~~(16)~~(17) Segment Information

On October 25, 2013, the Company sold its structured settlement business, which was previously reported as an operating segment. The operating results related to the Company’s structured settlement business have been included in discontinued operations in the Company’s Consolidated Statements of Operations for all periods presented and the Company has discontinued segment reporting. See Note 79 "Discontinued Operations" to the accompanying consolidated financial statements for further information. Management views its current operations as one segment.

~~(17)~~(18) Commitments and Contingencies

Lease Agreements

The Company leases office space under a lease that commenced on October 1, 2014. The lease expires on September 30, 2020. The annual base rent is ~~$253,000,~~$261,000, with a provision for a 3% increase on each anniversary of the rent commencement date. Rent expense was approximately ~~$114,000~~$63,000 and ~~$84,000~~$109,000 for the three months ended ~~September 30,~~August 31, 2019 and 2018, respectively, with approximately $215,000 and ~~2017, respectively, $343,000 and $296,000~~$338,000 for the nine months ended ~~September 30,~~August 31, 2019 and 2018, ~~and 2017,~~ respectively.

During the ~~three~~eleven months ended ~~September~~November 30, 2018, the Company entered into a sublease agreement with a subtenant that commenced on October 1, 2018 and expires on September 15, 2020. The annual base rent of the subtenant is $78,000. On March 11, 2019 the sublease contract was amended to increase the square footage thereunder, hence increasing the annual base rent to $89,000.

Employment Agreements

The Company has entered into employment agreements with certain of its officers, including with its chief financial officer, whose agreement provides for payments in the event that the executive terminates her employment with the Company due to a material change in the geographic location where the chief financial officer performs her duties or upon a material diminution of her base salary or responsibilities, with or without cause (the "2018 Martinez Agreement"). If the Company terminates the 2018 Martinez Agreement without cause or she resigns with Good Reason (as defined in the 2018 Martinez Agreement), she will be entitled to receive her base salary or $352,229, whichever is greater, through the twelve (12) months following such termination (the "Martinez Severance Period") as well as any bonus earned but not yet paid. If Ms. Martinez resigns for good reason, she will also be entitled to have the Company continue to pay its portion of healthcare premiums for plans in which she is participating immediately prior to the termination through the Martinez Severance Period. If such termination or resignation occurs within two years after a change in control (as defined in the 2018 Martinez Agreement), then in lieu of receiving her base salary, Ms. Martinez would be entitled to receive (i) accrued vacation days, (ii) a lump sum payment equal to the sum of two times her then base salary, (iii) a portion of her bonus prorated through the termination date that would be due to her when bonus payments are otherwise made for the year in which the termination occurs, (iv) any

unpaid portion of a bonus for the year preceding the termination, and (v) reimbursement of COBRA healthcare costs through the Martinez Severance Period.

On March 13, 2018, the Company entered into an employment agreement with Jack Simony (the "Simony Agreement"), pursuant to which Mr. Simony will continue to serve as Vice President and Chief Investment Officer of the Company. The term of the Simony Agreement commenced on March 13, 2018 and continues for one year, with automatic one-year extensions unless (x) either Mr. Simony or the Company gives written notice not to extend at least sixty (60) days’ prior to the end of the then-current term or (y) Mr. Simony’s employment is terminated in accordance with the terms of the Simony Agreement. Pursuant to the Simony Agreement, Mr. Simony will receive an annual base salary of $275,000.

The Simony Agreement further provides that Mr. Simony is entitled to participate in all benefit plans provided to executives of the Company. If the Company terminates Mr. Simony’s employment without cause or he resigns with Good Reason (as defined in the Simony Agreement), the Simony Agreement provides that he will be entitled to receive his base salary through the six (6) months following such termination (the "Simony Severance Period") as well as any incentive bonus that has been declared or awarded to him for a prior fiscal year but has not yet been paid. If Mr. Simony resigns for good reason, he will also be entitled to have the Company continue to pay its portion of health care premiums for plans in which he is participating immediately prior to the termination through the Simony Severance Period.

On March 13, 2018, the Company entered into an employment agreement with Harvey Werblowsky (the "Werblowsky Agreement"), pursuant to which Mr. Werblowsky will continue to serve as Vice President, Chief Legal Officer and General Counsel of the Company. The term of the Werblowsky Agreement commenced on March 13, 2018 and continues for one year, with automatic one-year extensions unless (x) either Mr. Werblowsky or the Company gives written notice not to extend at least

sixty (60) days’ prior to the end of the then-current term or (y) Mr. Werblowsky’s employment is terminated in accordance with the terms of the Werblowsky Agreement. Pursuant to the Werblowsky Agreement, Mr. Werblowsky will receive an annual base salary of $250,000.

The Werblowsky Agreement further provides that Mr. Werblowsky is entitled to participate in all benefit plans provided to executives of the Company. If the Company terminates Mr. Werblowsky’s employment without cause or he resigns with Good Reason (as defined in the Werblowsky Agreement), the Werblowsky Agreement provides that he will be entitled to receive his base salary through the six (6) months following such termination (the "Werblowsky Severance Period") as well as any incentive bonus that has been declared or awarded to him for a prior fiscal year but has not yet been paid. If Mr. Werblowsky resigns for good reason, he will also be entitled to have the Company continue to pay its portion of health care premiums for plans in which he is participating immediately prior to the termination through the Werblowsky Severance Period.

The Company does not have any general policies regarding the use of employment agreements, but has and may, from time to time, enter into such a written agreement to reflect the terms and conditions of employment of a particular named executive officer, whether at the time of hire or thereafter.

Litigation

In accordance with applicable accounting guidance, the Company establishes an accrued liability for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. When a loss contingency is not both probable and estimable, the Company does not establish an accrued liability. As a litigation or regulatory matter develops, the Company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. If, at the time of evaluation, the loss contingency related to a litigation or regulatory matter is not both probable and estimable, the matter will continue to be monitored for further developments that would make such loss contingency both probable and estimable. When a loss contingency related to a litigation or regulatory matter is deemed to be both probable and estimable, the Company will establish an accrued liability with respect to such loss contingency and record a corresponding amount of litigation-related expense. The Company will then continue to monitor the matter for further developments that could affect the amount of any such accrued liability.

Litigation Settlement

On May 22, 2019, a settlement (the "Lincoln Benefit Settlement") in the amount of $21.3 million was signed between Lincoln Benefit Life Company ("Lincoln Benefit"), White Eagle and Emergent Capital pursuant to which Lincoln Benefit agreed not to contest the 55 life insurance policies that are presently owned by White Eagle and Emergent Capital agreed to drop its legal action against Allstate Life Insurance Company and settle for $2.0 million. The Lincoln Benefit Settlement relates to six separate legal actions pertaining to the validity of certain White Eagle policies and receivables for maturities of life settlements totaling $39.1 million. The Lincoln Benefit Settlement was approved by the Bankruptcy Court in June 2019, and accordingly, the receivable for maturities of life settlement was adjusted to reflect the reduction which resulted in approximately $17.8 million recorded as change in fair value of life settlements loss in the condensed and consolidated financial statements of the Debtors atAugust 31, 2019. The amount was received during the three months ended August 31, 2019. The $2.0 million settlement related to the Allstate lawsuit was received during the three months ended August 31, 2019 and is recorded as other income on the statement of operations for consolidated financial statements atAugust 31, 2019.

Sun Life

On April 18, 2013, Sun Life Assurance Company of Canada ("Sun Life") filed a complaint against the Company and several of its affiliates in the United States District Court for the Southern District of Florida, entitled Sun Life Assurance Company of Canada v. Imperial Holdings, Inc., et al. ("Sun Life Case"), asserting, among other things, that at least 28 life insurance policies issued by Sun Life and owned by the Company through certain of its subsidiary companies were invalid. The

Sun Life complaint, as amended, asserted the following claims: (1) violations of the federal Racketeer Influenced and Corrupt Organizations ("RICO") Act, (2) conspiracy to violate the RICO Act, (3) common law fraud, (4) aiding and abetting fraud, (5) civil conspiracy to commit fraud, (6) tortious interference with contractual obligations, and (7) a declaration that the policies issued were void. Following the filing of a motion by the Company to dismiss the Sun Life Case, on December 9, 2014, counts (2), (4), (5), (6) and (7) of the Sun Life Case were dismissed with prejudice. The Company then filed a motion for summary judgment on the remaining counts. On February 4, 2015, the Court issued an order (the "Order") granting the

Company’s motion for summary judgment on counts (1) and (3), resulting in the Company prevailing on all counts in the Sun Life Case.

On July 29, 2013, the Company filed a separate complaint against Sun Life in the United States District Court for the Southern District of Florida, captioned Imperial Premium Finance, LLC v. Sun Life Assurance Company of Canada ("Imperial Case"), which was subsequently consolidated with the Sun Life Case. The Imperial Case asserted claims against Sun Life for breach of contract, breach of the covenant of good faith and fair dealing, and fraud, and sought a judgment declaring that Sun Life is obligated to comply with the promises made by it in certain insurance policies. The Imperial complaint also sought compensatory damages amounting to at least $30.0 million and an award of punitive damages. On August 23, 2013, Sun Life moved to dismiss the complaint, but the Court denied Sun Life’s motion in early 2015. Subsequently, on February 26, 2015, Sun Life appealed the denial to the United States Court of Appeals for the Eleventh Circuit. The Company moved to dismiss Sun Life’s appeal and, on December 17, 2015, the Court of Appeals ruled in favor of the Company, dismissing Sun Life’s appeal. The Imperial Case therefore returned to the District Court.

On September 22, 2016, however, the District Court granted summary judgment in favor of Sun Life on the entirety of the Imperial Case. Subsequently, on January 12, 2017, the Company appealed the District Court’s decision, and on January 24, 2017, Sun Life filed its own notice of appeal. As part of these two appeals, the Court of Appeals will review every dispositive order issued by the District Court throughout the consolidated case. Per the Court of Appeals, oral argument will be scheduled in the near future.

In January 2018, oral argument was held in the Eleventh Circuit Court of Appeals. In September 2018, the Circuit Court ruled that Florida is the jurisdiction for all the Sun Life cases.

Voluntary Petitions for Relief Under Chapter 11 and Suit

On the Petition Date, the November Chapter 11 Cases were filed. The commencement of the November Chapter 11 Cases constitutes an event of default under the White Eagle Revolving Credit Facility, resulting in the principal and accrued interest due from White Eagle thereunder becoming immediately due and payable. Lamington and WEGP have pledged their respective interests in White Eagle to secure its obligations under the White Eagle Revolving Credit Facility. Any efforts by LNV or CLMG to enforce such pledges by Lamington and WEGP of their respective interests in White Eagle in connection with the White Eagle Revolving Credit Facility are automatically stayed as a result of the commencement of the November Chapter 11 Cases and LNV’s and CLMG’s rights of enforcement in respect of the White Eagle Revolving Credit Facility are subject to the applicable provisions of the Bankruptcy Code. In addition, on November 15, 2018, White Eagle, LNV and CLMG entered into an Agreement Regarding Rights and Remedies (the "Standstill Agreement"), pursuant to which LNV and CLMG agreed to refrain from exercising their rights and remedies in connection with the White Eagle Revolving Credit Facility, subject to the terms and provisions of the Standstill Agreement, until 12:00 p.m. noon Pacific time on November 26, 2018, to facilitate negotiations.

On December 13, 2018, the White Eagle Chapter 11 Case was filed. The commencement of the White Eagle Chapter 11 Case would constitute a default and event of default under the terms of the Amended and Restated Senior Note Indenture 8.5% Senior Secured Notes Unsecured and the New Convertible Indenture relating to the New Convertible Notes. However, such defaults and events of default and their consequences were waived by holders of all of the outstanding principal amount of the outstanding 8.5% Senior Secured Notes and by holders of a majority of the outstanding principal amount of the outstanding New Convertible Notes, and consequently, the Company believes that no defaults, events of default or acceleration of the payment obligations thereunder, including principal or accrued interest, occurred under either the Amended and Restated Senior Note Indenture or the New Convertible Note Indenture.

On January 25, 2019, the Company, White Eagle, Lamington, and WEGP, collectively the "Plaintiffs", filed the Suit against LNV, Silver Point and GWG, the Defendants, in the Bankruptcy Court, where the Suit will be administered together with the Chapter 11 Cases. LNV, a subsidiary of Beal, is the lender under the White Eagle Revolving Credit Facility.

In the Suit, the Plaintiffs allege that the Defendants engaged in a scheme to coerce the Plaintiffs into selling their valuable portfolio of life insurance policies to defendants for well below its true value. Pursuant to the White Eagle Revolving Credit Facility, LNV agreed to lend $370 million to White Eagle, and in connection therewith received a 45% equity stake in White Eagle. That equity stake, and LNV’s significant control over White Eagle under the Credit Facility, creates a joint venture, and gives rise to fiduciary duties to White Eagle and Emergent, on the part of LNV. The Plaintiffs further allege that LNV has been engaged in a concerted campaign to "squeeze" White Eagle and Emergent by improperly restricting their cash flow, in the hopes that White Eagle and Emergent will have no choice but to sell the valuable policy portfolio to LNV or one of its proxies, including Silver Point and/or GWG, at below its true value.

Global Settlement Agreement in Principle in Bankruptcies

On May 7, 2019, a global settlement in principle of the Chapter 11 Cases and the Suit was announced on the record to, and filed with, the Bankruptcy Court jointly by the Debtors and Defendants (the "Proposed Settlement"). The Proposed Settlement would be effected together with the plan of reorganization, in accordance with the following schedule: (x) the Proposed Settlement and plan of reorganization, and other relevant documents, would be filed with the Bankruptcy Court by May 24, 2019, (y) the parties would use their best efforts to have the Proposed Settlement approved by the Bankruptcy Court by June 7, 2019, and (z) the parties would use their best efforts to have a confirmation hearing for approval of the plan of reorganization by the Bankruptcy Court held on or before June 21, 2019.

On June 5, 2019, the Bankruptcy Court approved an agreement memorializing the Proposed Settlement (the "Settlement

Agreement") and a debtor-in-possession credit agreement (the "DIP Financing"). The plan of reorganization for the Chapter

11 Cases, which implements the Settlement Agreements and the DIP Financing (the "Plan of Reorganization") was confirmed by the Bankruptcy Court on June 19, 2019.

Subsequent Event

On September 16, 2019, the Bankruptcy Court entered an order and final decree closing the White Eagle Chapter 11 Case.

Repayment and Termination of the White Eagle Revolving Credit Facility

On August 16, 2019, the Company entered into the Subscription Agreement, in connection with the Commitment Letter, pursuant to which White Eagle sold to Palomino 72.5% of its limited partnership interests, consisting of all of the newly issued and outstanding Class A and Class D interests, and WEGP sold to an affiliate of Jade Mountain all of its general partnership interests (collectively, the " WE Investment"). Pursuant to the Subscription Agreement, Lamington received 27.5% of the limited partnership interests of White Eagle, consisting of all of the newly issued and outstanding Class B interests in exchange for all of its previously owned White Eagle limited partnership interests.

The proceeds of the WE Investment were used to satisfy in full (i) the White Eagle Revolving Credit Facility, and (ii) the DIP Financing extended by CLMG, as agent, and LNV, as lender, to White Eagle, each in connection with the termination of the White Eagle Revolving Credit Facility and the release of the related liens on the collateral thereunder pursuant to the Master Termination Agreement. The repayment and termination of the White Eagle Revolving Credit Facility and the termination of the DIP Financing, which had not been drawn against, were in accordance with the Plan of Reorganization.

On August 16, 2019, Lamington also entered into (i) the Pledge Agreement pursuant to which it pledged the 27.5% limited partnership interests of White Eagle owned by it to Palomino and certain other secured parties in support of the payment and indemnification obligations described above, and (ii) the Assumption Agreement pursuant to which Lamington assumed all liabilities and obligations of White Eagle and WEGP as of the closing date of the Transactions, and Lamington, the Company and WEGP agreed to terminate, waive and release any intercompany debt, obligations and liabilities of White Eagle to Lamington, the Company and WEGP. On August 16, 2019, Emergent entered into the Indemnification Agreement pursuant to which it indemnified Wilmington Trust, National Association against claims and liabilities that may arise in relation to policies that have matured prior to the Closing Date but as to which Wilmington Trust, National Association has historically held title as securities intermediary.

Other Litigation

Other litigation is defined as smaller claims or litigations that are neither individually nor collectively material. It does not include lawsuits that relate to collections.

The Company is party to various other legal proceedings that arise in the ordinary course of business, separate from normal course accounts receivable collections matters. Due to the inherent difficulty of predicting the outcome of these litigations and other legal proceedings, the Company cannot predict the eventual outcome of these matters, and it is reasonably possible that some of them could be resolved unfavorably to the Company. As a result, it is possible that the Company’s results of operations or cash flows in a particular fiscal period could be materially affected by an unfavorable resolution of pending litigation or contingencies. However, the Company believes that the resolution of these other proceedings will not, based on information currently available, have a material adverse effect on the Company’s financial position or results of operations.

~~(18)~~(19) Stockholders’ Deficit/Equity

The Company has reserved an aggregate of 12,600,000 shares of common stock under its Omnibus Plan, pursuant to which, as of ~~September 30, 2018,~~August 31, 2019, options to purchase 85,000 shares of common stock granted to existing employees were outstanding, 100,000 shares of stock appreciation rights had been granted to ~~directors~~a director and were fully vested ~~during the three months ended September 30, 2018,~~and outstanding, 633,215 shares of restricted stock had been granted to directors ~~with 408,522shares~~and were fully vested, ~~during the three months ended September 30, 2018and~~ 2,270,000 shares of restricted stock units had been granted to certain employees, with a total of ~~2,150,000~~1,083,333 shares subject to vesting. Approximately ~~120,000~~1,186,667 shares have been vested since granted. There were 9,511,785 securities remaining for future issuance under the Omnibus Plan as of ~~September 30, 2018.~~August 31, 2019.

On September 1, 2015, the Company announced that its Board of Directors authorized a $10.0 million share and note repurchase program. The program had a two-year expiration date, and authorized the Company to repurchase up to $10.0 million of its common stock and/or its Convertible Notes due 2019. During 2015, the Company purchased 608,000 shares for a total cost of approximately $2.5 million, which is an average cost of $4.17 per share, including transaction fees. As of December 31, 2017, the repurchase program has terminated.

Warrants

On February 11, 2011, three shareholders received warrants that may be exercised for up to a total of 4,240,521 shares of the Company’s common stock at a weighted average exercise price of $14.51 per share. The warrants expired seven years after the date of issuance during the nine months ended September 30, 2018.

In connection with a settlement of class action litigation arising in connection with the investigation by the U.S. Attorney's Office for District of New Hampshire ("USAO") into the Company's now legacy premium finance business (the "USAO Investigation"), the Company issued warrants to purchase 2,000,000 shares of the Company’s stock into an escrow account in April of 2014. The estimated fair value as of the measurement date of such warrants was $5.4 million, which is included in stockholders’ equity. The warrants were distributed in October 2014 and have a five-year term from the date they were distributed to the class participants with an exercise price of $10.75. The Company is obligated to file a registration statement to register the shares underlying the warrants with the SEC if shares of the Company’s common stock have an average daily trading closing price of at least $8.50 per share for a 45 day period. The warrants will be exercisable upon effectiveness of the registration statement.

On July 28, 2017, in connection with the recapitalization transaction, the Company issued common stock purchase warrants to certain investors to purchase up to an aggregate of 42,500,000 shares of the Company’s common stock at an exercise price of $0.20 per share (the "Warrant Shares"). The warrants shall vest and become exercisable as follows: (i) with respect to 17,500,000 Warrant Shares, immediately upon the issuance of the warrants, and (ii) with respect to the remaining 25,000,000 Warrant Shares, at later times tied to the conversion of the Company’s Convertible Notes and New Convertible Notes (each as defined below) outstanding on July 28, 2017 into shares of the Company’s common stock or, if earlier, upon the date that all Convertible Notes or New Convertible Notes are no longer outstanding. The warrants have an eight year term. The Warrant are subject to anti-dilution adjustment provisions.

Recapitalization Transactions

On July 28, 2017, the Company consummated a series of integrated transactions to effect a recapitalization of the Company (the "Transaction Closing") pursuant to the Master Transaction Agreements.

Common Stock Purchase Agreement

In connection with the Transaction Closing, the Company entered into a Common Stock Purchase Agreement (the "Stock Purchase Agreement") by and among the Company, PJC, certain investors jointly designated by PJC and Triax Capital Advisors LLC, a New York limited liability company ("Triax"), to be party to the Stock Purchase Agreement (collectively, the "Common Stock Investors"), and certain Convertible Note Holders that were a party to the Stock Purchase Agreement (collectively, the "Convertible Note Holder Purchasers," and together with PJC and the Common Stock Investors, the "Purchasers"). Pursuant to the Stock Purchase Agreement, the Company issued and sold to the Purchasers 115,000,000 shares (the "Stock Purchase Agreement Shares") of the Company’s Common Stock at a price of $0.20 per share for an aggregate purchase price of $23.0 million, of which PJC and the Common Stock Investors purchased 75,000,000 Stock Purchase Agreement Shares for an aggregate purchase price of $15.0 million and the Convertible Note Holder Purchasers, pursuant to the previously announced rights offering which expired on July 26, 2017, purchased 40,000,000 Stock Purchase Agreement Shares for an aggregate purchase price of $8.0 million, of which PJC purchased 19,320,038 shares in connection with the exercise of rights assigned to it by certain Convertible Note Holder Purchasers. The Stock Purchase Agreement contained customary representations, warranties, and covenants.

In August 2017, the Company entered into a Securities Purchase Agreement (the "Securities Purchase Agreement") by and between the Company and Brennan Opportunities Fund I LP ("Brennan"). Pursuant to the Securities Purchase Agreement, Brennan purchased from the Company 12,500,000 shares (the "Brennan Shares") of Common Stock at a price of $0.40 per share for an aggregate purchase price of $5.0 million.

Articles Amendment

Effective on July 17, 2017, the Company filed an Articles of Amendment to Articles of Incorporation (the "Articles Amendment") to increase the authorized Common Stock from 80,000,000 shares to 415,000,000 shares. As previously disclosed, the Articles Amendment was approved by the Company’s shareholders at the Company’s 2017 Annual Meeting. The adoption of the Articles Amendment results in a greater number of shares of Common Stock available for issuance.

Change in Significant Holders

As a result of the consummation of the Master Transaction Agreements, on the date of the Transaction Closing, a change in significant holders of the Company's common stock occurred. PJC and Triax, together with certain of their affiliates,

acquired beneficial ownership of approximately 38.9% of the then outstanding Common Stock, based on their aggregate acquisition of 39,320,038 shares of Common Stock and warrants to purchase 27,150,000 shares of Common Stock. Other investors designated by PJC and Triax acquired beneficial ownership of approximately 43.6% of the then outstanding Common Stock, based on their aggregate acquisition of 55,000,000 shares of Common Stock and warrants to purchase 13,350,000 shares of Common Stock. Additionally, pursuant to the Board Designation Agreements, PJC and Triax designated two of seven directors to the Company’s Board, two other investors designated a third new director and a fourth new director, and a fifth new director was designated by a holder of New Convertible Notes, collectively resulting in a change in the majority of the Company’s Board.

~~(19)~~(20) Income Taxes

The Company’s provision for income taxes from continuing operations is estimated to result in an ~~annual~~ effective tax rate of ~~0.0%~~15.99% as of August 31, 2019 and a total tax expense of approximately $3.2 million for the nine months ended ~~September 30, 2018 and 2017, respectively.~~August 31, 2019. The Company’s ~~quarterly~~ effective ~~income tax rates are based upon the Company’s annual estimated tax rate. The Company’s annual estimated~~ tax rate ~~varies based upon~~is principally impacted by expected income inclusions under the GILTI tax regime, limitations imposed on the use of historical NOLs, and interest expense limitations under IRC Sec. 264(a)(4) that are expected to apply when determining tested income for the GILTI inclusion. As a result of the WE Investment (described below), the Company must now rely on information from the Manager in order to reasonably forecast and project taxable income related to its distributive share of White Eagle. As the forecasted allocable share of taxable income from the WE investment represents a significant portion of the Company’s expected taxable income, the Company is currently working with the Manager to obtain reasonable forecasts that can be used for purposes of applying the annual ~~federal taxable earnings,~~effective tax rate method to computing the overall tax provision. As such, in accordance with ASC 740 principles, the Company’s tax provision recorded to date is based on actual results through August 31, 2019. The Company believes this approach most fairly represents its income tax provision as ~~well as on a mix~~ of ~~taxable earnings in the various state and foreign jurisdictions.~~August 31, 2019.

Based on the ~~Company's~~Company’s evaluation, a deferred tax valuation allowance was established against its net deferred tax assets. In its evaluation, management considers taxable loss carryback availability, expectations of sufficient future taxable income, trends in earnings, existence of taxable income in recent years, the future reversal of temporary differences, and available tax planning strategies that could be implemented, if required. Valuation allowances are established based on the consideration of all available evidence using a more likely than not standard. This valuation allowance was determined to be necessary as an offset to the full amount of the federal and state deferred tax asset. During the ~~Nine Months Ended September 30, 2018,~~nine months ended August 31, 2019, the Company does not expect that position to change and therefore is not recording any income tax benefit.

OnFor tax years beginning after December ~~22,~~31, 2017 the United States enacted the Tax Cuts and Jobs Act ("TCJA"). Under ASC 740, Income Taxes, the effects of new legislation are recognized upon enactment. Accordingly, Management has reviewed the legislation and addressed the provisions that are most relevant to its business, including the required accounting under ASC 740. Due to the complexities inherent in the tax law changes, the SEC released Staff Accounting Bulletin (SAB) No. 118 on December 22, 2017, to address the application of ASC 740 where a Company does not have the requisite information available, prepared or analyzed in reasonable detail to properly account for items under the TCJA. The SAB has provided that where a Company can make a reasonable estimate, it should record that estimate and make appropriate disclosures with updates during a measurement period of no more than a year from enactment.

~~The guidance provided by SAB 118 was applied to the Transition Tax~~certain circumstances, Section 245A enacted by the TCJA. The Company made its best estimate of the impact of the Transition Tax as of December 31, 2017 and concluded that no cash tax obligation would arise from the Transition Tax. During the quarter ended September 30, 2018, the Company changed its U.S. tax year from December 31^st ~~to November 30~~^th and filed federal and state tax returns for the initial short year ended November 30, 2017. For the tax year ended November 30, 2017, the Company recognized a taxable dividend as it related to the Special Dividend Note issued on July 28, 2017 from Lamington Road, Ltd. ("Lamington"), its wholly-owned Irish subsidiary. The taxable dividend represented Lamington’s undistributed and previously untaxed accumulated earnings and profits ("E&P") of $45.4 million. As a result of the reduction in tax earnings and profits from the taxable dividend and Lamington’s loss activities through the applicable earnings and profits measurement date of December 31, 2017, Lamington has an earnings and profits deficit. Consequently, the Company has determined that it will not be subject to the Transition Tax.

~~The~~ TCJA ~~enacted Section 245A that eliminates~~eliminated U.S. federal income tax on dividends received from foreign subsidiaries of domestic corporations under a new participation exemption. However, the TCJA also created a new ~~regime~~tax on certain foreign income under new Section ~~951A referred to as the Global Intangible Low-Tax Income (GILTI). In general, under the GILTI,~~951A. Specifically, for tax years beginning after December 31, 2017, income earned in excess of a deemed return on tangible assets held by a ~~controlled foreign corporation~~CFC (the excess referred to as "GILTI") must generally be included as U.S. taxable income on a current basis by its U.S. shareholders. In general, the gross income inclusion can be offset by a deduction in an amount up to 50% of the inclusion (through the end of 2025, thereafter the deduction is reduced to 37.5%) subject to certain limitations.

The ~~GILTI is effective~~Company changed the tax year of its U.S. parent (Emergent Capital, Inc.) from December 31st to November 30th coupled with a concurrent change to the tax year of Lamington, its wholly-owned Irish subsidiary. The change was timely made by filing Form 1128, Application to Adopt, Change, or Retain a Tax Year, in accordance with Rev. Proc. 2006-45 and resulted in a short tax year ended November 30, 2017. The Company timely filed federal and state tax returns for ~~tax years beginning after December 31,~~the short period ended November 30, 2017. As ~~applied to~~a result of the change in tax year, the Company ~~the~~is subject to GILTI ~~will be effective~~ for ~~the Company’s~~its first tax year ~~that begins~~beginning on December 1, 2018. ~~The Company is in~~Based on the ~~process of exploring tax planning strategies to mitigate or eliminate~~Company’s life settlement assets held within Ireland, the ~~potential impacts of the~~net income generated from these activities qualify entirely as GILTI.

On January 10, 2018 the FASB provided guidance on how to account for deferred tax assets and liabilities expected to reverse in future years as GILTI. The FASB provided that a Company may either (1) elect to treat taxes due on future U.S. inclusions of GILTI as a current-period expense when incurred or (2) factor such amounts into the Company’s measurement of its deferred taxes. For ASC 740 purposes, the Company ~~intends to adopt~~adopted an accounting policy to treat any future GILTI inclusion as a current-period expense instead of providing for U.S. deferred taxes on all temporary differences related to future GILTI items.

~~In October 2016,~~On August 16, 2019, the ~~FASB issued ASU No. 2016-16 Income Taxes (Topic 740): Intra-entity transfers~~WE Investment was consummated whereby White Eagle, an indirectly-owned entity of ~~assets other than inventory ("ASU 2016-16"). Current GAAP prohibits~~ the ~~recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been~~Company, sold to ~~an outside party. This prohibition on recognition is an exception~~Palomino a 72.5% limited partnership interest in White Eagle, consisting of newly issued and outstanding Class A and Class D interests. Pursuant to the ~~principle~~agreement, Lamington received 27.5% of ~~comprehensive recognition~~the limited partnership interests of ~~current~~White Eagle, consisting of all of the newly issued and ~~deferred income taxes in GAAP. The Board decided that an entity should recognize the~~outstanding Class B interests. For U.S. income tax ~~consequences~~purposes, this transaction was treated as a contribution by White Eagle of ~~an intra-entity transfer of an asset other than inventory when~~its assets and liabilities to a newly formed partnership in exchange

for the ~~transfer occurs. Consequently, the amendments~~27.5% interest in this update eliminate the exception for an intra-entity transfer of an asset other than inventory. For public business entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2017.White Eagle’s capital and profits. The Company ~~adopted this standard in the March 31, 2018 reporting period which resulted in the elimination of~~recognized no gain or loss as a ~~deferred income tax charge of $17.6 million, gross related to prior year sales of life settlement policies to its Ireland subsidiaries. The adoption resulted in a reduction~~result of the ~~valuation allowance and had no impact on earnings.~~transaction.

The Company and its subsidiary companies are subject to U.S. federal income tax, as well as to income tax in Florida and other states and foreign jurisdictions in which it operates.

~~(20)~~(21) Subsequent Events

~~Voluntary Petitions for Relief Under Chapter 11~~

On ~~November 14, 2018, Lamington Road Designated Activity Company (formerly known as Lamington Road Limited),~~September 16, 2019, the Company’s wholly-owned indirect Irish subsidiary ("Lamington"), and White Eagle General Partner, LLC, the Company’s wholly-owned indirect Delaware subsidiary ("WEGP"), filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court ~~for the District of Delaware. The Chapter 11 cases are being administered under case numbers 18-12615~~entered an order and 18-12614, respectively (together, the "Chapter 11 Cases"). Lamington is the limited partner and owns 99.99%, and WEGP is the general partner and owns 0.01%, of White Eagle. In its capacity as general partner, WEGP manages the affairs of White Eagle.

The commencement of the Chapter 11 Cases would constitute defaults and events of default under the terms of the Company’s Amended and Restated Senior Secured Indenture and the New Convertible Note Indenture. However, such defaults and events of default and their consequences were waived in advance of the Chapter 11 Cases by holders of a majority of the outstanding principal amounts of each of the 8.5% Senior Secured Notes and the New Convertible Notes, and consequently, the Company believes that no defaults, events of default or acceleration of the payment obligations thereunder, including principal or accrued interest, occurred under either the Amended and Restated Senior Secured Indenture or the New Convertible Note Indenture. The commencement of the Chapter 11 Cases constitutes an event of default underfinal decree closing the White Eagle Revolving Credit Facility, resulting in the principal and accrued interest due from White Eagle thereunder becoming immediately due and payable. Lamington and WEGP have pledged their respective interests in White Eagle to secure its obligations under the White Eagle Revolving Credit Facility. Any efforts by LNV Corporation, the lender under the White Eagle Revolving Credit Facility ("LNV"), or CLMG Corp., the administrative agent under the White Eagle Revolving Credit Facility ("CLMG"), to enforce such pledges by Lamington and WEGP of their respective interests in White Eagle in connection with the White Eagle Revolving Credit Facility are automatically stayed as a result of the commencement of the Chapter 11 Cases and LNV’s and CLMG’s rights of enforcement in respect of the White Eagle Revolving Credit Facility are subject to the applicable provisions of the Bankruptcy Code. In addition, on November 15, 2018, White Eagle, LNV and CLMG entered into an Agreement Regarding Rights and Remedies (the "Standstill Agreement"), pursuant to which LNV and CLMG agreed to refrain from exercising their rights and remedies in connection with the White Eagle Revolving Credit Facility, subject to the terms and provisions of the Standstill Agreement, until 12:00 p.m. noon Pacific time on November 26, 2018, to facilitate negotiations.Case.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity, and cash flows of our Company as of and for the periods presented below and should be read in conjunction with the financial statements and accompanying notes included with this Quarterly Report on Form 10-Q. This discussion contains ~~forward-looking~~forward looking statements that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by ~~forward-looking~~forward looking statements as a result of various factors. See ~~"Forward-Looking~~"Forward Looking Statements."

Business Overview

Incorporated in Florida, Emergent Capital, through its subsidiaries, owns ~~a portfolio of 590~~two life insurance policies, also referred to as life settlements, with a fair value of ~~approximately $588.9~~$1.3 million and an aggregate death benefit of approximately ~~$2.8 billion~~$12.0 million at ~~September 30, 2018.~~August 31, 2019. Additionally, through a subsidiary, the Company owns a 27.5% equity investment, having an estimated fair value of approximately $132.3 million at August 31, 2019, in White Eagle Asset Portfolio, LP ("White Eagle"), which was previously a wholly-owned subsidiary of the Company that holds a portfolio of life settlements. The Company primarily earns income ~~on its life insurance policies from changes~~through change in ~~their~~ fair value and ~~through~~ death ~~benefits.~~benefits from these two polices and change in fair value and distributions from its equity investment in White Eagle.

The Company has incurred substantial losses and reported negative cash flows from operating activities of ~~$34.0~~$8.5 million for the nine months ended ~~September 30, 2018~~August 31, 2019 and ~~$34.8~~$32.6 million for the ~~year~~nine months ended ~~December~~August 31, ~~2017.~~2018. As of ~~September 30, 2018,~~August 31, 2019, we had approximately ~~$31.6~~$8.8 million of cash and cash equivalents and certificates of deposit of ~~$1.0 million;~~$508,000; of this amount, approximately ~~$2.2~~$8.8 million is available to pay premiums on the two unencumbered policies for which such expenses will approximate $45,000 in 2019 and other overhead ~~expenses, with approximately $29.3 million being restricted by the White Eagle Revolving Credit Facility.~~expenses.

Liquidity

The Company’s ability to continue as a going concern is dependent on its ability to meet its liquidity needs through a combination of factors including but not limited to, the receipt of ~~death benefits~~distributions from ~~life insurance policy maturities, borrowings under the~~its investment in its equity investment in White Eagle ~~Revolving Credit Facility subject to results of ongoing negotiations with the lenders (see below),~~Asset Portfolio, strategic capital market raises ~~policy sales (subject to certain asset sale restrictions)~~ and cash on hand.

As of the filing date of this Form 10-Q, we had approximately ~~$31.0~~$26.8 million of cash and cash equivalents ~~and~~inclusive of certificates of deposit of ~~$500,000, of this amount, approximately $2.4 million is available for normal operations, with approximately $28.1 million being restricted by the White Eagle Revolving Credit Facility.~~$511,000. In considering our forecast for the next twelve months ~~and the White Eagle Revolving Credit Facility ongoing negotiations with the lender, these facts, aggregated~~ with the current cash balance as of the filing ~~for~~of this Form 10-Q, ~~creates a substantial doubt of~~ the ~~Company’s ability~~Company has sufficient resources to meet ~~their financial needs.~~its liquidity needs for the foreseeable future.

The accompanying consolidated financial statements are prepared on a going concern basis and do not include any adjustments that might result from uncertainty about the Company’s ability to continue as a going concern.

~~Recent~~

White Eagle Revolving Credit Facility Events

Repayment and Termination of the White Eagle Revolving Credit Facility

On ~~January 22, 2018,~~August 16, 2019, the Company entered into a ~~stock purchase~~subscription agreement (the ~~"Agreement"~~"Subscription Agreement") with ~~SB Holdings, Inc.~~Lamington Road ("Class B Limited Partner"), ~~a California corporation~~White Eagle, WEGP ("~~Holdings"~~Withdrawing General Partner"), and ~~Sherman, Clay & Co.~~Palomino JV, L.P. ("Palomino" or "Class A Limited Partner"), ~~an Indiana corporation and wholly-owned Subsidiary of Holdings~~in connection with the commitment letter signed on June 22, 2019 with Jade Mountain Partners, LLC ("~~Sherman, Clay"~~Jade Mountain"), pursuant to which ~~the Company agreed~~White Eagle sold to ~~purchase~~Palomino 72.5% of its limited partnership interests, consisting of all of the newly issued and outstanding ~~capital stock~~Class A and Class D interests, and WEGP sold to an affiliate of ~~Sherman, Clay from Holdings~~Jade Mountain (the "Manager") all of its general partnership interests (collectively, the "WE Investment") for ~~an initial~~a purchase price of ~~18,000,000 shares (the "Initial Shares")~~approximately $366.2 million and $8.0 million for the Class A and Class D interests, respectively. Pursuant to the Subscription Agreement, Lamington received 27.5% of the ~~Company’s common stock~~limited partnership interests of ~~which 2,700,000 shares will be held back~~White Eagle, consisting of all of the newly issued and outstanding Class B interests in exchange for ~~up to 18 months from~~all of its previously owned White Eagle limited partnership interests with a value of approximately $138.9 million on the closing to offset potential indemnified claims. The initial purchase price is subject to increase pursuant to earn-outs based on financial performance during the first year after the acquisition closes (the "Additional Shares") and, together with the Initial Shares, the "Consideration Shares") as provided for in the Agreement.date.

The ~~Agreement contains standard representations and warranties related to each party, and may be terminated prior to the closing under certain circumstances. The closing~~proceeds of the ~~purchase of Sherman, Clay under~~WE Investment were used to satisfy in full (i) the ~~Agreement (the "Purchase"~~White Eagle Revolving Credit Facility , and (ii) DIP Financing extended by CLMG Corp., as Administrative Agent ("CLMG") ~~is subject~~, as agent, and LNV, LNV Corporation, as Lender ("LNV"), to ~~a number of closing conditions, including certain regulatory approvals and obtaining financing for working capital and general corporate purposes.~~

InWhite Eagle, each in connection with the ~~consummation~~termination of the ~~Purchase,~~White Eagle Revolving Credit Facility and the ~~Company also agreed to, among other things, enter into a registration rights agreement~~release of the related liens on the collateral thereunder pursuant to ~~which it will register the resale~~a Master Termination Agreement dated as of August 16 2019 among WEGP, Lamington, White Eagle, Markley Asset Portfolio, LLC, CLMG, as administrative agent, LNV, as initial lender, Wilmington Trust, National Association, in its capacities as securities intermediary, custodian and agent, and Palomino (the "Master Termination Agreement"). The repayment and termination of the ~~Consideration Shares.~~White Eagle Revolving Credit Facility and the termination of the DIP Financing, which had not been drawn against, were in accordance with the Plan of Reorganization for Lamington, WEGP and White Eagle approved by the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") with respect to the previously announced voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code of Lamington, WEGP and White Eagle (the "Chapter 11 Cases").

The WE Investment was consummated, and the White Eagle Revolving Credit Facility was paid off in full and terminated, on August 16, 2019. The payoff totaled $402.5 million, which included payment directly to CLMG by Palomino of $374.2 million and payment to CLMG by White Eagle of $28.3 million, collectively sufficient to repay, under the White Eagle Revolving Credit Facility, the outstanding principal of $368.0 million, accrued and unpaid interest of $21.3 million plus, under the Plan of Reorganization, an early payment amount due to LNV of $7.4 million and lender-allowed claims of $5.8 million. Of the $374.2 million purchase price, $8.0 million was allocated to the Class D interests which amount is to be repaid in accordance with the distribution terms of the amended and restated Limited Partnership Agreement of White Eagle.

~~On July 10, 2018, Company, Holdings~~White Eagle received proceeds of approximately $366.2 million towards the sale of 72.5% of its life settlement and ~~Sherman, Clay & Co. entered into a letter agreement (the "Letter") terminating~~recognize gains of approximately $21.3 million which is included in gains on sale of life settlements in the ~~Agreement. The termination was effected by mutual written consent of~~condensed and consolidated financial statements.

See Note 5, "Condensed and Consolidated Financial Statements for Entities in Bankruptcy", to the ~~Parties pursuant to Section 7.01 of the Agreement, without any liability, obligation or penalty incurred by any Party.~~accompanying consolidated financial statements for further information.

During the nine months ended September 30, 2018, the Company received approval for shares of its common stocks to be traded on the OTCQX® Best Market. Trading on the OTCQX commenced on May 29, 2018 and will continue to trade under the ticker symbol "EMGC."

On September 7, 2018, the Board of Directors adopted resolutions to change the Company’s fiscal year end, and have the Company cause its direct and indirect subsidiaries change their fiscal year ends, from DecemberAugust 31, ~~to November 30, effective immediately. The Company will file a transition report on Form 10-K in accordance with SEC rules and regulations.~~

~~Revolving Credit Facility Events~~

~~Our indirect subsidiary,~~2019, White Eagle ~~is the owner~~experienced maturity of 588 life insurance policies with an aggregate death benefit of approximately $2.8 billion and a fair value of approximately $587.8 million at September 30, 2018. White Eagle pledged its policies as collateral to secure borrowings made under the White Eagle Revolving Credit Facility, which is used, among other things, to pay premiums on the life insurance policies owned by White Eagle. Borrowings under the White Eagle Revolving Credit Facility fund the payment of premiums on the life insurance policies that have been pledged as collateral for the White Eagle Revolving Credit Facility. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources."

~~During the nine months ended September 30, 2018,~~ 18 life insurance policies with face amounts totaling ~~$86.4~~$100.4 million, ~~matured,~~ resulting in a net gain of approximately ~~$48.1~~$70.3 million. The gains related to these maturities are included in income from changes in the fair value of life settlements in the ~~consolidated~~deconsolidated subsidiaries statements of operations for the nine months ended ~~September 30, 2018. All policy maturities during the quarter served as collateral under the White Eagle Revolving Credit Facility.~~August 31, 2019. Proceeds from maturities totaling ~~$68.0~~$92.5 million were received during the nine months ended ~~September 30, 2018, with $24.2 million awaiting distribution through~~August 31, 2019 and were used solely for the ~~waterfall. Approximately $44.2 million inclusive~~purposes permitted under the budget approved by the Bankruptcy Court including repayment of ~~$7.8 million collected during~~ the ~~year ended December 31, 2017, was utilized to repay borrowings, interest and expenses~~outstanding debt under the White Eagle Revolving Credit ~~Facility~~Facility.

See Note 12, "White Eagle Revolving Credit Facility", to the accompanying consolidated financial statements for further information.

Investment in Limited Partnership Events

In connection with the nine months ended September 30, 2018. Assuming we recognize no policy maturities, our estimated premiums for the remainder of 2018 would be $23.8 million. White Eagle would be eligible to borrow approximately $23.8 million of this amount to pay premiums on policies secured byInvestment, the White Eagle ~~Revolving Credit Facility with approximately $38,000 in estimated premiums required~~Limited Partnership Agreement of White Eagle was amended and restated (the "A&R LPA") to provide for the issuance of the Class A, B and D limited partnership interests, and for funding of an "Advance Facility" to maintain ~~the policies not pledged as collateral under the~~reserves sufficient to fund premiums, certain operating expenses of White Eagle ~~Revolving Credit~~and certain minimum payments to Lamington as the holder of the Class B interest holders. Pursuant to the A&R LPA, holders of Class A

interests are entitled to receive distributions on the amounts paid or contributed by them in relation to the Investment and funding of the Advance Facility after payment of premiums on the portfolio policies and other fees and expenses. The A&R LPA provides generally that holders of the Class A and Class B Interests receive distributions of proceeds of the assets of White Eagle based on their 72.5% and 27.5% ownership, respectively, after certain expenses and reserves are funded (including such minimum payments to Lamington totaling approximately $8.0 million per year for the first three (3) years and $4.0 million for the subsequent seven (7) years, provided that, commencing after year three (3), such minimum payments will be utilize to satisfy the Class D Return of $8.0 million, which was advanced at closing, plus the greater of $2.0 million or 11% per annum on such $8.0 million to the extent necessary to fully repay such Class D Return. The minimum payments to the Company will occur regardless of maturities with payments through the premium/expense reserve account when there are no maturity proceeds available for distribution as described below). However, the A&R LPA also provides that all payments to holders of the Class B interests (other than such minimum payments to Lamington during the first eight (8) years following the Closing Date) are fully subordinated to payments in respect of the minimum returns to holders of the Class A and Class D interests (including repayment of all amounts advanced in respect of the Advance Facility) and to any indemnification payments, if any, due to such holders and related indemnified persons pursuant to the indemnities afforded them in and in relation to the A&R LPA, Subscription Agreement, Master Termination Agreement and related documents. As of the closing of the Investment, Lamington Bermuda resigned as manager of the portfolio and was replaced by Jade Mountain or an affiliate thereof.

On August 16, 2019, Lamington also entered into (i) a pledge agreement (the "Pledge Agreement") pursuant to which it pledged the 27.5% limited partnership interests of White Eagle owned by it to Palomino and certain other secured parties in support of the payment and indemnification obligations described above, and (ii) an assumption agreement among White Eagle, Lamington, the Company and WEGP (the "Assumption Agreement") pursuant to which Lamington assumed all liabilities and obligations of White Eagle and WEGP as of ~~September 30, 2018.~~the closing date of the Transactions, and Lamington, the Company and WEGP agreed to terminate, waive and release any intercompany debt, obligations and liabilities of White Eagle to Lamington, the Company and WEGP. On August 16, 2019, Emergent entered into an indemnification agreement (the "Indemnification Agreement") pursuant to which it indemnified Wilmington Trust, National Association against claims and liabilities that may arise in relation to policies that have matured prior to the Closing Date but as to which Wilmington Trust, National Association has historically held title as securities intermediary.

On August 16, 2019, Lamington's capital contribution to White Eagle was an estimated fair value of approximately $138.9 million. The Company performed a valuation at August 31, 2019 resulting in a value of approximately $132.3 million.

Critical Accounting Policies

Critical Accounting Estimates

The preparation of the financial statements requires us to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. We base our judgments, estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions and conditions. We evaluate our judgments, estimates and assumptions on a regular basis and make changes accordingly. We believe that the judgments, estimates and assumptions involved in the accounting for income taxes, the valuation of life settlements, the valuation of the debt owing under the White Eagle Revolving Credit Facility have the greatest potential impact on our financial statements and accordingly believe these to be our critical accounting estimates.

Fair Value Measurement Guidance

We follow ASC 820, Fair Value Measurements and Disclosures, which defines fair value as an exit price representing the amount that would be received if an asset were sold or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. Level 1 relates to quoted prices in active markets for identical assets or liabilities. Level 2 relates to observable inputs other than quoted prices included in Level 1. Level 3 relates to unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Our investments in life insurance policies, investment in limited partnership and White Eagle Revolving Credit Facility debt are considered Level 3 as there is currently no active market where we are able to observe quoted prices for identical assets/liabilities and our valuation model incorporates significant inputs that are not observable. See Note ~~15,~~16, "Fair Value Measurements" of the notes to Consolidated Financial Statements for a discussion of our fair value measurement.

Fair Value Option

We have elected to account for life settlements using the fair value method. The fair value of the asset is the estimated amount that would be received to sell an asset in an orderly transaction between market participants at the measurement date. We calculate the fair value of the asset using a present value technique to estimate the fair value of its life settlements. The Company currently uses a probabilistic method of valuing life insurance policies, which the Company believes to be the preferred valuation method in the industry. The most significant assumptions are the estimates of life expectancy of the insured and the discount rate. See Note 8,10, "Life Settlements (Life Insurance Policies)" and Note ~~15,~~16, "Fair Value Measurements" of the notes to ~~Consolidated Financial Statements~~consolidated financial statements for further information.

We have elected to account for the investment in limited partnership using the fair value method. We calculate the fair value of the investment using a present value technique to estimate the fair value the limited partnership investment. The most significant assumptions are the estimates of life expectancy of the insured for the life insurance policies that are held by the partnership, the stipulated rate of return by the Class A Holder of the partnership, repayment of advances made by the Class A holder on the Company's behalf, distributions to the Company and the discount rate. See Note 11, "Investment in Limited Partnership" and Note 16, "Fair Value Measurements" of the notes to consolidated financial statements for further information.

We have elected to account for the debt under the White Eagle Revolving Credit Facility, which includes the interest in policy proceeds to the lender, using the fair value method. The fair value of the debt is the estimated amount that would have to be paid to transfer the debt to a market participant in an orderly transaction. We calculated the fair value of the debt using a discounted cash flow model taking into account the stated interest rate of the credit facility and probabilistic cash flows from the pledged policies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, our estimates are not necessarily indicative of the amounts that we, or holders of the instruments, could realize in a current market exchange. The most significant assumptions are the estimates of life expectancy of the insured and the discount rate. The use of assumptions and/or estimation methodologies could have a material effect on the estimated fair values.

Income Recognition

Our primary sources of income are in the form of changes in fair value of life settlements, ~~and~~ gains on life settlements, ~~net.~~net, change in fair value of investment in limited partnership and distributions from limited partnership. Our income recognition policies for this source of income is as follows:

Changes in Fair Value of Life Settlements—When we acquire certain life insurance policies, we initially record these investments at the transaction price, which is the fair value of the policy for those acquired upon relinquishment or the amount paid for policies acquired for cash. The fair value of the investment in insurance policies is evaluated at the end of each reporting period. Changes in the fair value of the investment based on evaluations are recorded as changes in fair value of life settlements in our consolidated statement of operations. The fair value is determined on a discounted cash flow basis that incorporates current life expectancy assumptions. The discount rate incorporates current information about market interest rates, the credit exposure to the insurance company that issued the life insurance policy and our estimate of the risk premium an investor in the policy would require. The Company recognizes income from life settlement maturities on the date we are in receipt of death notice or verified obituary of the insured. This income is the difference between the death benefits and fair values of the policy at the time of maturity.

Change in Fair Value of Investment in Limited Partnership — ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities requires that a reporting entity should account for its equity investments that are not consolidated or accounted for under the equity method at fair value, with changes to fair value recorded in current earnings. White Eagle previously valued its life settlement policies at fair value whose valuation are based on inputs that are both significant to the fair value measurement and unobservable. The Company now holds an equity investment of 27.5% in White Eagle whose only assets are these life settlement. Additionally, the investment includes a mezzanine financing which the Company assumed at closing which repayment by, and ultimate distributions to, the Company are based on a prescribed waterfall with a guaranteed 11% return to the majority owner partner. Given the nature of this ownership, fair value is not readily redeemable and inputs are not observable. The Company recognizes income from monthly distribution from the partnership as prescribed by the Subscription Agreement.

Deferred Debt Costs

Deferred debt costs include costs incurred in connection with acquiring and maintaining debt arrangements. These costs are directly deducted from the carrying amount of the liability in the consolidated balance sheets, are amortized over the life of the related debt using the effective interest method and are classified as interest expense in the accompanying consolidated statement of operations. These deferred costs are related to the Company's 8.5% Convertible Notes, 5% Convertible Notes and 8.5% Senior Secured Notes. The Company did not recognize any deferred debt costs on the White Eagle Revolving Credit Facility given all costs were expensed due to electing the fair value option in valuing the White Eagle Revolving Credit Facility.

Income Taxes

We account for income taxes in accordance with ASC 740, Income Taxes. Under ASC 740, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, we consider tax regulations of the jurisdictions in which we operate, estimates of future taxable income and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies varies, adjustments to the carrying value of the deferred tax assets and liabilities may be required. Valuation allowances are based on the "more likely than not" criteria of ASC 740.

The accounting for uncertain tax positions guidance under ASC 740 requires that we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. We recognize interest and penalties (if any) on uncertain tax positions as a component of income tax expense.

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act ("TCJA"). TCJA created a new regime under Section 951A referred to as the Global Intangible Low-Tax Income (GILTI). In general, under the GILTI, income earned in excess of a deemed return on tangible assets held by a controlled foreign corporation must be included as U.S. taxable income on a current basis by its U.S. shareholders. The GILTI is effective for tax years beginning after December 31, 2017. As applied to the Company, the GILTI will be effective for the Company’s tax year that begins December 1, 2018. The Company is in the process of exploring tax planning strategies to mitigate or eliminate the potential impacts of the GILTI. On January 10, 2018, the FASB provided guidance on how to account for deferred tax assets and liabilities expected to reverse in future years as GILTI. The FASB provided that a Company may either (1) elect to treat taxes due on future U.S. inclusions of GILTI as a current-period expense when incurred or (2) factor such amounts into the Company’s measurement of its deferred taxes. For ASC 740 purposes, the Company has adopted an accounting policy to treat any future GILTI inclusion as a current-period expense instead of providing for U.S. deferred taxes on all temporary differences related to future GILTI items.

Stock-Based Compensation

We have adopted ASC 718, Compensation—Stock Compensation. ASC 718 addresses accounting for share-based awards, including stock options, restricted stock, performance shares and warrants, with compensation expense measured using fair value and recorded over the requisite service or performance period of the award. The fair value of equity instruments will be determined based on a valuation using an option pricing model that takes into account various assumptions that are subjective. Key assumptions used in the valuation will include the expected term of the equity award taking into account both the contractual term of the award, the effects of expected exercise and post-vesting termination behavior, expected volatility, expected dividends and the risk-free interest rate for the expected term of the award. Compensation expense associated with performance shares is only recognized to the extent that it is probable the performance measurement will be met.

Held-for-sale and discontinued operations

The Company reports a business as held-for-sale when management has approved or received approval to sell the business and is committed to a formal plan, the business is available for immediate sale, the business is being actively marketed, the sale is anticipated to occur during the ensuing year and certain other specified criteria are met. A business classified as held-for-sale is recorded at the lower of its carrying amount or estimated fair value less cost to sell. If the carrying amount of the business exceeds its estimated fair value, a loss is recognized. Depreciation is not recorded on assets of a business classified as held-for-sale. Assets and liabilities related to a business classified as held-for-sale are segregated in the Consolidated Balance Sheet and major classes are separately disclosed in the notes to the Consolidated Financial Statements commencing in the period in which the business is classified as held-for-sale. The Company reports the results of operations of a business as discontinued operations if the business is classified as held-for-sale, the operations and cash flows of the business have been or will be eliminated from the ongoing operations of the Company as a result of a disposal transaction and the Company will not have any significant continuing involvement in the operations of the business after the disposal transaction. The results of discontinued operations are reported in Discontinued Operations in the Consolidated Statement of Operations for current and prior periods commencing in the period in which the business meets the criteria of a discontinued operation, and include any gain or loss recognized on closing or adjustment of the carrying amount to fair value less cost to sell. During the fourth quarter of 2013, the Company sold substantially all of our structured settlements business. As a result, the Company has classified its structured settlement operating results as discontinued operations.

Foreign Currency

The Company owns certain foreign subsidiaries formed under the laws of Ireland, Bahamas and Bermuda. These foreign subsidiaries utilize the U.S. dollar as their functional currency. The foreign subsidiaries' financial statements are denominated in U.S. dollars and therefore, there are no translation gains and losses resulting from translating the financial statements at exchange rates other than the functional currency. Any gains and losses resulting from foreign currency transactions (transactions denominated in a currency other than the subsidiaries' functional currency) are included in income. These gains and losses are immaterial to the Company's financial statements.

Deconsolidation

Lamington and its subsidiaries’ (White Eagle and WEGP) filing for reorganization was a reconsideration event for Emergent Capital to reevaluate whether consolidation of Lamington and its subsidiaries (White Eagle, WEGP and Lamington Road Bermuda Limited and together with Lamington, the “Deconsolidated Entities" continued to be appropriate. Under ASC 810, Consolidation, specifically ASC 810-10-15, consolidation of a majority-owned subsidiary is precluded where control does not rest with the majority owners, for instance, where the subsidiary is in legal reorganization or bankruptcy. Accordingly, when a subsidiary files for bankruptcy, it is appropriate for the parent to deconsolidate the subsidiary. Under ASC 810, this loss of control would likely trigger a gain or loss for the parent as the parent would remeasure its retained noncontrolling investment at fair value. We assessed the inherent uncertainties associated with the outcome of the Chapter 11 reorganization process and the anticipated duration thereof, and concluded that it was appropriate to deconsolidate Lamington and its subsidiaries effective on the Petition Date. Effective August 17, 2019, the entities were deemed to have emerged from bankruptcy and were no longer deconsolidated.

Lamington and WEGP had pledged their respective interests in White Eagle to secure its obligations under the White Eagle Revolving Credit Facility. With the termination of the facility, this pledge was released. There were no outstanding third party liabilities for either Lamington or WEGP at August 16, 2019 besides intercompany obligations to Emergent.

On September 16, 2019, subsequent to the quarter end, the Bankruptcy Court entered an order and final decree closing the White Eagle Chapter 11 Case. The Lamington and WEGP case were not yet dismissed as of the filing date of this Form 10-Q.

Although the final decree was filed after the quarter end, August 16, 2019 is considered to be the reconsideration date which is the date all material unresolved conditions precedent to the plan becoming binding are resolved. This date is also considered the consolidation date for both Lamington and WEGP given the pledge of their interest in White Eagle was also terminated and there were no outstanding third party liabilities pending.

ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities was effective for calendar year-end public business entities in 2018. Under the new guidance, a reporting entity should account for its equity investments that are not consolidated or accounted for under the equity method at fair value, with changes to fair value recorded in current earnings. Lamington's main subsidiary, White Eagle, carries its life settlements policies and debt under the White Eagle Revolving Credit Facility at fair value, these valuations are based on inputs that are both significant to the fair value measurement and unobservable. As a result, the Company adopted ASU 2016-01 to value its investment in Lamington during the eleven months ended November 30, 2018. The calculation was performed consistent with ASC 820, Fair Value Measurement with changes in fair value recorded in current earnings.

Related Party Relationship

Upon filing for Chapter 11 and the subsequent deconsolidation, transactions with Lamington are no longer eliminated in consolidation and are treated as related party transactions for Emergent Capital up to August 16, 2019. See Note 5 "Condensed and Consolidated Financial Statements For Entities in Bankruptcy" for all transactions between Emergent Capital and Lamington.

Accounting Changes

Note 3, "Recent Accounting Pronouncements," of the Notes to Consolidated Financial Statements discusses accounting standards adopted in ~~2018,~~2019, as well as accounting standards recently issued but not yet required to be adopted and the expected impact of these changes in accounting standards. Any material impact of adoption is discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the Notes to the Consolidated Financial Statements.

Selected Operating Data (dollars in thousands):


										Three Months Ended August 31,				Nine Months Ended August 31,
	Three Months Ended September 30,				Nine Months Ended September 30,					2019		2018		2019		2018
	2018		2017		2018		2017		��
End of Period — Policies Owned
Number of policies owned	590		611		590		611			2		591		2		591
Average age of insured	84.1		83.2		84.1		83.2			78.4		84.1		78.4		84.1
Average death benefit per policy	$	4,737	$	4,726	$	4,737	$	4,726		$	6,000	$	4,739	$	6,000	$	4,739
Average Life Expectancy — Calculated LE (Years)	7.8		8.5		7.8		8.5			11.6		7.9		11.6		7.9
Aggregate Death Benefit	$	2,794,652	$	2,887,827	$	2,794,652	$	2,887,827		$	12,000	$	2,800,613	$	12,000	$	2,800,613
Aggregate fair value	$	588,853	$	555,222	$	588,853	$	555,222		$	1,254	$	575,837	$	1,254	$	575,837
Monthly premium — average per policy	$	13.9	$	11.8	$	13.9	$	11.8		$	7.7	$	13.8	$	7.7	$	13.8

Period Maturities
Number of policies matured	6		3		18		10			—		3		—		15
Average age of insured at maturity	87.1		80.3		85.6		82.6			—		89.2		—		89.2
Average life expectancy - Calculated LE (Years)	4.7		6.8		4.7		4.4			—		2.7		—		2.7
Aggregate death benefit	$	32,500	$	16,500	$	86,435	$	59,573		$	—	$	14,250	$	—	$	68,185
Gains on maturity	$	20,091	$	11,597	$	48,091	$	30,603		$	—	$	7,115	$	—	$	35,114
Proceeds collected	$	32,000	$	8,200	$	68,045	$	34,373		$	—	$	20,500	$	—	$	52,304

White Eagle Portfolio - Deconsolidated*
Period Maturities
Number of policies matured										6		—		18		—
Average age of insured at maturity										87.4		—		86.1		—
Average life expectancy - Calculated LE (Years)										3.6		—		5.9		—
Aggregate death benefit										$	31,768	$	—	$	100,374	$	—
Gains on maturity										$	19,999	$	—	$	70,300	$	—
Proceeds collected										$	60,163	$	—	$	92,505	$	—



Florida		30-0663473
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



Large accelerated filer	¨	¨	Accelerated filer	¨
Non-accelerated filer	ý	ý	Smaller reporting company	ý
			Emerging growth company	¨



	Page No.
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)	5
Consolidated Balance ~~Sheet~~Sheets as of ~~September~~August 31, 2019 and November 30, 2018 ~~and December 31, 2017~~	5
Consolidated Statements of Operations for the three ~~months~~ and nine months ended ~~September 30,~~August 31, 2019 and 2018 ~~and 2017~~	6
Consolidated Statements of Stockholders' Deficit/Equity for the nine months ended ~~September 30,~~August 31, 2019 and 2018	7
Consolidated Statements of Cash Flows for the nine months ended ~~September 30,~~August 31, 2019 and 2018 ~~and 2017~~	8
Notes to Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	4262
Item 3. Quantitative and Qualitative Disclosures About Market Risk	6182
Item 4. Controls and Procedures	6283

PART II — OTHER INFORMATION

Item 1. Litigation	6384
Item 1A. Risk Factors	6384
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	6384
Item 3. Defaults Upon Senior Securities	6384
Item 4. Mine Safety Disclosures	6384
Item 5. Other Information	6384
Item 6. Exhibits	6485



	September 30, 2018			December 31, 2017*
	(Unaudited)
	(In thousands except share data)
ASSETS
Assets
Cash and cash equivalents	$	2,209		$	18,131
Cash and cash equivalents (VIE Note 4)	29,347			13,136
Certificates of deposit	1,016			1,010
Prepaid expenses and other assets	767			617
Prepaid expenses and other assets (VIE Note 4)	48			53
Deposits - other	1,377			1,377
Life settlements, at estimated fair value (Note 15)	1,043			750
Life settlements, at estimated fair value (VIE Note 4 & Note 15)	587,810			566,742
Receivable for maturity of life settlements (VIE Note 4)	48,435			30,045
Fixed assets, net	90			145
Investment in affiliates	2,384			2,384
Total assets	$	674,526		$	634,390
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Accounts payable and accrued expenses	$	1,831		$	2,015
Accounts payable and accrued expenses (VIE Note 4)	1,243			753
Other liabilities	217			451
Other liabilities (VIE Note 4)	48			—
Interest payable - 8.5% Convertible Notes (Note 10)	21			46
8.5% Convertible Notes, net of discount and deferred debt costs (Note 10)	1,160			1,098
Interest payable - 5.0% Convertible Notes (Note 11)	485			1,432
5.0% Convertible Notes, net of discount and deferred debt costs (Note 11)	69,535			68,654
Interest payable - 8.5% Senior Secured Notes (Note 13)	124			132
8.5% Senior Secured Notes, net of deferred debt costs (Note 13)	34,124			33,927
White Eagle Revolving Credit Facility, at estimated fair value (VIE Note 4 & Note 9)	367,931			329,240
Total liabilities	476,719			437,748
Commitments and Contingencies (Note 17)
Stockholders’ Equity
Common stock (par value $0.01 per share, 415,000,000 authorized at September 30, 2018 and December 31, 2017; 159,028,458 issued and 158,420,458 outstanding as of September 30, 2018;158,495,399 issued and 157,887,399 outstanding as of December 31, 2017)	1,590			1,585
Preferred stock (par value $0.01 per share, 40,000,000 authorized; 0 issued and outstanding as of September 30, 2018 and December 31, 2017)	—			—
Treasury Stock, net of issuance cost (608,000 shares as of September 30, 2018 and December 31, 2017)	(2,534		)	(2,534		)
Additional paid-in-capital	334,118			333,629
Accumulated deficit	(135,367		)	(136,038		)
Total stockholders’ equity	197,807			196,642
Total liabilities and stockholders’ equity	$	674,526		$	634,390



	August 31, 2019			November 30, 2018*
	(Unaudited)
	(In thousands except share data)
ASSETS
Assets
Cash and cash equivalents	$	8,780		$	1,209
Certificates of deposit	508			500
Prepaid expenses and other assets	844			657
Deposits - other	1,377			1,377
Life settlements, at estimated fair value	1,254			1,172
Receivable for maturity of life settlements	17,768			—
Fixed assets, net	28			78
Investment in limited partnership, at estimated fair value (Note 11)	132,334			—
Investment in deconsolidated subsidiaries, at estimated fair value (Note 4)	—			128,795
Investment in affiliate	2,384			2,384
Deferred tax asset	—			576
Total assets	$	165,277		$	136,748
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Accounts payable and accrued expenses	$	2,093		$	2,446
Other liabilities	100			194
Interest payable - 8.5% Convertible Notes (Note 13)	—			37
8.5% Convertible Notes, net of discount and deferred debt costs (Note 13)	—			1,173
Interest payable - 5.0% Convertible Notes (Note 14)	169			1,116
5.0% Convertible Notes, net of discount and deferred debt costs (Note 14)	70,697			69,742
Interest payable - 8.5% Senior Secured Notes (Note 15)	1,091			628
8.5% Senior Secured Notes, net of deferred debt costs (Note 15)	44,042			34,170
Current tax liability	2,642			—
Total liabilities	120,834			109,506
Commitments and Contingencies (Note 18)
Stockholders’ Equity
Common stock (par value $0.01 per share, 415,000,000 authorized at August 31, 2019 and November 30, 2018; 158,659,803 issued and 158,051,803 outstanding as of August 31, 2019; 158,733,928 issued and 158,125,928 outstanding as of November 30, 2018)	1,587			1,587
Preferred stock (par value $0.01 per share, 40,000,000 authorized; 0 issued and outstanding as of August 31, 2019 and November 30, 2018)	—			—
Treasury Stock, net of issuance cost (608,000 shares as of August 31, 2019 and November 30, 2018)	(2,534		)	(2,534		)
Additional paid-in-capital	334,488			334,198
Accumulated deficit	(289,098		)	(306,009		)
Total stockholders’ equity	44,443			27,242
Total liabilities and stockholders’ equity	$	165,277		$	136,748



Title of each class	Trading Symbol(s)	Name of each exchange on which registered


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended August 31,						For the Nine Months Ended August 31,
	2018			2017			2018			2017			2019			2018			2019			2018
	(in thousands, except share and per share data)												(in thousands, except share and per share data)
Income
Change in fair value of life settlements (Notes 8 & 15)	$	29,299		$	24,372		$	40,219		$	53,294
Change in fair value of life settlements (Notes 10 & 16)													$	(42	)	$	5,404		$	(37	)	$	19,299
Change in fair value of investment in limited partnership													(5,821		)	—			(5,821		)	—
Change in fair value of investment in deconsolidated subsidiaries (Notes 4 & 16)													90,710			—			37,941			—
Other income	415			116			649			245			2,011			153			2,028			396
Total income	29,714			24,488			40,868			53,539			86,858			5,557			34,111			19,695
Expenses
Interest expense	7,982			9,773			23,383			25,471			2,832			7,979			8,370			23,398
Loss on extinguishment of debt	—			2,018			—			2,018
Change in fair value of White Eagle Revolving Credit Facility (Notes 9 & 15)	6,566			1,163			4,189			11,209
Change in fair value of White Eagle Revolving Credit Facility (Notes 12 & 16)													—			(7,037		)	—			(11,663		)
Personnel costs	623			2,040			2,329			4,174			694			800			1,001			2,460
Legal fees	446			821			3,080			2,473			1,448			552			2,117			3,478
Professional fees	1,755			667			4,654			3,475			1,142			1,875			1,470			4,497
Insurance	193			198			590			587			270			193			666			592
Other selling, general and administrative expenses	398			381			1,370			1,294			276			394			399			1,407
Total expenses	17,963			17,061			39,595			50,701			6,662			4,756			14,023			24,169
Income (loss) from continuing operations before income taxes	11,751			7,427			1,273			2,838			80,196			801			20,088			(4,474		)
(Benefit) provision for income taxes	(2,537		)	3,210			584			3,210			(5		)	3,094			3,213			(136		)
Net income (loss) from continuing operations	$	14,288		$	4,217		$	689		$	(372	)	$	80,201		$	(2,293	)	$	16,875		$	(4,338	)
Discontinued Operations:
Income (loss) from discontinued operations before income taxes	(13		)	(33		)	(18		)	(257		)	70			(17		)	36			(14		)
(Benefit) provision for income taxes	—			—			—			—			—			—			—			—
Net income (loss) from discontinued operations	(13		)	(33		)	(18		)	(257		)	70			(17		)	36			(14		)
Net income (loss)	$	14,275		$	4,184		$	671		$	(629	)	$	80,271		$	(2,310	)	$	16,911		$	(4,352	)
Basic income (loss) per share:
Basic income (loss) per common share:
Continuing operations	$	0.09		$	0.04		$	—		$	(0.01	)	$	0.51		$	(0.01	)	$	0.11		$	(0.03	)
Discontinued operations	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Net income (loss) - basic	$	0.09		$	0.04		$	—		$	(0.01	)	$	0.51		$	(0.01	)	$	0.11		$	(0.03	)
Diluted income (loss) per share:
Continuing operations	$	0.07		$	0.03		$	—		$	(0.01	)	$	0.41		$	(0.01	)	$	0.10		$	(0.03	)
Discontinued operations	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Net income (loss) - diluted	$	0.07		$	0.03		$	—		$	(0.01	)	$	0.41		$	(0.01	)	$	0.10		$	(0.03	)
Weighted average shares outstanding:
Basic	155,872,138			115,462,646			155,824,327			57,580,062			156,968,470			158,305,635			156,949,425			157,919,215
Diluted	210,535,600			137,083,825			174,415,402			57,580,062			195,979,957			158,305,635			194,867,908			157,919,215



	Common Stock				Treasury Stock					Additional Paid-in Capital			Accumulated Deficit			Total
	Shares		Amount		Shares		Amount			Additional Paid-in Capital			Accumulated Deficit			Total
	(in thousands, except share data)
Balance, January 1, 2018	158,495,399		$	1,585	(608,000	)	$	(2,534	)	$	333,629		$	(136,038	)	$	196,642
Net income	—		—		—		—			—			671			671
Issue of common stock, net	25,000		—		—		—			9			—			9
Stock-based compensation	550,000		5		—		—			485			—			490
Retirement of common stock	(41,941	)	—		—		—			(5		)	—			(5		)
Balance, September 30, 2018	159,028,458		$	1,590	(608,000	)	$	(2,534	)	$	334,118		$	(135,367	)	$	197,807



Nine Months Ended August 31, 2019
	Common Stock				Treasury Stock					Additional Paid-in Capital		Accumulated Deficit			Total
	Shares		Amount		Shares		Amount			Additional Paid-in Capital		Accumulated Deficit			Total
	(in thousands, except share data)
Balance, December 1, 2018	158,733,928		$	1,587	(608,000	)	$	(2,534	)	$	334,198	$	(306,009	)	$	27,242
Net income/(loss)	—		—		—		—			—		(37,476		)	(37,476		)
Stock-based compensation	—		—		—		—			98		—			98
Balance, February 28, 2019	158,733,928		$	1,587	(608,000	)	$	(2,534	)	$	334,296	$	(343,485	)	$	(10,136	)
Net income/(loss)	—		—		—		—			—		(25,884		)	(25,884		)
Stock-based compensation	—		—		—		—			97		—			97
Retirement of common stock	(74,125	)	—		—		—			—		—			—
Balance, May 31, 2019	158,659,803		$	1,587	(608,000	)	$	(2,534	)	$	334,393	$	(369,369	)	$	(35,923	)
Net income/(loss)	—		—		—		—			—		80,271			80,271
Stock-based compensation	—		—		—		—			95		—			95
Balance, August 31, 2019	158,659,803		$	1,587	(608,000	)	$	(2,534	)	$	334,488	$	(289,098	)	$	44,443



Nine Months Ended August 31, 2018
	Common Stock				Treasury Stock					Additional Paid-in Capital			Accumulated Deficit			Total
	Shares		Amount		Shares		Amount			Additional Paid-in Capital			Accumulated Deficit			Total
	(in thousands, except share data)
Balance, December 1, 2017	156,515,399		$	1,565	(608,000	)	$	(2,534	)	$	333,631		$	(143,718	)	$	188,944
Net income/(loss)	—		—		—		—			—			4,851			4,851
Stock-based compensation	2,000,000		20		—		—			121			—			141
Retirement of common stock	(40,000	)			—		—			(91		)	—			(91		)
Balance, February 28, 2018	158,475,399		$	1,585	(608,000	)	$	(2,534	)	$	333,661		$	(138,867	)	$	193,845
Net income/(loss)	—		—		—		—			—			(6,893		)	(6,893		)
Stock-based compensation	150,000		1		—		—			122			—			123
Issue of common stock, net	25,000		—		—		—			9			—			9
Balance, May 31, 2018	158,650,399		$	1,586	(608,000	)	$	(2,534	)	$	333,792		$	(145,760	)	$	187,084
Net income/(loss)	—		—		—		—			—			(2,310		)	(2,310		)
Stock-based compensation	400,000		4		—		—			207			—			211
Retirement of common stock	(21,941	)			—		—			(4		)	—			(4		)
Balance, August 31, 2018	159,028,458		$	1,590	(608,000	)	$	(2,534	)	$	333,995		$	(148,070	)	$	184,981



Investment in Lamington at December 1, 2018	$	128,795
Less: Change in fair value	37,941
Investment in Lamington at August 16, 2019	$	166,736



			Change in Fair Value
	November 30, 2018		December 1, 2018 to August 16, 2019			August 16, 2019
Equity investment	$	66,251	$	(45,847	)	$	20,404
Promissory notes	56,596		89,736			146,332
Other liabilities	5,948		(5,948		)	—
Total investment	$	128,795	$	37,941		$	166,736



	August 31, 2019		November 30, 2018
	(Unaudited)
	(In thousands except share data)
ASSETS
Assets
Cash and cash equivalents	$	—	$	33,719
Prepaid expenses and other assets	—		68
Investment in life settlements, at estimated fair value	—		505,235
Receivable for maturity of life settlements	—		27,700
Total assets	$	—	$	566,722

LIABILITIES AND STOCKHOLDERS' DEFICIT/EQUITY
Liabilities
Accounts payable and accrued expenses	—		1,410
Other liabilities (subject to compromise)*	—		5,997
Revolving Credit Facility debt, at estimated fair value	—		346,671
Promissory notes payable (subject to compromise)*	—		137,813
Promissory notes interest payable (subject to compromise)*	—		8,580
Total liabilities	—		500,471

Share Capital (1 share of $1 authorized and issued)	—		—
Additional paid in capital	—		60,602
Accumulated deficit/retained earnings	—		5,649
Total stockholders' deficit/equity	—		66,251
Total liabilities and stockholders' equity	$	—	$	566,722



	Primary Beneficiary				Not Primary Beneficiary
	Consolidated VIE				Non-consolidated VIE
	Assets		Liabilities		Total Assets		Maximum Exposure To Loss
September 30, 2018	$	665,640	$	369,222	$	2,384	$	2,384
December 31, 2017	$	609,976	$	329,993	$	2,384	$	2,384


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended August 31,					For the Nine Months Ended August 31,
	2018(1)			2017(3)			2018(2)			2017(3)(4)			2019(1)		2018(2)			2019(3)		2018(4)
Income (loss) per share:
Numerator:
Net income (loss) from continuing operations	$	14,288		$	4,217		$	689		$	(372	)	$	80,201	$	(2,293	)	$	16,875	$	(4,338	)
Net income (loss) from discontinued operations	(13		)	(33		)	(18		)	(257		)	70		(17		)	36		(14		)
Numerator for basic EPS - net income (loss) attributable to common stockholders	$	14,275		$	4,184		$	671		$	(629	)	$	80,271	$	(2,310	)	$	16,911	$	(4,352	)
Add back convertible notes interest	1,306			—			3,862			—			1,095		—			3,270		—
Numerator for diluted earnings per share - net income (loss) attributable to common stockholders	15,581			4,184			4,533			(629		)	$	81,296	$	(2,293	)	$	20,145	$	(4,338	)
Basic income (loss) per common share:
Basic income (loss) from continuing operations	$	0.09		$	0.04		$	—		$	(0.01	)	$	0.51	$	(0.01	)	$	0.11	$	(0.03	)
Basic income (loss) from discontinued operations	—			—			—			—			—		—			—		—
Basic income (loss) per share available to common shareholders	$	0.09		$	0.04		$	—		$	(0.01	)	$	0.51	$	(0.01	)	$	0.11	$	(0.03	)
Diluted income (loss) per common share:
Diluted income (loss) from continuing operations	0.07			$	0.03		$	—		$	(0.01	)	$	0.41	$	(0.01	)	$	0.10	$	(0.03	)
Diluted income (loss) from discontinued operations	—			—			—			—			—		—			—		—
Diluted income (loss) per share available to common shareholders	$	0.07		$	0.03		$	—		$	(0.01	)	$	0.41	$	(0.01	)	$	0.10	$	(0.03	)
Denominator:
Basic	155,872,138			115,462,646			155,824,327			57,580,062			156,968,470		158,305,635			156,949,425		157,919,215
Diluted	210,535,600			137,083,825			174,415,402			57,580,062			195,979,957		158,305,635			194,867,908		157,919,215



Remaining Life Expectancy (In Years)*	Number of Life Settlement Contracts	Estimated Fair Value		Face Value
0 - 1	6	$	23,575	$	28,540
1 - 2	16	37,103		58,465
2 - 3	29	63,772		124,616
3 - 4	42	69,064		164,538
4 - 5	57	99,244		285,847
Thereafter	440	296,095		2,132,646
Total	590	$	588,853	$	2,794,652



Remaining Life Expectancy (In Years)*	Number of Life Settlement Contracts	Fair Value		Face Value
0-1	6	$	24,221	$	28,796
1-2	12	30,828		46,390
2-3	31	72,343		126,402
3-4	37	57,874		139,447
4-5	46	77,719		217,450
Thereafter	454	242,251		2,217,430
Total	586	$	505,236	$	2,775,915



Remaining Life Expectancy (In Years)*	Number of Life Settlement Contracts	Estimated Fair Value		Face Value
0-1	9	$	29,520	$	36,474
1-2	13	30,362		42,718
2-3	25	46,609		92,780
3-4	32	68,439		168,946
4-5	60	98,516		281,865
Thereafter	469	294,046		2,257,704
Total	608	$	567,492	$	2,880,487



Remainder of 2018	$	23,649
2019	100,689
Remainder of 2019			$	45
2020	103,875		191
2021	103,316		222
2022	99,404		254
2023			286
Thereafter	794,442		4,989
	$	1,225,375	$	5,987


(1)	The computation of diluted EPS does not include 85,000 shares of common stock underlying options, 100,000 shares of stock appreciation rights and 2,000,000 shares of common stock underlying warrants, as the effect of their inclusion would have been anti-dilutive.


(3)	The computation of diluted EPS ~~did~~does not include ~~122,522 shares of restricted stock, 556,827~~85,000 shares of common stock underlying options, ~~6,240,521~~100,000 shares of stock appreciation rights, 1,083,333 shares of restricted stock and 44,500,000shares of common stock underlying warrants, as the effect of their inclusion would have been anti-dilutive.


~~(4)~~	~~The computation of diluted EPS did not include~~ ~~21,621,179~~ ~~warrants as the effect of their inclusion would have been anti-dilutive.~~


Common Stock Options	Number of Shares		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value		Number of Shares	Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Options outstanding, January 1, 2018	542,102		$	8.75	1.33	$	—
Outstanding Balance, December 1, 2018								85,000	$	6.94	1.50	$	—
Options granted	—		—		—			—	—		—
Options exercised	—		—		—			—	—		—
Options forfeited	(457,102	)	$	9.09	—			—	$	—	—
Options expired	—		—		—			—	—		—
Options outstanding, September 30, 2018	85,000		$	6.94	1.68	$	—
Exercisable at September 30, 2018	85,000		$	6.94	1.68
Unvested at September 30, 2018	—		—		—	$	—
Options outstanding, August 31, 2019								85,000	$	6.94	0.75	$	—
Exercisable at August 31, 2019								85,000	$	6.94	0.75
Unvested at August 31, 2019								—	—		—	$	—



Common Unvested Shares	Number of Shares
Outstanding ~~January~~Balance, December 1, 2018	~~2,102,522~~1,400,000
Granted	~~550,000~~—
Vested	(~~482,522~~316,667	)
Forfeited	~~(20,000~~—	)
Outstanding ~~September 30, 2018~~August 31, 2019	~~2,150,000~~1,083,333


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended August 31,						Nine Months Ended August 31,
	2018			2017			2018			2017			2019			2018			2019			2018
Total income	$	—		$	—		$	17		$	33		$	—		$	—		$	—		$	17
Total expenses	13			33			35			$	290		(70		)	18			(36		)	32
Income (loss) before income taxes	(13		)	(33		)	(18		)	(257		)	70			(18		)	36			(15		)
(Benefit) provision for income taxes	—			—			—			—			—			—			—			—
Net income (loss) from discontinued operations, net of income taxes	$	(13	)	$	(33	)	$	(18	)	$	(257	)	$	70		$	(18	)	$	36		$	(15	)



Remaining Life Expectancy (In Years)	Number of Life Settlement Contracts	Fair Value		Face Value
0-1	—	$	—	$	—
1-2	—	—		—
2-3	—	—		—
3-4	—	—		—
4-5	—	—		—
Thereafter	2	1,254		12,000
Total	2	$	1,254	$	12,000



Premium/Expense Reserve Account	Three Months Ended August 31, 2019		Nine Months Ended August 31, 2019
	Amount				Use of Proceeds
First	$	8,210	$	8,210	Premiums, Expenses and Manager Fees
Second	—		—		Minimum Class B Interest Monthly Distribution - after three years, Class D Returns takes priority until paid in full
Third	—		—		Minimum Class B Interest Monthly Distribution
Fourth	—		—		Retained For Premium/Expense to Cover Three Months of Transactions, excess to be sent to the Collection Account
	$	8,210	$	8,210



Collection Account	Three Months Ended August 31, 2019		Nine Months Ended August 31, 2019
Priority	Amount				Use of Proceeds
First	$	—	$	—	Premium/Expense Reserve Account - to cover next three months of premiums and expense
Second	—		—		Class A Minimum Return Cumulative Amount*
Third	—		—		Minimum Class B Interest Monthly Distribution
Fourth	—		—		Re-balancing the Total Return Distributions with 72.5% to the Class A Limited Partner and 27.5% to Class B Limited Partner
Fifth	—		—		72.5% to the Class A Limited Partner and 27.5% to the Class B Limited Partner
	$	—	$	—



LTV	Premiums, Interest & Other Fees	Principal	Distribution to White Eagle - 55%	Lender Participation - 45%
N/A	100%	—%	—%	—%
>65%	N/A	100%	—%	—%
50-65%	N/A	70%	16.5%	13.5%
35-50%	N/A	55%	24.8%	20.3%
0-35%	N/A	45%	30.3%	24.8%



Collection account balance at December 1, 2018	$	28,059
Face value collected in current quarter	60,163
Face value collected in prior quarters	32,342
Other collections *	2,575
	$	123,139

Expenses paid from the collection account Post-Petition
Premiums paid 2019	$	(65,905	)
Interest expenses	(28,331		)
Payment toward principal	(1,804		)
White Eagle credit facility expenses	(9,304		)
Refund of premium payments advanced by parent	(3,000		)
Lender allowed claim-Beal	(5,839		)
Transfers of remaining funds to Lamington	(8,956		)
	$	(123,139	)

Collection account balance at August 16, 2019**	$	—



	Three Months Ended September 30, 2018		Nine Months Ended September 30, 2018
Clause	Amount				Use of Proceeds
First:	$	84	$	251	Custodian and Securities Intermediary
Second:	—		—		White Eagle - Ongoing Maintenance Cost Reimbursable
Third:	—		—		Administrative Agent - Protective Advances
Fourth:	26		43		Administrative Agent - Administrative Agent Fee and Legal Expense Reimbursement
Fifth:	5,844		16,716		Administrative Agent - Accrued and Unpaid Interest
Sixth:	6,854		26,397		Administrative Agent - Required Amortization
Seventh:	—		—		Administrative Agent - Amortization Shortfall
Eighth:	—		340		Administrative Agent - Participation Interest
Ninth:	—		—		Reserved - $0
Tenth:	—		—		Administrative Agent Aggregate Unpaid Participation Interest
Eleventh:	—		—		Administrative Agent - Remaining Available Amount After Clause First to Tenth
Twelfth:	—		—		Wilmington Trust - Custodian and Securities Intermediary - Unpaid Fees
Thirteenth:	—		416		Borrower - Any Remaining Available Amount After Clause First to Twelfth
Total Distributions	$	12,808	$	44,163



	Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017
Clause	Amount				Use of Proceeds
First:	$	84	$	228	Custodian and Securities Intermediary
Second:	—		—		White Eagle - Ongoing Maintenance Cost Reimbursable
Third:	—		—		Administrative Agent - Protective Advances
Fourth:	7		30		Administrative Agent - Administrative Agent Fee and Legal Expense Reimbursement
Fifth:	4,600		11,294		Administrative Agent - Accrued and Unpaid Interest
Sixth:	11,558		17,214		Administrative Agent - Required Amortization
Seventh:	—		—		Administrative Agent - Amortization Shortfall
Eighth:	—		—		Administrative Agent - Participation Interest
Ninth:	—		—		Reserved - $0
Tenth:	—		—		Administrative Agent Aggregate Unpaid Participation Interest
Eleventh:	—		—		Administrative Agent - Remaining Available Amount After Clause First to Tenth
Twelfth:	—		—		Wilmington Trust - Custodian and Securities Intermediary - Unpaid Fees
Thirteenth:	—		—		Borrower - Any Remaining Available Amount After Clause First to Twelfth
Total Distributions	$	16,249	$	28,766



Face value collected in 2017 and distributed in 2018	$	7,759
Face value collected and distributed during the nine months ended September 30, 2018	36,045
Face value collected in current quarter	32,000
Other collections*	805
Total waterfall collection	76,609
Less: Total waterfall distribution during the nine months ended September 30, 2018	(44,163		)
Less: Early principal repayment during the three and nine months ended September 30, 2018	(8,200		)
Total to be distributed subsequent to the quarter ended September 30, 2018	24,246



	Three Months Ended August 31, 2018		Nine Months Ended August 31, 2018
Clause	Amount				Use of Proceeds
First:	$	84	$	251	Custodian and Securities Intermediary
Second:	—		—		White Eagle - Ongoing Maintenance Cost Reimbursable
Third:	—		—		Administrative Agent - Protective Advances
Fourth:	26		43		Administrative Agent - Administrative Agent Fee and Legal Expense Reimbursement
Fifth:	5,844		16,716		Administrative Agent - Accrued and Unpaid Interest
Sixth:	6,854		26,397		Administrative Agent - Required Amortization
Seventh:	—		—		Administrative Agent - Amortization Shortfall
Eighth:	—		340		Administrative Agent - Participation Interest
Ninth:	—		—		Reserved - $0
Tenth:	—		—		Administrative Agent Aggregate Unpaid Participation Interest
Eleventh:	—		—		Administrative Agent - Remaining Available Amount After Clause First to Tenth
Twelfth:	—		—		Wilmington Trust - Custodian and Securities Intermediary - Unpaid Fees
Thirteenth:	—		416		Borrower - Any Remaining Available Amount After Clause First to Twelfth
Total Distributions	$	12,808	$	44,163


	Three Months Ended September 30, 2018				Nine Months Ended September 30, 2018				Three Months Ended August 31,				Nine Months Ended August 31,
	2018		2017		2018		2017		2019		2018		2019		2018
Amount drawn for premium payments	$	16,577	$	21,056	$	67,189	$	63,305	$	—	$	22,668	$	4,221	$	67,580
Amount drawn in fees to service providers	629		631		1,910		1,781		—		629		—		1,910
Total amount drawn	$	17,206	$	21,687	$	69,099	$	65,086	$	—	$	23,297	$	4,221	$	69,490



	Level 1		Level 2		Level 3		Total Fair Value
Assets:
Investment in limited partnership	$	—	$	—	132,334		$	132,334
Investment in life settlements	—		—		1,254		1,254
	$	—	$	—	$	133,588	$	133,588



($ in thousands)	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at 9/30/18		Aggregate death benefit at 9/30/18		Valuation Technique	Unobservable Input	Range (Weighted Average)
Non-premium financed	$	98,680	$	296,226	Discounted cash flow	Discount rate	14.50%	-	15.50%
						Life expectancy evaluation	(5.1 years)
Premium financed	$	490,173	$	2,498,426	Discounted cash flow	Discount rate	14.50%	-	21.50%
						Life expectancy evaluation	(8.2 years)
Total Life settlements	$	588,853	$	2,794,652	Discounted cash flow	Discount rate	15.66%
						Life expectancy evaluation	(7.8 years)
White Eagle Revolving Credit Facility	$	367,931	$	2,782,652	Discounted cash flow	Discount rate	19.27%
						Life expectancy evaluation	(7.8 years)



($ in thousands)	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at 8/31/19		Aggregate death benefit at 08/31/19		Valuation Technique	Unobservable Input	Range (Weighted Average)
Investment in life settlements	$	1,254	$	12,000	Discounted cash flow	Discount rate	13.25%	15.25%
						Life expectancy evaluation	(11.6 years)
Investment in limited partnership	$	132,334	$	735,798	Discounted cash flow	Discount rate	15.03%
						Life expectancy evaluation, distributions, return on investment


Life Expectancy Months Adjustment	Value		Change in Value			Value		Change in Value
+6	$	497,328	$	(91,525	)	$	1,051	$	(203	)
-	$	588,853	$	—		$	1,254	$	—
-6	$	686,026	$	97,173		$	1,466	$	212