1,939,119		$	-		$	-			$	18,264,139
Restricted cash			-				26,000			1,398,466			-				1,424,466
Investment in life settlements, at fair value			-				-			147,828,800			-				147,828,800
Other assets			52,982				175,340			656,309			-				884,631
Investment in subsidiaries			43,175,407				83,480,002			-			(126,655,409	)			-
TOTAL ASSETS		$	59,553,409			$	85,620,461		$	149,883,575		$	(126,655,409	)		$	168,402,036
L I A B I L I T I E S  &  O W N E R S'  E Q U I T Y  (D E F I C I T)
LIABILITIES
Revolving credit facility		$	-			$	-		$	66,000,000		$	-			$	66,000,000
Series I Secured notes payable			-				39,221,704			-			-				39,221,704
Secured renewable debentures			32,112,270				-			-			-				32,112,270
Interest			443,120				2,296,506			131,274			-				2,870,900
Accounts payable and accrued expenses			1,043,857				1,004,476			194,667			-				2,243,000
Deferred taxes			4,411,929				-			-			-				4,411,929
TOTAL LIABILITIES			38,011,176				42,522,686			66,325,941			-				146,859,803
CONVERTIBLE, REDEEMABLE PREFERRED STOCK			23,391,533				-			-			-				23,391,533
EQUITY (DEFICIT)
Member capital			-				43,097,775			83,557,634			(126,655,409	)			-
Common stock			9,989				-			-			-				9.989
Additional paid-in capital			7,335,887				-			-			-				7,335,887
Accumulated deficit			(9,195,176	)			-			-			-				(9,195,176	)
TOTAL EQUITY (DEFICIT)			(1,849,300	)			43,097,775			83,557,634			(126,655,409	)			(1,849,300	)
TOTAL LIABILITIES AND EQUITY (DEFICIT)		$	59,553,409			$	85,620,461		$	149,883,575		$	(126,655,409	)		$	168,402,036

December 31, 2011	Parent				Guarantor Sub			Non-Guarantor Sub			Eliminations				Consolidated
A S S E T S
Cash and cash equivalents		$	1,746,456			$	131,893		$	-		$	-			$	1,878,349
Restricted cash			-				822,227			3,972,075			-				4,794,302
Investment in life settlements, at fair value			-				4,876,389			117,292,135			-				122,168,524
Other assets			34,817				170,346			342,937			-				548,100
Investment in subsidiaries			17,026,465				61,326,724			-			(78,353,189	)			-
TOTAL ASSETS		$	18,807,738			$	67,327,579		$	121,607,147		$	(78,353,189	)		$	129,389,275
L I A B I L I T I E S & O W N E R S' E Q U I T Y (D E F I C I T)
LIABILITIES
Revolving credit facility		$	-			$	-		$	60,000,000		$	-			$	60,000,000
Series I Secured notes payable			-				48,179,271			-			-				48,179,271
Interest			-				1,779,796			108,039			-				1,887,835
Accounts payable and accrued expenses			889,676				507,015			7,416			-				1,404,107
Deferred taxes			4,308,217				-			-			-				4,308,217
TOTAL LIABILITIES			5,197,893				50,466,082			60,115,455			-				115,779,430
CONVERTIBLE, REDEEMABLE PREFERRED STOCK			12,661,276				-			-			-				12,661,276
EQUITY (DEFICIT)
Member capital			-				16,861,497			61,491,692			(78,353,189	)			-
Common stock			9,989				-			-			-				9,989
Additional paid-in capital			8,169,303				-			-			-				8,169,303
Accumulated deficit			(7,230,723	)			-			-			-				(7,230,723	)
TOTAL EQUITY (DEFICIT)			948,569				16,861,497			61,491,692			(78,353,189	)			948,569
TOTAL LIABILITIES AND EQUITY (DEFICIT)		$	18,807,738			$	67,327,579		$	121,607,147		$	(78,353,189	)		$	129,389,275

Condensed Consolidating Statements of Operations

For the nine months ended September 30, 2012	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Contract servicing fees	$	-		$	1,184,627		$	-	$	(1,184,627	)	$	-
Gain on life settlements, net		-			-			10,257,537		-			10,257,537
Interest and other income		8,650			222,863			42,734		(219,671	)		54,576
TOTAL REVENUE		8,650			1,407,490			10,300,271		(1,404,298	)		10,312,113
EXPENSES
Origination and servicing fees		-			-			1,184,627		(1,184,627	)		-
Employee compensation and benefits		-			1,862,469			-		-			1,862,469
Legal and professional fees		851,954			86,927			13,170		-			952,051
Interest expense		2,555,271			3,770,808			1,295,098		-			7,621,177
Other expenses		703,373			996,284			257,171		(219,671	)		1,737,157
TOTAL EXPENSES		4,110,598			6,716,488			2,750,066		(1,404,298	)		12,172,854
INCOME (LOSS) BEFORE EQUITY IN LOSS OF SUBSIDIARIES		(4,101,948	)		(5,308,998	)		7,550,205		-			(1,860,741	)
EQUITY IN LOSS OF SUBSIDIARY		2,241,207			7,637,541			-		(9,878,748	)		-
NET INCOME (LOSS) BEFORE INCOME TAXES		(1,860,741	)		2,328,543			7,550,205		(9,878,748	)		(1,860,741	)
INCOME TAX EXPENSE		103,712			-			-		-			103,712
NET INCOME (LOSS)	$	(1,964,453	)	$	2,328,543		$	7,550,205	$	(9,878,748	)	$	(1,964,453	)

For the nine months ended September 30, 2011	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Contract servicing fees	$	-		$	2,409,825		$	-	$	(2,409,825	)	$	-
Gain on life settlements, net		-			7,240			14,144,000		-			14,151,240
Interest and other income		3,488			34,171			3,591		-			41,250
TOTAL REVENUE		3,488			2,451,236			14,147,591		(2,409,825	)		14,192,490
EXPENSES
Origination and servicing fees		-			6,000			2,403,825		(2,409,825	)		-
Employee compensation and benefits		-			1,403,844			-		-			1,403,844
Legal and professional fees		297,865			296,365			3,000		-			597,230
Interest expense		49,369			5,079,971			1,012,561		-			6,141,901
Investment banking services		3,595,027			-			-		-			3,595,027
Other expenses		186,815			719,593			38,001		-			944,409
TOTAL EXPENSES		4,129,076			7,505,773			3,457,387		(2,409,825	)		12,682,411
INCOME (LOSS) BEFORE EQUITY IN LOSS OF SUBSIDIARIES		(4,125,588	)		(5,054,537	)		10,690,204		-			1,510,079
EQUITY IN LOSS OF SUBSIDIARY		5,635,667			10,777,541			-		(16,413,208	)		-
NET INCOME  BEFORE INCOME TAXES		1,510,079			5,723,004			10,690,204		(16,413,208	)		1,510,079
INCOME TAX EXPENSE		2,363,851								-			2,363,851
NET INCOME (LOSS)	$	(853,772	)	$	5,723,004		$	10,690,204	$	(16,413,208	)	$	(853,772	)

For the three months ended September 30, 2012	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Contract servicing fees	$	-		$	746,377		$	-	$	(746,377	)	$	-
Gain on life settlements, net		-			(229,277	)		5,017,568		-			4,788,291
Interest and other income		5,601			219,670			81		(219,671	)		5,681
TOTAL REVENUE		5,601			736,770			5,017,649		(966,048	)		4,793,972
EXPENSES
Origination and servicing fees		-			6,500			739,877		(746,377	)		-
Employee compensation and benefits		-			745,386			-		-			745,386
Legal and professional fees		196,354			41,124			13,170		-			250,648
Interest expense		1,287,059			1,074,260			441,866		-			2,803,185
Other expenses		169,274			292,730			232,171		(219,671	)		474,505
TOTAL EXPENSES		1,652,687			2,160,000			1,427,084		(966,048	)		4,273,723
INCOME (LOSS) BEFORE EQUITY IN LOSS OF SUBSIDIARIES		(1,647,086	)		(1,423,230	)		3,590,565		-			520,249
EQUITY IN LOSS OF SUBSIDIARY		2,167,335			3,619,677			-		(5,787,012	)		-
NET INCOME BEFORE INCOME TAXES		520,249			2,196,447			3,590,565		(5,787,012	)		520,249
INCOME TAX EXPENSE		633,572			-			-		-			633,572
NET INCOME (LOSS)	$	(113,323	)	$	2,196,447		$	3,590,565	$	(5,787,012	)	$	(113,323	)

For the three months ended September 30, 2011	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Contract servicing fees	$	-		$	409,900		$	-	$	(409,900	)	$	-
Gain on life settlements, net		-			52,567			3,804,564		-			3,857,131
Interest and other income		3,488			5,787			5					9,280
TOTAL REVENUE		3,488			468,254			3,804,569		(409,900	)		3,866,411
EXPENSES
Origination and servicing fees		-			-			409,900		(409,900	)		-
Employee compensation and benefits		-			461,824			-		-			461,824
Legal and professional fees		219,958			66,723			-		-			286,681
Interest expense		49,369			2,409,814			371,506		-			2,830,689
Investment banking services		3,595,027			-			-		-			3,595,027
Other expenses		139,100			224,291			12,501		-			375,892
TOTAL EXPENSES		4,003,454			3,162,652			793,907		(409,900	)		7,550,113
INCOME (LOSS) BEFORE EQUITY IN LOSS OF SUBSIDIARIES		(3,999,966	)		(2,694,398	)		3,010,662		-			(3,683,702	)
EQUITY IN LOSS OF SUBSIDIARY		316,264			3,039,774			-		(3,356,038	)		-
NET INCOME (LOSS) BEFORE INCOME TAXES		(3,683,702	)		345,376			3,010,662		(3,356,038	)		(3,683,702	)
INCOME TAX EXPENSE		(1,417,649	)		-			-		-			(1,417,649	)
NET INCOME (LOSS)	$	(2,266,053	)	$	345,376		$	3,010,662	$	(3,356,038	)	$	(2,266,053	)

Condensed Consolidating Statements of Cash Flows

For the nine months ended September 30, 2012	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(1,964,453	)	$	2,328,543		$	7,550,205		$	(9,878,748	)	$	(1,964,453	)
Adjustments to reconcile net income (loss) to cash:
(Equity) loss of subsidiaries		(2,241,206	)		(7,637,542	)		-			9,878,748			-
(Gain) loss on life settlements		-			999,677			(20,871,468	)		-			(19,871,791	)
Amortization of deferred financing and issuance costs		182,410			946,813			174,672			-			1,303,895
Deferred income taxes		103,712			-			-			-			103,712
Accrued convertible, redeemable preferred stock dividends		636,069			-			-			-			636,069
(Increase) decrease in operating assets:
Other assets		(19,717,082	)		(20,256,072	)		(146,874	)		41,061,553			941,525
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		334,182			1,092,292			24,484			-			1,450,958
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(22,666,368	)		(22,526,289	)		(13,268,981	)		41,061,553			(17,400,085	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(7,986,570	)		-			(7,983,570	)
Proceeds from settlement of life settlements		-			-			416,665			-			416,665
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES		-			-			(7,566,905	)		-			(7,566,905	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from revolving credit facility		-			-			6,000,000			-			6,000,000
Proceeds from issuance of Series I Secured notes payable		-			50,000			-			-			50,000
Payments for redemption of Series I Secured notes payable		-			(5,311,989	)		-			-			(5,311,989	)
Proceeds from issuance of debentures		33,635,657			-			-			-			33,635,657
Payments for issuance of debentures		(1,627,467	)		-			-			-			(1,627,467	)
Proceeds (payments) from restricted cash		-			796,227			2,573,610			-			3,369,837
Issuance of member capital		-			28,799,277			12,262,276			(41,061,553	)		-
Issuance of preferred stock		6,287,375			-			-			-			6,287,375
Payments for issuance of preferred stock		(1,050,633	)		-			-			-			(1,050,633	)
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES		37,244,932			24,333,515			20,835,886			(41,061,553	)		41,352,780
NET INCREASE IN CASH AND CASH EQUIVALENTS		14,578,564			1,807,226			-			-			16,385,790
CASH AND CASH EQUIVALENTS
BEGINNING OF THE YEAR		1,746,456			131,893			-			-			1,878,349
END OF THE YEAR	$	16,325,020		$	1,939,119		$	-		$	-		$	18,264,139

For the three months ended September 30, 2012	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(113,323	)	$	2,196,447		$	3,590,565		$	(5,787,012	)	$	(113,323	)
Adjustments to reconcile net income (loss) to cash:
(Equity) loss of subsidiaries		(2,167,335	)		(3,619,677	)		-			5,787,012			-
(Gain) loss on life settlements		-			-			(8,881,542	)		-			(8,881,542	)
Amortization of deferred financing and issuance costs		135,788			200,426			58,224			-			394,438
Deferred income taxes		633,572			-			-			-			633,572
Accrued convertible, redeemable preferred stock dividends		215,059			-			-			-			215,059
(Increase) decrease in operating assets:
Other assets		(10,792,184	)		(9,512,249	)		-			20,188,672			(115,761	)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		(272,808	)		1,053,205			11,428			-			791,825
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(12,361,231	)		(9,681,848	)		(5,221,325	)		20,188,672			(7,075,732	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			-			(5,361,540	)		-			(5,361,540	)
Proceeds from settlement of life settlements		-			-			-			-			-
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES		-			-			(5,361,540	)		-			(5,361,540	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from revolving credit facility		-			-			-			-			-
Proceeds from issuance of Series I Secured notes payable		-			-			-			-			-
Payments for redemption of Series I Secured notes payable		-			(1,843,032	)		-			-			(1,843,032	)
Proceeds from issuance of debentures		17,878,571			-			-			-			17,878,571
Payments for issuance of debentures		(914,880	)		-			-			-			(914,880	)
Proceeds (payments) from restricted cash		-			(26,000	)		3,453,198			-			3,427,198
Issuance of member capital		-			13,059,005			7,129,667			(20,188,672	)		-
Issuance of preferred stock		500,000			-			-			-			500,000
Payments for issuance of preferred stock		558,729			-			-			-			558,729
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES		18,022,420			11,189,973			10,582,865			(20,188,672	)		19,606,586
NET INCREASE IN CASH AND CASH EQUIVALENTS		5,661,189			1,508,125			-			-			7,169,314
CASH AND CASH EQUIVALENTS
BEGINNING OF THE QUARTER		10,663,831			430,994			-			-			11,094,825
END OF THE QUARTER	$	16,325,020		$	1,939,119		$	-		$	-		$	18,264,139

For the nine months ended September 30, 2011	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(853,772	)	$	5,723,004		$	10,690,204		$	(16,413,208	)	$	(853,772	)
Adjustments to reconcile net income (loss) to cash:
(Gain) on life settlements		-			(337,788	)		(23,537,267	)		-			(23,875,055	)
Amortization of deferred financing and issuance costs		-			1,374,401			174,672			-			1,549,073
Investment banking services		3,595,027			-			-						3,595,027
Deferred income taxes		2,363,851			-			-			-			2,363,851
Convertible, redeemable preferred stock dividends payable		44,669			-			-			-			44,669
(Increase) decrease in operating assets:
Other assets		(2,889,356	)		(15,912,784	)		(859,099	)		18,674,893			(986,346	)
Increase (decrease) in operating liabilities:
Accrued expenses		504,995			(3,344,913	)		4,469,773			(2,261,685	)		(631,830	)
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES		2,765,414			(12,498,080	)		(9,061,717	)		-			(18,794,383	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			(12,000	)		(10,488,756	)		-			(10,500,756	)
NET CASH FLOWS USED IN  INVESTING ACTIVITIES		-			(12,000	)		(10,488,756	)		-			(10,500,756	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from revolving credit facility		-			-			18,599,549			-			18,599,549
Proceeds from issuance of Series I Secured notes payable		-			8,126,034			-			-			8,126,034
Payments for redemption of Series I Secured notes payable		-			(1,006,680	)		-			-			(1,006,680	)
Proceeds (payments) from restricted cash		-			3,039,582			(617,464	)		-			2,422,118
Issuance of common stock		4,973			-			-			-			4,973
Issuance of preferred stock		1,670,010			-			-			-			1,670,010
Payments for issuance of preferred stock		(956,851	)		-			-			-			(956,851	)
Proceeds from notes receivable from related parties		-			2,306,068			-			-			2,306,068
Common stock dividends		(2,306,068	)		-			-			-			(2,306,068	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		(1,587,936	)		12,465,004			17,982,085			-			28,859,153
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		1,177,478			(45,076	)		(1,568,388	)		-			(435,986	)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE YEAR		-			189,842			1,568,388			-			1,758,230
END OF THE YEAR	$	1,177,478		$	144,766		$	-		$	-		$	1,322,244

For the three months ended September 30, 2011	Parent			Guarantor Sub			Non-Guarantor Sub			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(2,266,053	)	$	345,376		$	3,010,662		$	(3,356,038	)	$	(2,266,053	)
Adjustments to reconcile net income (loss) to cash:
(Gain) on life settlements		-			(165,915	)		(7,070,547	)		-			(7,236,462	)
Amortization of deferred financing and issuance costs		-			1,374,401			58,224			-			1,432,625
Investment banking services		3,595,027			-			-			-			3,595,027
Deferred income taxes		(1,415,149	)		-			-			-			(1,415,149	)
Convertible, redeemable preferred stock dividends payable		44,669			-			-			-			44,669
(Increase) decrease in operating assets:
Other assets		2,461,049			(910,657	)		(473,860	)		(1,510,873	)		(434,341	)
Increase (decrease) in operating liabilities:
Accrued expenses		279,040			(3,585,432	)		(1,997,506	)		4,866,911			(436,987	)
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES		2,698,583			(2,942,227	)		(6,473,027	)		-			(6,716,671	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements		-			4,150			(1,381,176	)		-			(1,377,026	)
NET CASH FLOWS USED IN  INVESTING ACTIVITIES		-			4,150			(1,381,176	)		-			(1,377,026	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from revolving credit facility		-			-			7,510,001			-			7,510,001
Proceeds from issuance of Series I Secured notes payable		-			(3,216,821	)		-			-			(3,216,821	)
Payments for redemption of Series I Secured notes payable		-			3,280,899			-			-			3,280,899
Proceeds (payments) from restricted cash		-			430,358			344,202			-			774,560
Issuance of common stock		4,973			-			-			-			4,973
Issuance of preferred stock		1,670,010			-			-			-			1,670,010
Payments for issuance of preferred stock		(956,851	)		-			-			-			(956,851	)
Proceeds from notes receivable from related parties		-			2,306,068			-			-			2,306,068
Common stock dividends		(2.306.068	)		-			-			-			(2,306,068	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		(1,587,936	)		2,800,504			7,854,203			-			9,066,771
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		1,110,647			(137,573	)		-			-			973,074
CASH AND CASH EQUIVALENTS
BEGINNING OF THE QUARTER		66,831			282,339			-			-			349,170
END OF THE QUARTER	$	1,177,478		$	144,766		$	-		$	-		$	1,322,244

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Guarantees of Secured Debentures (Details 1) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
REVENUE
Contract servicing fees
Gain on life settlements, net	4,788,291	3,857,131	10,257,537	14,151,240
Interest and other income	5,681	9,280	54,576	41,250
TOTAL REVENUE	4,793,972	3,866,411	10,312,113	14,192,490
EXPENSES
Origination and servicing fees
Employee compensation and benefits	745,386	461,824	1,862,469	1,403,844
Legal and professional fees	250,648	286,681	952,051	597,230
Interest expense	2,803,185	2,830,689	7,621,177	6,141,901
Other expenses	474,504	375,892	1,737,157	944,409
Investment banking services		3,595,027		3,595,027
TOTAL EXPENSES	4,273,723	7,550,113	12,172,854	12,682,411
INCOME (LOSS) BEFORE EQUITY IN LOSS OF SUBSIDIARIES	520,249	(3,683,702)	(1,860,741)	1,510,079
EQUITY IN LOSS OF SUBSIDIARY
NET INCOME (LOSS) BEFORE INCOME TAXES	520,249	(3,683,702)	(1,860,741)	1,510,079
INCOME TAX EXPENSE (BENEFIT)	633,572	(1,417,649)	103,712	2,363,851
NET INCOME (LOSS)	(113,323)	(2,266,053)	(1,964,453)	(853,772)
Parent [Member]
REVENUE
Contract servicing fees
Gain on life settlements, net
Interest and other income	5,601	3,488	8,650	3,488
TOTAL REVENUE	5,601	3,488	8,650	3,488
EXPENSES
Origination and servicing fees
Employee compensation and benefits
Legal and professional fees	196,354	219,958	851,954	297,865
Interest expense	1,287,059	49,369	2,555,271	49,369
Other expenses	169,274	139,100	703,373	186,815
Investment banking services		3,595,027		3,595,027
TOTAL EXPENSES	1,652,687	4,003,454	4,110,598	4,129,076
INCOME (LOSS) BEFORE EQUITY IN LOSS OF SUBSIDIARIES	(1,647,086)	(3,999,966)	(4,101,948)	(4,125,588)
EQUITY IN LOSS OF SUBSIDIARY	2,167,335	316,264	2,241,207	5,635,667
NET INCOME (LOSS) BEFORE INCOME TAXES	520,249	(3,683,702)	(1,860,741)	1,510,079
INCOME TAX EXPENSE (BENEFIT)	633,572	(1,417,649)	103,712	2,363,851
NET INCOME (LOSS)	(113,323)	(2,266,053)	(1,964,453)	(853,772)
Guarantor Subsidiary
REVENUE
Contract servicing fees	746,377	409,900	1,184,627	2,409,825
Gain on life settlements, net	(229,277)	52,567		7,240
Interest and other income	219,670	5,787	222,863	34,171
TOTAL REVENUE	736,770	468,254	1,407,490	2,451,236
EXPENSES
Origination and servicing fees	6,500			6,000
Employee compensation and benefits	745,386	461,824	1,862,469	1,403,844
Legal and professional fees	41,124	66,723	86,927	296,365
Interest expense	1,074,260	2,409,814	3,770,808	5,079,971
Other expenses	292,730	224,291	996,284	719,593
Investment banking services
TOTAL EXPENSES	2,160,000	3,162,652	6,716,488	7,505,773
INCOME (LOSS) BEFORE EQUITY IN LOSS OF SUBSIDIARIES	(1,423,230)	(2,694,398)	(5,308,998)	(5,054,537)
EQUITY IN LOSS OF SUBSIDIARY	3,619,677	3,039,774	7,637,541	10,777,541
NET INCOME (LOSS) BEFORE INCOME TAXES	2,196,447	345,376	2,328,543	5,723,004
INCOME TAX EXPENSE (BENEFIT)
NET INCOME (LOSS)	2,196,447	345,376	2,328,543	5,723,004
Non-Guarantor Subsidiaries
REVENUE
Contract servicing fees
Gain on life settlements, net	5,017,568	3,804,564	10,257,537	14,144,000
Interest and other income	81	5	42,734	3,591
TOTAL REVENUE	5,017,649	3,804,569	10,300,271	14,147,591
EXPENSES
Origination and servicing fees	739,877	409,900	1,184,627	2,403,825
Employee compensation and benefits
Legal and professional fees	13,170		13,170	3,000
Interest expense	441,866	371,506	1,295,098	1,012,561
Other expenses	232,171	12,501	257,171	38,001
Investment banking services
TOTAL EXPENSES	1,427,084	793,907	2,750,066	3,457,387
INCOME (LOSS) BEFORE EQUITY IN LOSS OF SUBSIDIARIES	3,590,565	3,010,662	7,550,205	10,690,204
EQUITY IN LOSS OF SUBSIDIARY
NET INCOME (LOSS) BEFORE INCOME TAXES	3,590,565	3,010,662	7,550,205	10,690,204
INCOME TAX EXPENSE (BENEFIT)
NET INCOME (LOSS)	3,590,565	3,010,662	7,550,205	10,690,204
Eliminations [Member]
REVENUE
Contract servicing fees	(746,377)	(409,900)	(1,184,627)	(2,409,825)
Gain on life settlements, net
Interest and other income	(219,671)		(219,671)
TOTAL REVENUE	(966,048)	(409,900)	(1,404,298)	(2,409,825)
EXPENSES
Origination and servicing fees	(746,377)	(409,900)	(1,184,627)	(2,409,825)
Employee compensation and benefits
Legal and professional fees
Interest expense
Other expenses	(219,671)		(219,671)
Investment banking services
TOTAL EXPENSES	(966,048)	(409,900)	(1,404,298)	(2,409,825)
INCOME (LOSS) BEFORE EQUITY IN LOSS OF SUBSIDIARIES
EQUITY IN LOSS OF SUBSIDIARY	(5,787,012)	(3,356,038)	(9,878,748)	(16,413,208)
NET INCOME (LOSS) BEFORE INCOME TAXES	(5,787,012)	(3,356,038)	(9,878,748)	(16,413,208)
INCOME TAX EXPENSE (BENEFIT)
NET INCOME (LOSS)	$ (5,787,012)	$ (3,356,038)	$ (9,878,748)	$ (16,413,208)

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Series I Secured Notes Payable (Details Textual) (USD $)	1 Months Ended	3 Months Ended		9 Months Ended
	Jun. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Series I Secured Notes Payable (Textual)
Weighted average market interest rate of Secured notes payable		7.30%		7.30%
Secured notes		$ 32,112,270		$ 32,112,270
Amortization of deferred financing and issuance costs		58,000	58,000	175,000	175,000
Series I Secured Notes Payable [Member]
Series I Secured Notes Payable (Textual)
Minimum maturity period of secured notes	6 months
Maximum maturity period of secured notes	7 years
Interest rate on secured notes, Minimum	7.00%
Interest rate on secured notes, Maximum	9.55%
Description of interest payment				Interest is payable monthly, quarterly, annually or at maturity depending on the terms of the note
Weighted average market interest rate of Secured notes payable		8.20%		8.20%		8.04%
Secured notes		40,025,000		40,025,000		49,332,000
Amortization of deferred financing and issuance costs		200,000	594,000	947,000	1,374,000
Future expected amortization of deferred financing costs				$ 803,000
Conditions for proceed from issuance of debenture				(1) payment of commissions of Series I Secured note sales, (2) purchase life insurance policies, (3) pay premiums of life insurance policies, (4) pay principal and interest to Senior Liquidity Provider (DZ Bank), (5) pay portfolio or note operating fees or costs, (6) pay trustee (Wells Fargo Bank, N.A.), (7) pay servicer and collateral fees, (8) pay principal and interest on Series I Secured notes, (9) make distributions to equity holders for tax liability related to portfolio, (10) purchase interest rate caps, swaps, or hedging instruments, (11) pay GWG Series I Trustee fees, and (12) Pay offering expenses.

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Condensed Consolidated Statement of Cash Flows (unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME (LOSS)	$ (113,323)	$ (2,266,053)	$ (1,964,453)	$ (853,772)
Adjustments to reconcile net (loss) to net cash flows from operating activities:
Gain on life settlements	(8,881,542)	(7,236,462)	(19,871,791)	(23,875,055)
Amortization of deferred financing and issuance costs	394,438	1,432,625	1,303,895	1,549,073
Investment banking services		3,595,027		3,595,027
Deferred income taxes	633,572	(1,415,149)	103,712	2,363,851
Convertible, redeemable preferred stock dividends payable	215,059	44,669	636,069	44,669
(Increase) decrease in operating assets:
Other assets	(115,761)	(434,341)	941,525	(986,346)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses	791,825	(436,987)	1,450,958	(631,830)
NET CASH FLOWS USED IN OPERATING ACTIVITIES	(7,075,732)	(6,716,671)	(17,400,085)	(18,794,383)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life settlements	(5,361,540)	(1,377,026)	(7,983,570)	(10,500,756)
Proceeds from settlement of life settlements			416,665
NET CASH FLOWS USED IN INVESTING ACTIVITIES	(5,361,540)	(1,377,026)	(7,566,905)	(10,500,756)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from revolving credit facility		7,510,001	6,000,000	18,599,549
Proceeds from issuance of Series I Secured notes payable		(3,216,821)	50,000	8,126,034
Payments for redemption of Series I Secured notes payable	(1,843,032)	3,280,899	(5,311,989)	(1,006,680)
Proceeds from issuance of renewable secured debentures	17,878,571		33,635,657
Payments for redemption and issuance of renewable secured debentures	(914,880)		(1,627,467)
Proceeds from restricted cash	3,427,198	774,560	3,369,837	2,422,118
Issuance of common stock		4,973	5.0	4,973
Issuance of convertible, redeemable preferred stock	500,000	1,670,010	6,287,375	1,670,010
Payments of issuance cost for convertible, redeemable preferred stock	558,729	(956,851)	(1,050,633)	(956,851)
Proceeds from notes receivable from related parties		2,306,068		2,306,068
Common stock dividends		(2,306,068)		(2,306,068)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES	19,606,586	9,066,771	41,352,780	28,859,153
NET INCREASE IN CASH AND CASH EQUIVALENTS	7,169,314	973,074	16,385,790	(435,986)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE QUARTER	11,094,825	349,170	1,878,349	1,758,230
END OF THE QUARTER	18,264,139	1,322,244	18,264,139	1,322,244
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	1,839,000	1,090,000	4,958,000	3,505,000
Convertible, redeemable preferred stock:
Non-cash conversion of Series I secured notes		7,189,000	4,220,000	7,189,000
Non-cash conversion of accrued interest payable on Series I secured notes		202,000	8,000	202,000
Non-cash conversion of dividends payable	160,000		408,000
Warrants issued to purchase common stock	2,000		41,000
Non-cash conversion of accrued interest payable on Series I secured notes to principal	43,000	106,000	80,000	106,000
Conversion from LLC to corporation				6,871,000
Investment in life settlements included in accounts payable	$ 340,000	$ 701,000	$ 501,000	$ 701,000

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Notes Receivable from Related Parties

9 Months Ended

Sep. 30, 2012

Notes Receivable From Related Parties [Abstract]

Notes receivable from related parties

( 5 )       Notes receivable from related parties

Notes receivable from related parties consisted of various unsecured notes receivable. These notes were due from shareholders of the Company, with interest rates ranging from 4.2% to 5%, payable annually and were paid in full July 27, 2011. Interest income from related parties totaled $24,000 during the nine months ended September 30, 2011. As a part of the Company’s compensation plan effective January 1, 2011, interest income earned on these notes were treated as guaranteed payments to the members and are included in employee compensation and benefits in the statement of operations for the nine months ended September 30, 2011. On July 27, 2011, the Company paid dividends to the shareholders in the amount of their respective note receivable balances. They immediately repaid their balance due on each note and the related accrued interest in full.

As of September 30, 2012, and December 31, 2011, the Company had receivables totaling $5,000,000 due from an affiliate, Opportunity Finance, LLC, that were fully reserved. Opportunity Finance ceased operations in 2008.

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Concentration (Tables)

9 Months Ended

Sep. 30, 2012

Concentration [Abstract]

Summary of the face value of insurance contracts with specific life insurance companies exceeding 10% of the total face value held by the Company

	September 30,		December 31,
	2012		2011
Life insurance company	%		%
Company A		17.27		17.43
Company B		13.38		15.06
Company C		12.06		12.53
Company D		*		10.09

Summary of the number of insurance contracts held in specific states exceeding 10% of the total face value held by the Company

	September 30,		December 31,
	2012		2011
State of residence	%		%
California		29.59		31.43
New York		12.76		13.71
Florida		12.76		11.43

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Notes Receivable from Related Parties (Details) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Notes Receivable from Related Parties (Textual)
Interest rates, minimum	4.20%
Interest rates, maximum	5.00%
Repaid full notes	Jul. 27, 2011
Interest income from related parties		$ 24,000
Receivables due from an affiliate, Opportunity Finance, LLC	$ 5,000,000		$ 5,000,000

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Nature of Business and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2012

Nature Of Business and Summary Of Significant Accounting Policies [Abstract]

Nature of business

Nature of business - GWG Holdings, Inc. (Holdings) (previously GWG Holdings, LLC) and Subsidiaries, located in Minneapolis, Minnesota, facilitates the purchase of life insurance policies for its own investment portfolio through its wholly owned subsidiary, GWG Life Settlements, LLC (GWG Life), and its subsidiaries, GWG Trust (Trust), GWG DLP Funding II, LLC (DLP II) and its wholly owned subsidiary, GWG DLP Master Trust II (the Trust II). Holdings converted from a limited liability company into a corporation effective June 10, 2011 and as a result of this change all member units were converted into common stock. Holdings and its subsidiaries finance the acquisition of life insurance policies and pay policy premiums through funds available on its line of credit and proceeds from other debt and equity securities as well as from revenues from maturities of life insurance policies.  GWG Broker Services, LLC (Broker Services) a wholly owned subsidiary was formed to earn fees for brokering policy transactions between market participants. GWG Member, LLC a wholly owned subsidiary formed November 2010 to facilitate the acquisition of policies, has not commenced operations as of September 30, 2012. The entities were legally organized in Delaware and are collectively referred herein to as GWG, or the Company.

Basis of presentation

Basis of presentation - The condensed consolidated balance sheet as of September 30, 2012, the condensed consolidated statements of operations for the three months and nine months ended September 30, 2012 and 2011, and the condensed consolidated statements of cash flows for the three months and nine months ended September 30, 2012 and 2011, and the related information presented in these notes, have been prepared by management in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, without audit. To the extent that information and notes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements are contained in or are consistent with the consolidated audited financial statements presented in the Company’s Form 10-K for the year ended December 31, 2011, such information and notes have not been duplicated herein. In the opinion of management, all adjustments considered necessary for a fair presentation of results have been included. The condensed consolidated balance sheet at December 31, 2011 was derived from the audited consolidated financial statements as of that date. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Special Financial Report on Form 10-K for the year ended December 31, 2011.

Use of estimates

Use of estimates - The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The most significant estimates with regard to these consolidated financial statements relate to (1) the determination of the assumptions used in estimating the fair value of the investment in life insurance policies, and (2) the valuation of deferred tax assets.

Operating agreement

Operating agreement – Effective June 10, 2011, the Company filed a certificate of conversion from a limited liability company into a corporation, registered in the state of Delaware. With this conversion, the Company is authorized to issue 210,000,000 shares of common stock, par value $.001, and 40,000,000 shares of preferred stock, par value $.001. In connection with the conversion, the outstanding member units were converted to 4,500,000 shares of common stock (prior to giving effect to the August 9, 2011 two-for-one forward stock split discussed below). Common stock dividends distributed subsequent to the conversion will be recorded as a reduction of paid in capital until the Company reflects accumulated positive earnings.

On July 31, 2011, the Company began a private placement offering for the sale of up to 3,333,333 shares of Series A 10% convertible, redeemable preferred stock at an offering price of $7.50 per share.  The offering of Series A concluded on September 2, 2012, and resulted in the sale of 3,279,000 shares of Series A and issuance of an additional 60,000 shares as dividends in-kind to shareholders (see note 10). The Company provided for an overallotment of 666,667 shares, allowing for total offering of 4,000,000 shares. As of September 30, 2012 we have issued 3,339,000 shares.

On August 9, 2011 the Company filed an amendment to its certificate of incorporation to effect a two-for-one forward stock split of its common stock. Unless otherwise noted, all share amounts contained in these consolidated financial statements are post-split share amounts determined after giving effect to the forward stock split.

Life settlements

Life settlements - ASC 325-30, Investments in Insurance Contracts, allows an investor the election to account for its investments in life settlements using either the investment method or the fair value method. The election shall be made on an instrument-by-instrument basis and is irrevocable. Under the investment method, an investor shall recognize the initial investment at the purchase price plus all initial direct costs. Continuing costs (policy premiums and direct external costs, if any) to keep the policy in force shall be capitalized. Under the fair value method, an investor shall recognize the initial investment at the purchase price. In subsequent periods, the investor shall re-measure the investment at fair value in its entirety at each reporting period and shall recognize the change in fair value in current period income net of premiums paid. The Company uses the fair value method to account for all investments in life settlements.

The Company recognizes the difference between the policy benefits received and carrying values of the respective life insurance policy when an insured event has occurred and the Company determines that settlement and ultimate collection of the policy benefits is realizable and reasonably assured. Revenue from a transaction must meet both criteria in order to be recognized. The Company recognizes these realized gains (revenue) from life settlement contracts upon one of the two following events:

1)           Receipt of mortality notice or verified obituary of insured

2)           Sale of policy and filing of change of ownership forms and receipt of payment

Deposits and initial direct costs advanced on policies to be purchased, but not yet settled, are recorded as other assets until policy ownership has been transferred to the Company.

Deferred financing and issuance costs

Deferred financing and issuance costs – Financing costs incurred to obtain financing under the revolving credit facility have been capitalized and are amortized using the straight-line method over the term of the revolving credit facility. Amortization of deferred financing costs related to the revolving credit facility was $58,000 for the three months ended September 30, 2012 and 2011. Amortization of deferred financing costs related to the revolving credit facility was $175,000 for each of the nine months ended September 30, 2012 and 2011 and is included in interest expense in the statement of operations. The expected amortization expense is $58,000 and $97,000 for the three months ending December 31, 2012 and the year ending December 31, 2013, respectively.

The Series I Secured note obligations, as described in note 7, are reported net of issuance costs, sales commissions and other direct expenses, which are amortized using the interest method over the term of the borrowings. The renewable secured debentures, as described in note 8, are reported net of issuance costs, sales commissions, and other direct expenses, which are amortized using the interest method over the term of the borrowings.

The Series A convertible, redeemable preferred stock, as described in note 10, is reported net of issuance costs, sales commissions, and other direct expenses. The discount is amortized directly to equity using the interest method over the three year redemption period to the redemption amount.

Earnings (loss) per share

Earnings (loss) per share – The Company converted from a limited liability company into a corporation effective June 10, 2011, and as a result of this change all member units were converted into common stock. The earnings (loss) per share has been restated to reflect the equivalent common stock per share amounts as of the earliest period reported. Basic per share earnings (loss) is calculated using the weighted average number of shares outstanding during the period. Diluted earnings per share is calculated based on the potential dilutive impact, if any, of the Company’s preferred stock and outstanding warrants. The Company has 831,909 warrants and 5,009,225 shares of Convertible Redeemable Preferred Stock (equivalent common shares if Convertible Redeemable Preferred Stock were converted into common stock) outstanding as of September 30, 2012. The Convertible Redeemable Preferred Stock and warrants are anti-dilutive for the three and nine months ended September 30, 2012 and 2011.

ASU No. 2011-04, Fair Value Measurement [Member]

New Accounting Pronouncements or Change in Accounting Principle [Line Items]

Recently adopted pronouncements

In May 2011, the FASB issued ASU No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS,” which amends disclosure requirements related to categorization within the fair value hierarchy. This update results in common principles and requirements for measuring fair value and disclosing information about fair value measurements in accordance with GAAP and International Financial Reporting Standards. The guidance became effective January 1, 2012. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.