EMERGENT CAPITAL, INC. - FORM 10-K

EMERGENT CAPITAL, INC. - FORM 10-K - March 13, 2020

Attached files

Attached files

EMERGENT CAPITAL, INC. Reports

file	filename
EX-23.1 - EXHIBIT 23.1 - EMERGENT CAPITAL, INC.	emg2019-consentdraftform10.htm
EX-32.2 - EXHIBIT 32.2 - EMERGENT CAPITAL, INC.	a20191130-ex322.htm
EX-32.1 - EXHIBIT 32.1 - EMERGENT CAPITAL, INC.	a20191130-ex321.htm
EX-31.2 - EXHIBIT 31.2 - EMERGENT CAPITAL, INC.	a20191130-ex312.htm
EX-31.1 - EXHIBIT 31.1 - EMERGENT CAPITAL, INC.	a20191130-ex311.htm
EX-21.1 - EXHIBIT 21.1 - EMERGENT CAPITAL, INC.	emergentsubsidiarylist2020.htm
EX-4.9 - EXHIBIT 4.9 - EMERGENT CAPITAL, INC.	descriptionofsecurities-em.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

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

For the fiscal year ended November 30, 2019

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

For the transition period from to

Commission file number: 001-35064

EMERGENT CAPITAL, INC.

(Exact name of registrant as specified in its charter)



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

5355 Town Center Road—Suite 701

Boca Raton, Florida 33486

(Address of principal executive offices, including zip code)

(561) 995-4200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:



Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share		OTCQX

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No þ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ¨ No ¨

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

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant on May 31, 2019 was $8,224,053.

The number of shares of the registrant’s common stock outstanding as of March 12, 2020 was 159,270,553.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the registrant’s definitive proxy statement for the 2020 annual meeting are incorporated by reference in this Annual Report on Form 10-K in response to Part III— Items 10, 11, 12, 13 and 14.

EMERGENT CAPITAL, INC.

2019 Annual Report on Form 10-K

Table of Contents



Item		Page No.
PART I
1.	Business	1
1A.	Risk Factors	6
1B.	Unresolved Staff Comments	14
2.	Properties	14
3.	Legal Proceedings	14
4.	Mine Safety Disclosures	14
PART II
5.	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Our Equity Securities	14
6.	Selected Financial Data	15
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
7A.	Quantitative and Qualitative Disclosures about Market Risk	50
8.	Financial Statements and Supplementary Data	50
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	50
9A.	Controls and Procedures	51
9B.	Other Information	51
PART III
10.	Directors, Executive Officers and Corporate Governance	52
11.	Executive Compensation	61
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	70
13.	Certain Relationships and Related Transactions, and Director Independence	72
14.	Principal Accountant Fees and Services	74
PART IV
15.	Exhibits and Financial Statement Schedules	75
	Exhibit Index	76
	Signatures	81
	Table of Contents to Consolidated Financial Statements and Notes	F-1

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this Annual Report on Form 10-K are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about the Company and the Company’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company’s control. Accordingly, readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable as of the date made, results may prove to be materially different. Unless otherwise required by law, the Company disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made in this report.

Factors that could cause our actual results to differ materially from those indicated in our forward-looking statements include, but are not limited to, the following


•	our ability to obtain future financings on favorable terms, or at all;


•	our ability to meet our debt service obligations;


•	delays in the receipt of death benefits may impact distribution from our investment in the limited partnership that constitutes our primary asset;


•	increases in premiums on, or the cost of insurance of, life insurance policies that we own or owned by the limited partnership;


•	our lack of control over the policies that are within the limited partnership under its current ownership and control;


•	changes in general economic conditions, including inflation, changes in interest or tax rates;


•	our actual results of operations;


•	our ability to continue to make premium payments on the life insurance policies that we own;


•	adverse developments, including financial ones, associated with litigation and judicial actions;


•	changes to actuarial life expectancy tables including inaccurate estimates regarding the likelihood and magnitude of death benefits related to life insurance policies that we own or owned by the limited partnership;


•	lack of mortalities of insureds of the life insurance policies that we own or owned by the limited partnership;


•	increases to the discount rates used to value the life insurance policies that we own;


•	changes in mortality rates and inaccurate assumptions about life expectancies;


•	changes in life expectancy calculation methodologies by third party medical underwriters;


•	the effect on our financial condition as a result of any lapse of life insurance policies;


•	our ability to sell the two life insurance policies we own at favorable prices, if at all;


•	adverse developments in capital markets;


•	deterioration of the market for life insurance policies and life settlements;


•	increased carrier challenges to the validity of our life insurance policies;


•	adverse court decisions regarding insurable interest and the obligation of a life insurance carrier to pay death benefits or return premiums upon a successful rescission or contest;


•	challenges to the ownership of the policies in the portfolio held by the limited partnership;


•	changes in laws and regulations;


•	deterioration in the credit worthiness of the life insurance companies that issued the policies included in the portfolio held by the limited partnership;


•	regulation of life settlement transactions as securities;


•	liabilities associated with our legacy structured settlement business;


•	our failure to maintain the security of personally identifiable information pertaining to insureds and counterparties;


•	our ability to maintain a listing or quotation on a national securities exchange or other trading platform for our common stock;


•	cyber security risks and the threat of data breaches resulting in disruption of our information technology systems;


•	loss of the services of any of our executive officers;


•	our ability to mitigate the effects of global intangible low-taxed income ("GILTI") tax; and


•	We do not control our significant asset and rely on third parties to manage it.

See Item 1A,"Risk Factors" for more information. All written and oral forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by these cautionary statements. You should evaluate all forward-looking statements made in this Annual Report on Form 10-K in the context of these risks and uncertainties. The Company cautions you that the important factors referenced above may not contain all of the factors that are important to you.

All statements in this Annual Report on Form 10-K to "Emergent Capital," "Company," "we," "us," or "our" refer to Emergent Capital, Inc. and its consolidated subsidiaries unless the context suggests otherwise.

PART I

Item 1. Business

Overview

Emergent Capital, Inc. was founded in December 2006 as a Florida limited liability company, Imperial Holdings, LLC, and converted into Imperial Holdings, Inc. on February 3, 2011, in connection with the Company’s initial public offering. Effective September 1, 2015, the name was changed to Emergent Capital, Inc. (with its subsidiary companies, the "Company" or "Emergent Capital").

Emergent Capital, through its subsidiaries owns two life insurance policies, also referred to as life settlements, with a fair value of $1.3 million and an aggregate death benefit of approximately $12.0 million at November 30, 2019. Additionally, through a subsidiary, the Company owns a 27.5% equity investment, having an estimated fair value of approximately $137.8 million at November 30, 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 through change in fair value and death benefits from these two polices and change in fair value and distributions from its equity investment in White Eagle.

Change in Financial Year End

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 December 31 to November 30, effective immediately. Our financial results for the fiscal year ended November 30, 2019 will cover the twelve months of transactions from December 1, 2018 to November 30, 2019, and are compared to the results of our previous fiscal year ended November 30, 2018 which covers the eleven months transition period from January 1, 2018 to November 30, 2018 and our previous twelve month year-end as of December 31, 2017.

Voluntary Petitions for Relief Under Chapter 11 and De-consolidation of Subsidiaries

On November 14, 2018 (the "Petition Date"), Lamington Road Designated Activity Company (formerly known as Lamington Road Limited), the Company’s wholly-owned indirect Irish subsidiary ("Lamington" or "Lamington Road DAC"), 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 "Bankruptcy Court"). 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 Lamington and WEGP filings are referred to as the "November Chapter 11 Cases."

The commencement of the November 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 (each as defined below). However, such defaults and events of default and their consequences were waived in advance of the November 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 November Chapter 11 Cases constituted an event of default under the Second Amended and Restated Loan and Security Agreement, dated as of January 31, 2017, by and among White Eagle, as borrower, Imperial Finance and Trading, LLC, Lamington Road Bermuda, LTD, as Portfolio Manager ("Lamington Bermuda"), CLMG Corp., as Administrative Agent ("CLMG"), and LNV Corporation, as Lender ("LNV"), as amended (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.

The effective period under the Standstill Agreement was extended several times, finally to December 13, 2018. On November 25, 2019, the Bankruptcy Court entered an order and final decree closing both of the Lamington and WEGP chapter 11 cases.

On December 13, 2018, White Eagle filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the "White Eagle Chapter 11 Case" and, together with the November Chapter 11 Cases, the "Chapter 11 Cases"). The Company obtained waivers from the requisite holders of each of the 8.5% Senior Secured Notes and the New Convertible Notes with respect to the White Eagle Chapter 11 Case, similar to the waivers for the November Chapter 11 Cases, and believes that no defaults, events of default or acceleration of the payment obligations thereunder, including principal or accrued interest, occurred with respect to both the 8.5% Senior Secured Notes and the New Convertible Notes. On September 16, 2019, the Bankruptcy Court entered an order and final decree closing the White Eagle Chapter 11 Case.

Beal Litigation

On January 25, 2019, the Company, White Eagle, Lamington, and WEGP, collectively the "Plaintiffs", filed suit (the "Suit") against LNV , Silver Point Capital L.P. ("Silver Point") and GWG Holdings, Inc. ("GWG" and, with LNV and Silver Point, the "Defendants") in the Bankruptcy Court, where the Suit will be administered together with the Chapter 11 Cases. LNV, a subsidiary of Beal Bank ("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.

In connection with the White Eagle Chapter 11 Case, on January 15, 2019, the Court authorized the Debtors to use the proceeds of pre-petition cash collateral for a period of twenty (20) weeks (the "Cash Collateral"), which allowance was extended in May 2019 for another nine (9) weeks. The Cash Collateral may be used solely for the purposes permitted under the budget approved by the Court, including (i) to provide working capital needs of the Debtors and general corporate purposes of the Debtors, (ii) to make the payments or fund amounts otherwise permitted in the final order that authorized such uses and such budget, (iii) to fund amounts necessary to pay certain fees; and (iv) to fund amounts necessary to pay certain professional fees in accordance with such Budget.

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.

Pursuant to the Proposed Settlement, among other things:

•

White Eagle shall have up to and including September 17, 2019 to satisfy any and all obligations to LNV under the Credit Facility by paying LNV 102% of its outstanding principal plus accrued interest at the relevant default rate, accrued fees and costs, which aggregate amount would include the resolution of the 45% participation interest element of the Credit Facility which was part of the subject matter of the Suit;


•	If White Eagle satisfies such obligations after September 17, 2019 and by December 30, 2019, the amount due on the outstanding principal would increase to 104%;


•	In the event LNV has not received the payoff described above by September 17, 2019, the court-appointed liquidation trustee, together with investment banking assistance from Maple Life Financial, LLC, shall have full authority to sell

White Eagle’s life insurance policy portfolio (which constitutes collateral under the Credit Facility) for the maximum amount achievable through an orderly sale process, taking into account that the transaction must be closed no later than December 30, 2019; in connection with this authority, the liquidation trustee and the investment banker may work prior to September 17, 2019 to prepare the portfolio for sale, but may not take actions to actually commence a sale including, but not limited to, marketing the portfolio or contacting potential buyers about the portfolio, prior to such date.


•	If the portfolio is sold in whole or in part, LNV shall only have the right to step in to bid for such sale if, and to the extent, the total amounts generated through the sale thereof do not fully satisfy the payoff amount.

•

If the sale of any portion of the policies that serve as collateral under the White Eagle Revolving Credit Facility (the "Collateral") has not closed or the proceeds of such sale(s) have not been received by CLMG by December 30, 2019, and if the obligations due to LNV (the "Payoff Amount") has not then been paid in cash in full, such Collateral shall be transferred on or before Noon Eastern on December 31, 2019 to CLMG (or its designee) in full satisfaction of the remaining unpaid portion of the amounts due to LNV.

In addition, in order to provide sufficient cash flow to the Company during this period, and subject to negotiation of mutually-agreed upon terms and conditions, the Debtors shall have the right to use proceeds from the maturity of any portfolio policy and resolution of certain claims, and LNV will provide the Debtors a revolving $15.0 million of debtor-in-possession financing (which amount may be increased if found to be insufficient) through December 30, 2019 (the "DIP Financing").

On June 5, 2019, the Bankruptcy Court approved an agreement memorializing the Proposed Settlement (the "Settlement Agreement") and the DIP Financing. The plan of reorganization for the Chapter 11 Cases, which implements the Settlement Agreement and the DIP Financing (the "Plan of Reorganization") was confirmed by the Bankruptcy Court on June 19, 2019.

On July 18, 2019, the Company entered into a commitment letter (the "Commitment Letter") with Lamington, White Eagle and Jade Mountain Partners, LLC ("Jade Mountain") in connection with the Plan of Reorganization. The Commitment Letter provided for a transaction in which Jade Mountain and/or certain of its affiliates and/or certain investors would acquire 72.5% of the equity interests of White Eagle in exchange for $384.3 million as may be adjusted in accordance with the final documentation. The Commitment Letter and its terms and the transactions contemplated thereby were approved by the Bankruptcy Court on July 22, 2019.

Repayment and Termination of the White Eagle Revolving Credit Facility

On August 16, 2019, the Company entered into a subscription agreement (the "Subscription Agreement") with Lamington Road ("Class B Limited Partner"), White Eagle, WEGP ("Withdrawing General Partner"), and Palomino JV, L.P. ("Palomino" or "Class A Limited Partner"), in connection with the commitment letter signed on June 22, 2019 with Jade Mountain 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 (the "Manager") all of its general partnership interests (collectively, the "WE Investment") for a purchase price of 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 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 with a value of approximately $138.9 million on the closing date.

The proceeds of the WE Investment were used to satisfy in full (i) the White Eagle Revolving Credit Facility, and (ii) DIP Financing extended by CLMG, as Administrative Agent ("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 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 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 Bankruptcy Court with respect to the Chapter 11 Cases.

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 of the limited partnership, $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.

In connection with the WE Investment, the 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 reserves sufficient to fund premiums, certain operating expenses of White Eagle and certain minimum payments to Lamington as the holder of the Class B interests. 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 WE 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 utilized to repay 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 distributions 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 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.

See Note 10, "Investment in Limited Partnership", to the accompanying consolidated financial statements for further information.

Deconsolidation and Subsequent Measurement of the Deconsolidated Entities

Lamington and its subsidiaries' (White Eagle, WEGP and Lamington Bermuda), financial results were excluded from the Company’s consolidated results for the period from November 14, 2018, the Petition Date to August 16, 2019 the date the White Eagle Revolving Facility was terminated. ASC 810, Consolidation require that an entity whose financial statements were previously consolidated with those of its parent that files for protection under the U.S. Bankruptcy Code, whether solvent or insolvent, generally must be prospectively deconsolidated from the parent and presented as an equity investment (deconsolidation applies to Lamington and all subsidiaries owned, directly or indirectly, by Lamington, including WEGP, White Eagle and Lamington Bermuda which collectively are referred to herein as the ("Deconsolidated Entities" or the "Debtors"). Therefore, our 2019 results are not comparable with our 2018 results. 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 each reporting period. 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.

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 also terminated. There was no outstanding third party liabilities for either Lamington or WEGP at August 16, 2019 besides intercompany obligations to Emergent.

On September 16, 2019, the Bankruptcy Court entered an order and final decree closing the White Eagle Chapter 11 Case, and on November 25, 2019, the Bankruptcy Court entered an order and final decree closing both of the Lamington and WEGP chapter 11 cases. However pursuant to ASC 810, Consolidation, management took the position that given that all third party claims had been satisfied in the case, consolidation of Lamington and WEGP as of August 17, 2019 was appropriate.

As part of the WE Investment, the Company sold 72.5% of its ownership in White Eagle, which is the most substantial asset of the Company, resulting in a reduction in its ownership from 100% to 27.5%. Given the new percentage ownership, this is considered an equity investment. Based on the A&R LPA, the Company will receive funds from White Eagle through a monthly distribution which is highly driven by maturities of the portfolio. Although the Company is guaranteed certain monthly payments, the Class A Partner must be made whole based on their established internal rate of return ("IRR") of 11% which exposes the Company as to the amount and timing of funds that will be received. Although White Eagle continues to be a variable interest entity ("VIE") under ASC 810, Consolidation, the Company has not met the criteria for consolidation as they do not have a controlling interest in While Eagle, financially or otherwise. Based on the A&R LPA, the Company's management responsibilities are very limited. The Company's remaining ownership of White Eagle does not give the Company any control over decisions of White Eagle and the Company is the minority owner. As a result, the Company is precluded from consolidating White Eagle at November 30, 2019.

White Eagle previously valued its life settlement policies at fair value whose valuation were 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 settlements. 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. The Company will utilize a fair value approach to account for its 27.5% investment in White Eagle, and the calculation will be performed consistent with ASC 820, Fair Value Measurement with changes in fair value recorded in current earnings.

Life Settlements Portfolio & Portfolio Management

The life insurance policies previously included in the Company and its subsidiaries portfolio were acquired through a combination of direct policy purchases from the original policy owners (the secondary market), purchases of policies owned by other institutional investors (the tertiary market) and from policy surrenders or foreclosures in satisfaction of loans issued under the Company’s legacy premium finance business. Emergent Capital previously used a probabilistic method of valuing life insurance policies, meaning the insured individual's probability of survival and probability of death are applied to the required premiums and net death benefit of the policy to extrapolate the likely cash flows over the life expectancy of the insured. These likely cash flows are then discounted using a net present value formula. Management believes this to be the preferred valuation method in the industry at the present time.

Until a policy matures, the Company must pay ongoing premiums to keep that policy in force and to prevent it from lapsing. Upon a policy lapse, the Company would suffer a complete loss on its investment in that policy.

Regulation

The sale and solicitation of life insurance policies in the secondary market is highly regulated by the laws and regulations of individual states and other applicable jurisdictions. The purchase of a policy directly from a policy owner is referred to as a life settlement and is regulated on a state-by-state basis.

At November 30, 2019, the Company, through its subsidiary Imperial Life Settlements, LLC, maintained licenses to transact life settlements as a provider in 28 of the states that currently require a license and could conduct business in 36 states, and the District of Columbia.

The primary regulator for Imperial Life Settlements, LLC when purchasing life settlements in the secondary market is the Florida Office of Insurance Regulation. A majority of the state laws and regulations concerning life settlements relate to: (i) provider and broker licensing requirements; (ii) reporting requirements; (iii) required contract provisions and disclosures; (iv) privacy requirements; (v) fraud prevention measures; (vi) criminal and civil remedies; (vii) marketing requirements; (viii) the time period in which policies cannot be sold in life settlement transactions; and (ix) other rules governing the relationship between policy owners, insured persons, insurers, and others.

Competition

Competition is primarily through two channels: life settlement providers and institutional investors. In order to be a life settlement provider and transact with the original holder of a life insurance policy, in most instances, a license on a state-by-state basis is required. The life settlement business is highly fragmented and, therefore, competition is diverse. Often, life settlement providers are originating life settlements on behalf of institutional investors who do not maintain the necessary licenses to transact in the secondary market for life insurance. These investors may have significantly more resources than the Company and can generally also transact directly in the tertiary market.

Employees

At November 30, 2019, we employed 9 full-time employees and no part-time employees. None of our employees are subject to any collective bargaining agreements. We believe that our employee relations are good.

Company Website Access and SEC Filings

Our website may be accessed at www.emergentcapital.com. All of our filings with the Securities and Exchange Commission ("SEC") can be accessed free of charge through our website promptly after filing; however, in the event that the website is inaccessible, we will provide paper copies of our most recent Annual Report on Form 10-K, the most recent quarterly reports on Form 10-Q, current reports filed or furnished on Form 8-K, and all related amendments, excluding exhibits, free of charge upon request. These filings are also accessible on the SEC’s website at www.sec.gov. Information on our website is not incorporated by reference into this Annual Report on Form 10-K.

General Information

Our registrar and stock transfer agent is American Stock Transfer & Trust Company, LLC. Our transfer agent is responsible for maintaining all records of shareholders, canceling or issuing stock certificates and resolving problems related to lost, destroyed or stolen certificates. For more information, please contact: American Stock Transfer & Trust Company at 6201 15th Avenue, Brooklyn, NY 11219 Phone: 800-937-5449.

Item 1A. Risk Factors

Risks Related to Our Indebtedness & Organizational Structure

We may not have sufficient funds to pay our debt and other obligations.

Our cash, cash equivalents, short-term investments and operating cash flows may be inadequate to meet our obligations under our outstanding indebtedness and our other obligations. 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 utilized to repay 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 distributions 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). Accordingly, there can be no assurance as to when proceeds will be received from the WE Investment.

Our substantial leverage and significant debt service obligations could adversely affect our ability to fulfill our obligations and make it more difficult for us to fund our operations.

As of November 30, 2019, we had $123.4 million in outstanding long-term debt (including that held by our subsidiaries and without giving effect to the fair value of such indebtedness) consisting of our 5.0% senior unsecured convertible notes due 2023 (the " New Convertible Notes") and the 8.5% senior secured notes due 2021 (the "8.5% Senior Secured Notes"). Our substantial level of indebtedness could have important negative consequences to you and us, including:


•	we may have difficulty satisfying our debt obligations, including payment of current interest obligations;


•	we may have difficulty refinancing our existing indebtedness or obtaining financing in the future for working capital, acquisitions or other purposes;


•	we will need to use a substantial portion of our available cash flow to pay interest and principal on our debt, which will reduce the amount of money available to finance our operations and other business activities;


•	our debt level increases our vulnerability to general economic downturns and adverse industry conditions;


•	our debt level could limit our flexibility in planning for, or reacting to, changes in our business and in our industry in general; and


•	our leverage could place us at a competitive disadvantage compared to our competitors that have less debt.

While the terms of the financing arrangements governing our debt contain restrictions on our ability to incur additional indebtedness, these restrictions are subject to a number of important qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. Accordingly, we could incur significant additional indebtedness in the future; the more we increase our leverage, the more we become exposed to the risks described above.

We may have exposure to greater than anticipated tax liabilities.

Our income tax obligations are based in part on our corporate operating structure and intercompany arrangements, including the manner that we own our life settlements and the valuations of our intercompany transactions. The tax laws applicable to our business, including the laws of the United States, Ireland and other jurisdictions, are subject to interpretation and certain jurisdictions are aggressively interpreting their laws in new ways in an effort to raise additional tax proceeds from companies. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for intercompany arrangements and ownership of life settlements, which could increase our effective tax rate and harm our financial position and results of operations. We are subject to regular review and audit by U.S. federal and state authorities and from 2014 on, foreign tax authorities. Tax authorities may disagree with certain positions we have taken and any adverse outcome of such a review or audit could have a material negative effect on our financial position and results of operations. In addition, the determination of our provision for income taxes and other tax liabilities requires significant judgment by management, and there are many transactions where the ultimate tax determination is uncertain. Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially affect our financial results in the period or periods for which such determination is made. In addition, our future income taxes could be adversely affected by changes in tax laws, regulations, or accounting principles. We have been adversely impacted by the GILTI tax described below and are considering various options of restructuring the business in order to mitigate this; however, there can be no assurance that such mitigation will be achieved quickly or at all.

Changes in tax laws or tax rulings could materially affect our financial position and results of operations.

The U.S., Ireland and many countries in the European Union, are actively considering and implementing changes to existing tax laws. Certain proposals, including proposals with retroactive effects, could include recommendations that would significantly increase our tax obligations where we do business or where our subsidiaries own life insurance policies. Any changes in the taxation of either international business activities or ownership of life settlements may increase our effective tax rate and harm our financial position and results of operations.

On December 22, 2017, the United States enacted the "Tax Cuts and Jobs Act" (the "TCJA"). The TCJA is complex and includes significant amendments to the Code, including amendments that drastically changed the taxation of offshore earnings and the deductibility of interest. The Company has assessed the impact of the TCJA on its business and consolidated financial statements. In connection with that ongoing assessment, the Company has identified provisions that impact the Company, some of which have had a material and adverse effect on its business.

First, the TCJA generally required the Company to include in income with respect to its 2017 taxable year any undistributed and previously untaxed earnings of its foreign subsidiaries existing at December 31, 2017, subject to adjustments.

Second, and applicable in the year ended November 30, 2019, the TCJA generally will subject the Company to a current U.S. tax on any undistributed earnings of its foreign subsidiaries to the extent such earnings are considered to be "global intangible low-taxed income" ("GILTI"), subject to certain deductions and adjustments.

Third, the TCJA generally will disallow the Company's U.S. interest deductions going forward to the extent such deductions exceed 30% of its U.S. "adjusted taxable income" (which will be roughly equivalent to earnings before interest, tax, depreciation and amortization ("EBITDA") through 2022 and to earnings before interest and tax ("EBIT") thereafter).

Fourth, any net operating loss incurred by the Company in taxable years beginning after December 31, 2017 cannot offset more than 80% of the Company’s taxable income in any tax year and cannot be carried back to offset prior year taxable income.

Finally, the TCJA significantly amends Section 162(m) of the Code. Pursuant to Section 162(m) of the Code, the Company may not deduct compensation of more than $1.0 million paid to the Company’s "covered employees," which includes (i) any individual who at any time during the taxable year is a chief executive officer, chief financial officer, or an employee whose total compensation for the tax year is required to be reported to stockholders because he or she is among the three highest compensated officers for the tax year, other than the chief executive officer or chief financial officer, and (ii) any person who was a covered employee at any time after December 31, 2016.

Prior to January 1, 2018, certain grants may have qualified as "performance-based compensation" and, as such, would be exempt from the $1.0 million limitation on deductible compensation. The TCJA eliminated the performance-based compensation exception with respect to tax years beginning on or after January 1, 2018. However, the TCJA provides a transition rule with respect to remuneration which is provided pursuant to a written binding contract which was in effect on November 2, 2017 and which was not materially modified after that date. These, and other provisions of the TCJA, may have a material and adverse impact on the Company's business and financial condition and the value of the Company's common shares. The Company is continuing to assess the impact of the TCJA. Holders should consult their tax advisors about the TCJA and its potential impact on their ownership of its common stock.

We may be unable to deduct interest payments on debt that is attributed to policies that we own and other operating losses, which would reduce any future income and cash flows.

Generally, under the Internal Revenue Code of 1986, as amended (the "Code"), interest paid or accrued on debt obligations is deductible in computing a taxpayer’s federal income tax liability. However, when the proceeds of indebtedness are used to pay premiums on life insurance policies that are owned by the entity incurring the debt or otherwise used to support the purchase or ownership of life insurance policies, the interest in respect of such proceeds may not be deductible. Accordingly, so long as we use a portion of debt financing to pay the premiums on policies owned by us or to support the continued ownership of life insurance policies by us, the interest paid or accrued on that portion of the debt may not be currently deductible by us for federal income tax purposes. We may have net operating losses that we may be able to use to reduce a portion of our future taxable income, but the inability to currently deduct interest accrued on debt could have a material adverse effect on our future earnings and cash flows available for the payment of interest.

In addition, under Section 382 of the Code, a corporation that undergoes an "ownership change" (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period) is subject to limitation on its ability to utilize its pre-change net operating loss carry-forwards, or net operating losses, to offset future taxable income. Recent changes in our stock ownership triggered, an ownership change, and as a result our ability to utilize our net operating losses to offset income has been substantially limited.

We may not have the cash necessary to repurchase the 5.0% Convertible Notes and the 8.50% Senior Secured Notes.

We have issued $75.8 million in aggregate principal amount of 5.0% Convertible Notes (the "New Convertible Notes") and $47.6 million in 8.5% Senior Secured Notes. The New Convertible Note Indenture provides for customary events of default, which include (subject in certain cases to customary grace and cure periods), among others: nonpayment of principal or interest; breach of covenants or other agreements in the New Convertible Note Indenture; defaults or failure to pay certain other indebtedness; and certain events of bankruptcy or insolvency. Generally, if an event of default occurs and is continuing under the New Convertible Note Indenture, the trustee or the holders of at least 25% in aggregate principal amount of the New Convertible Notes then outstanding may declare all unpaid principal plus accrued interest on the New Convertible Notes immediately due and payable, subject to certain conditions set forth in the New Convertible Note Indenture. In addition, holders of the New Convertible Notes may require the Company to repurchase the New Convertible Notes upon the occurrence of certain designated events at a repurchase price of 100% of the principal amount of the New Convertible Notes, plus accrued and unpaid interest.

The 8.5% Senior Secured Notes must be redeemed in full upon additional issuances of debt by the Company in each case, at a price equal to 100% of the principal amount redeemed plus (i) accrued and unpaid interest on the 8.5% Senior Secured Notes redeemed up to the date of redemption, and (ii) the Applicable Premium, if any, as defined in the Amended and Restated

Senior Secured Indenture. Upon a change of control, the Company will be required to make an offer to holders of the 8.5% Senior Secured Notes to repurchase the 8.5% Senior Secured Notes at a price equal to 107.5% of their principal amount, plus accrued and unpaid interest up to the date of redemption.

The Amended and Restated Senior Secured Indenture provides for customary events of default which include (subject in certain cases to customary grace and cure periods), among others: nonpayment of principal or interest; breach of covenants or other agreements in the Amended and Restated Senior Secured Indenture; defaults in failure to pay certain other indebtedness; and certain events of bankruptcy or insolvency. Generally, if an event of default occurs and is continuing under the Amended and Restated Senior Secured Indenture, the trustee or the holders of at least 25% in aggregate principal amount of the 8.5% Senior Secured Notes then outstanding may declare the principal of and accrued but unpaid interest, plus a premium, if any, on all the 8.5% Senior Secured Notes immediately due and payable, subject to certain conditions set forth in the Amended and Restated Senior Secured Indenture.

However, we may not have enough available cash to make a required repurchase of the New Convertible Notes or the 8.5% Senior Secured Notes at the applicable time, and may not be able to obtain the necessary financing on favorable terms. In addition, our ability to repurchase the New Convertible Notes or the 8.5% Senior Secured Notes may be limited by law or by the agreements governing our other indebtedness that exist at the time of the repurchase, as the case may be. Our failure to repurchase the New Convertible Notes or the 8.5% Senior Secured Notes when required by their indenture would constitute a default, which could also lead to a default under the agreements governing our other indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and to repurchase the New Convertible Notes or the 8.5% Senior Secured Notes. Any such default would have a material adverse effect on our business, prospects, financial condition and operating results.

Interest on the New Convertible Notes and on the 8.5% Senior Secured Notes is due semi-annually and quarterly, respectively.

Risks Related to Our Business

We have been experiencing net losses and expect that net losses could continue for an uncertain period. If we continue to operate at a loss, our business may not be financially viable.

As of November 30, 2019, our net income from continuing operations was $16.9 million with an accumulated deficit of $291.5 million. As of November 30, 2019, our cash balance was $24.3 million and certificates of deposit were $511,000. We had net working capital of $22.8 million, outstanding debt of $123.4 million, we had equity investment of $137.8 million and life settlement assets of $1.3 million. If we do not succeed in our business plan’s objectives to achieve profitability, our business might continue to experience losses and may not be sustainable in the future.

Our success in operating our life finance business is dependent on making accurate assumptions about life expectancies and maintaining adequate cash balances to pay premiums.

We are responsible for paying all premiums necessary to keep the two policies in our portfolio in force and prevent them from lapsing. On December 4, 2019, subsequent to the year end, the Company entered into a Settlement Agreement and Mutual Release with Sun Life Assurance Company of Canada and Wilmington Trust, N.A. as securities intermediary pursuant to which, thirty life insurance policies (included the two policies mentioned earlier) issued by Sun Life and held by the Company, primarily by White Eagle Asset Portfolio, L.P. ("White Eagle"), were canceled in exchange for a lump sum payment from Sun Life $36.1 million. As such, there are no further premium payments for the two life insurance policies subsequent to November 30, 2019.

As of November 30, 2019, we had approximately $24.3 million of cash and cash equivalents and certificates of deposit of $511,000.

We do not control our significant asset and rely on third parties to manage it.

As a result of the transaction we consummated on August 16, 2019, pursuant to which we sold newly-issued limited partnership interests in White Eagle, constituting 72.5% of White Eagle’s outstanding equity, to Palomino, we no longer control many of the operations and decisions of White Eagle relating to management of its life settlement portfolio, although the distributions from our remaining 27.5% investment in White Eagle constitute substantially all of our revenue. Specifically, we do not control decisions relating to optimizing the portfolio, including whether to sell policies, buy new policies, and lapse policies, and although we contribute to the payment of premiums which is funded by Palomino and repaid by us from funds to

be distributed to the Company through the waterfall, we do not control the timing or any decisions for the premium payments. In spite of the change in ownership, the distributions from that portfolio still constitute substantially all of our revenue. Accordingly, we rely on third parties, including Palomino, Palomino JV GP Limited, the general partner of White Eagle, and the manager of the portfolio as selected by such general partner, to manage the portfolio. There can be no assurance that such third parties will manage the portfolio in a successful manner or in the manner that we would do so. If such third parties do not manage the portfolio successfully, there could be adverse effects on our financial results, liquidity and performance.

Our fair value assumptions are inherently subjective and, if the fair value of our equity investment in limited partnership decreases, we will report losses with respect to this investment.

The evaluation of the fair value of our equity investment in limited partnership is inherently subjective as it requires estimates and assumptions that are susceptible to significant revision as more information becomes available. Using our valuation model, we determine the fair value of our equity investment on a discounted cash flow basis. The most significant assumptions that we estimate are the life expectancy of the insured, expected premium payments, the discount rate, repayment of the Class A and Class B investments. The discount rate is based upon current information about market interest rates, our estimate of the risk margin an investor in a similar transaction would require.

If the calculation of fair value results in a decrease in value, we record this reduction as a loss. If we determine that it is appropriate to increase the discount rate or adjust other inputs to our fair value model, if we are otherwise unable to accurately estimate the assumptions in our valuation model, the carrying value of our equity investment may be materially adversely affected and may materially and adversely affect our business, financial condition and results of operations.

Delays in payment and non-payment of life insurance policy proceeds to the limited partnership can occur for many reasons and any such delays may have a material adverse effect on our business, financial condition and results of operations.

A number of arguments may be made by former beneficiaries (including but not limited to spouses, ex-spouses and descendants of the insured) under a life insurance policy, by the beneficiaries of the trust that once held the policy, by the estate or legal heirs of the insured or by the insurance company issuing such policy, to deny or delay payment of proceeds following the death of an insured, including arguments related to lack of mental capacity of the insured, usury, contestability or suicide provisions in a policy. The statements in the Non-Prosecution Agreement may make such delays more likely and may increase challenges by carriers to paying out death claims or challenges by families of insureds to policy proceeds. Furthermore, if the death of an insured cannot be verified and no death certificate can be produced, the related insurance company may not pay the proceeds of the life insurance policy until the passage of a statutory period (usually five to seven years) for the presumption of death without proof. Such delays in payment or non-payment of policy proceeds to the limited partnership may have a material adverse effect on our business, financial condition and results of operations.

We compete with a number of other finance companies and investors and may encounter additional competition.

There are a number of finance companies and investors that compete with us in the life finance industry. Many are significantly larger and possess considerably greater financial, marketing, management and other resources than we do. The life finance business could also prove attractive to new entrants. As a consequence, competition in this sector may increase. Increased competition could result in increased acquisition costs, changes to discount rates, margin compression and/or less favorable financing terms, each of which could materially adversely affect our income, which would have a material adverse effect on our business, financial condition and results of operations.

If a regulator or court decides that trusts that were formed to own the life insurance policies that once served as collateral for our premium finance loans do not have an insurable interest in the life of the insured, such determination could have a material adverse effect on our investment in the limited partnership which will impact our business, financial condition and results of operations.

Generally, there are two forms of insurable interests in the life of an individual, familial and financial. Additionally, an individual is deemed to have an insurable interest in his or her own life. It is also a common practice for an individual, as a grantor or settlor, to form an irrevocable trust to purchase and own a life insurance policy insuring the life of the grantor or settlor, where the beneficiaries of the trust are persons who themselves, by virtue of certain familial relationships with the grantor or settlor, also have an insurable interest in the life of the insured. In the event of a payment default on our premium finance loan, we previously acquired life insurance policies owned by trusts (or the beneficial interests in the trust itself) that we believe had an insurable interest in the life of the related insureds. However, a state insurance regulatory authority or a court may determine that the trust or policy owner did not have an insurable interest in the life of the insured or that we, as then lender, only had a limited insurable interest. Any such determination could result in the limited partnership being unable to

receive the proceeds of the life insurance policy, which could lead to a total loss on the investment in life settlements. Any such loss or losses could have a material adverse effect on our business, financial condition and results of operations.

Our limited partnership is dependent on the creditworthiness of the life insurance companies that issued the policies comprising its portfolio. If a life insurance company defaults on its obligation to pay death benefits on a policy own, it would experience a loss of its investment, which could have a material adverse effect on our returns on investment, business, financial condition and results of operations.

Our limited partnership is dependent on the creditworthiness of the life insurance companies that issued the policies that it owns. The limited partnership assume the credit risk associated with life insurance policies issued by various life insurance companies. The failure or bankruptcy of any such life insurance or annuity company could have a material adverse impact on its financial condition and results of operation. A life insurance company’s business tends to track general economic and market conditions that are beyond its control, including extended economic recessions or interest rate changes. Changes in investor perceptions regarding the strength of insurers generally and the policies or annuities they offer can adversely affect our ability to sell or finance our assets. Adverse economic factors and volatility in the financial markets may have a material adverse effect on a life insurance company’s business and credit rating, financial condition and operating results, and an issuing life insurance company may default on its obligation to pay death benefits on the life insurance policies that we own. In such event, the limited partnership would experience a loss of its investment in such life insurance policies, which could have a material adverse effect on our investment in the limited partnership and our business, financial condition and results of operations.

If we are unable to maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the trading price of our common stock may be negatively affected.

We are subject to Section 404 of the Sarbanes-Oxley Act (SOX), which requires us to maintain internal controls over financial reporting and to report any material weaknesses in such internal controls. We have consumed and will continue to consume management resources and incur expenses for SOX compliance on an ongoing basis. In addition, as we have reduced the number of our employees and moved certain of our operations to foreign subsidiaries, we have increased our reliance on third parties for various aspects of our internal controls. If we identify material weaknesses in our internal control over financial reporting, or if we are unable to comply with the requirements of Section 404 in a timely manner or are unable to assert that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports and the trading price of our common stock could be negatively affected, and we could become subject to investigations by the SEC, or other regulatory authorities, which could require additional financial and management resources.

Changes to statutory, licensing and regulatory regimes governing life settlements could have a material adverse effect on our activities and income.

Changes to statutory, licensing and regulatory regimes could result in the enforcement of stricter compliance measures or adoption of additional measures on us or on the insurance companies that stand behind the insurance policies that we own, which could have a material adverse impact on our business activities and income. The SEC issued a task force report in July 2010 recommending that sales of life insurance policies in life settlement transactions be regulated as securities for purposes of the federal securities laws. To date, the SEC has not made such a recommendation to Congress. However, if the statutory definitions of "security" were amended to encompass life settlements, we could become subject to additional extensive regulatory requirements under the federal securities laws, including the obligation to register sales and offerings of life settlements with the SEC as public offerings under the Securities Act of 1933 and, potentially, the obligation to register as an "investment company" pursuant to the Investment Company Act of 1940. Any legislation implementing such regulatory change or a change in the transactions that are characterized as life settlement transactions could lead to significantly increased compliance costs, increased liability risk and adversely affect our ability to acquire or sell life insurance policies in the future, which could have a material adverse effect on our business, financial condition and results of operations.

Under the current Presidential administration and U.S. Congress, we expect that there may be many changes to existing U.S. laws, regulations, and standards that may affect our business. Because of the uncertainty regarding existing law, we cannot quantify or predict with any certainty the likely impact of such change on our business model, prospects, financial condition or results of operations. We cannot assure you as to the ultimate content, timing, or effect of changes, nor is it possible at this time to estimate the impact of any such potential legislation.

Our former structured settlements business may expose us to future claims or contingent liabilities.

Pursuant to the terms of the asset purchase agreement we entered into in connection with the sale of our structured settlements business, we sold substantially all of that business’ operating assets in 2013 while retaining substantially all of its

liabilities. In addition, we agreed to indemnify the purchaser for certain breaches of representations and warranties regarding us and various aspects of that business. Many of our indemnification obligations are subject to time and maximum liability limitations, however, in some instances our indemnification obligations are not subject to any limitations. Significant indemnification claims by the purchaser or other claims or contingent liability related to our former structured settlement business could materially and adversely affect our business, financial condition and results of operations.

Failure to maintain the security of personally identifiable and other information, non-compliance with our contractual or other legal obligations regarding such information, or a violation of our privacy and security policies with respect to such information, could adversely affect us.

In connection with our business, we collect and retain significant volumes of certain types of personally identifiable and other information pertaining to insureds and counterparties. The legal, regulatory and contractual environment surrounding information security and privacy is constantly evolving. A significant actual or potential theft, loss, fraudulent use or misuse of customer, counterparty, employee or our data by cybercrime or otherwise, non-compliance with our contractual or other legal obligations regarding such data or a violation of our privacy and security policies with respect to such data could adversely impact our reputation and could result in significant costs, fines, penalties, litigation or regulatory action.

Disasters, disruptions and other impairment of our information technologies and systems could adversely affect our business.

Our businesses depend upon the use of sophisticated information technologies and systems, including third party hosted services and data facilities that we do not control. While we have developed certain disaster recovery plans and backup systems, these plans and systems are not fully redundant. A system disruption caused by a natural disaster, cybercrime or other impairment could have a material adverse effect on our results of operations and may cause delays, loss of critical data and reputational harm, and could otherwise prevent us from servicing our portfolio of life insurance policies.

Risks Related to Our Common Stock

Provisions in our executive officers’ employment agreements could impede an attempt to replace or remove our directors or otherwise effect a change of control, which could diminish the price of our common stock.

We have entered into employment agreements with certain of our executive officers. These agreements provide for substantial payments upon the occurrence of certain triggering events, including a material diminution of base salaries or responsibilities. These payments may deter any transaction that would result in a change in control, which could diminish the price of our common stock.

These provisions could delay or prevent a change of control that a shareholder might consider favorable. For example, these provisions may prevent a shareholder from receiving the benefit from any premium over the market price of our common stock offered by a bidder in a potential takeover. Even in the absence of an attempt to effect a change in management or a takeover attempt, these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging changes in management and takeover attempts in the future. Furthermore, our articles of incorporation and our bylaws provide that the number of directors shall be fixed from time to time by our board of directors, provided that the board shall consist of at least three and no more than fifteen members.

The market price of our stock has been highly volatile.

The market price of our common stock has fluctuated and could fluctuate substantially in the future. This volatility may subject our stock price to material fluctuations due to the factors discussed in this Risk Factors section, and other factors including market reaction to the estimated fair value of our portfolio; our capital structure; cash position; our ability to service our debt; rumors or dissemination of false information; changes in coverage or earnings estimates by analysts; our ability to meet analysts’ or market expectations; and sales of common stock by existing shareholders. A decline in the market price of our common stock could adversely affect our ability to raise capital by issuing additional securities.

The conversion rate for the Convertible Notes will be adjusted in connection with a make-whole fundamental change.

The provisions of the New Convertible Note Indenture include a make-whole provision to compensate the holders of such notes for the lost option time value and forgone interest payments upon the Company experiencing a Fundamental Change (as defined in the New Convertible Note Indenture). These Fundamental Changes revolve around change in beneficial ownership, the consummation of specified transactions which result in the conversion of common stock into other assets or the sale,

transfer or lease of all or substantially all of the Company’s assets, a majority change in the composition of the Company’s Board of Directors, the Company’s stockholders' approval of any plan for liquidation of dissolution of the Company, and the Common Stock ceasing to be listed or quoted on a Trading Market (as defined under the New Convertible Notes). The number of incremental additional shares to be issued as a result of a Fundamental Change is based on a table which calculates the adjustment based on the inputs of time and share value. Such increase in the conversion rate will dilute the ownership interest of our common stock shareholders.

Provisions in our articles of incorporation and bylaws, as well as the Board Rights agreements entered into as part of our 2017 recapitalization, could impede an attempt to replace or remove our directors or otherwise effect a change of control, which could diminish the price of our common stock.

Our articles of incorporation and bylaws contain provisions that may entrench directors and make it more difficult for shareholders to replace directors even if the shareholders consider it beneficial to do so. In particular, shareholders are required to provide us with advance notice of shareholder nominations and proposals to be brought before any annual meeting of shareholders, which could discourage or deter a third party from conducting a solicitation of proxies to elect its own slate of directors or to introduce a proposal. In addition, our articles of incorporation eliminate our shareholders’ ability to act without a meeting and require the holders of not less than 50% of the voting power of our common stock to call a special meeting of shareholders. In addition, our bylaws require that in order to be eligible to nominate or propose for nomination a candidate for election as a director, a shareholder must own at least one percent of the Company's outstanding shares of common stock for no less than twelve months.

Certain laws of the State of Florida could impede a change of control, which could diminish the price of our common stock.

As a Florida corporation, we are subject to the Florida Business Corporation Act, which provides that a person who acquires shares in an "issuing public corporation," as defined in the statute, in excess of certain specified thresholds generally will not have any voting rights with respect to such shares, unless such voting rights are approved by the holders of a majority of the votes of each class of securities entitled to vote separately, excluding shares held or controlled by the acquiring person. The Florida Business Corporation Act also contains a statute which provides that an affiliated transaction with an interested shareholder generally must be approved by (i) the affirmative vote of the holders of two thirds of our voting shares, other than the shares beneficially owned by the interested shareholder, or (ii) a majority of the disinterested directors.

One of our subsidiaries, Imperial Life Settlements, LLC, a Delaware limited liability company, is licensed as a viatical settlement provider and is regulated by the Florida Office of Insurance Regulation. As a Florida viatical settlement provider, Imperial Life Settlements, LLC is subject to regulation as a specialty insurer under certain provisions of the Florida Insurance Code. Under applicable Florida law, no person can finally acquire, directly or indirectly, 10% or more of the voting securities of a viatical settlement provider or its controlling company without the written approval of the Florida Office of Insurance Regulation. Accordingly, any person who acquires beneficial ownership of 10% or more of our voting securities will be required by law to notify the Florida Office of Insurance Regulation no later than five days after any form of tender offer or exchange offer is proposed, or no later than five days after the acquisition of securities or ownership interest if no tender offer or exchange offer is involved. Such person will also be required to file with the Florida Office of Insurance Regulation an application for approval of the acquisition no later than 30 days after the same date that triggers the 5-day notice requirement.

The Florida Office of Insurance Regulation may disapprove the acquisition of 10% or more of our voting securities by any person who refuses to apply for and obtain regulatory approval of such acquisition. In addition, if the Florida Office of Insurance Regulation determines that any person has acquired 10% or more of our voting securities without obtaining its regulatory approval, it may order that person to cease the acquisition and divest itself of any shares of our voting securities that may have been acquired in violation of the applicable Florida law. Due to the requirement to file an application with and obtain approval from the Florida Office of Insurance Regulation, purchasers of 10% or more of our voting securities may incur additional expenses in connection with preparing, filing and obtaining approval of the application, and the effectiveness of the acquisition will be delayed pending receipt of approval from the Florida Office of Insurance Regulation.

The Florida Office of Insurance Regulation may also take disciplinary action against Imperial Life Settlements, LLC’s license if it finds that an acquisition of our voting securities is made in violation of the applicable Florida law and would render the further transaction of business hazardous to our counterparties, creditors, shareholders or the public.

Due to delisting our common stock from the New York Stock Exchange ("NYSE"), you may find it difficult to dispose of your shares and our share price may be adversely affected.

On January 23, 2017, we voluntarily delisted our common stock from the NYSE, and on February 3, 2017, the trading of our common stock began on the over-the-counter market, OTCQB. On May 29, 2018, trading of our common stock moved to the OTCQX market. Such trading could reduce the market liquidity of our common stock. As a result, investors may find it more difficult to dispose of, or obtain accurate quotations for the price of, our common stock, and our ability to raise future capital through the sale of the shares of our common stock or other securities convertible into or exercisable for our common stock could be severely limited.

Trading in our common stock might also become subject to the requirements of certain rules promulgated under the Securities Exchange Act of 1934, which require additional disclosure by broker-dealers in connection with any trade involving a stock defined as a "penny stock" (generally, any equity security not listed on a national securities exchange that has a market price of less than $5.00 per share, subject to certain exceptions). Many brokerage firms are reluctant to recommend low-priced stocks to their clients. Moreover, various regulations and policies restrict the ability of stockholders to borrow against or "margin" low-priced stocks, and declines in the stock price below certain levels may trigger unexpected margin calls. Additionally, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher priced stocks, the current price of the common stock can result in an individual stockholder paying transaction costs that represent a higher percentage of total share value than would be the case if our share price were higher. This factor may also limit the willingness of institutions to purchase our common stock. Finally, the additional burdens imposed upon broker-dealers by these requirements could discourage broker-dealers from facilitating trades in our common stock, which could severely limit the market liquidity of the stock and the ability of investors to trade our common stock, thereby negatively impacting the share price of our common stock.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our offices are located at 5355 Town Center Road, Suite 701, Boca Raton, Florida 33486 and consist of approximately 11,000 square feet of leased office space. We consider our facilities to be adequate for our current operations.

Item 3. Legal Proceedings

For a description of legal proceedings, see "Litigation" under Note 17, "Commitments and Contingencies" to the accompanying consolidated financial statements.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

During the twelve months ended November 30, 2019, shares of our common stock were traded on the OTC Market Group’s OTCQX marketplace under the trading symbol "EMGC."

The following table shows the high and low sales prices for our common stock for the periods indicated, as reported by the OTC:



	2019
	High		Low
1st Quarter	$	0.12	$	0.04
2nd Quarter	$	0.22	$	0.07
3rd Quarter	$	0.28	$	0.15
4th Quarter	$	0.34	$	0.21



	2018
	High		Low
1st Quarter	$	0.48	$	0.37
2nd Quarter	$	0.40	$	0.26
3rd Quarter	$	0.38	$	0.25
4th Quarter	$	0.28	$	0.10

As of March 12, 2020, we had 18 holders of record of our common stock and the closing stock price was $0.21.

Dividend Policy

We have never paid any cash dividends on our common stock and do not expect to pay any cash dividends on our common stock for the foreseeable future. We currently intend to retain any future earnings to finance our operations. Any future determination to pay cash dividends on our common stock will be at the discretion of our board of directors and will be dependent on our earnings, financial condition, operating results, capital requirements, any contractual, regulatory and other restrictions on the payment of dividends by us or by our subsidiaries to us, and other factors that our board of directors deems relevant.

We are a holding company and have no direct operations. Our ability to pay dividends in the future depends on the ability of our operating subsidiaries to pay dividends to us. Certain of our debt arrangements, including the White Eagle Revolving Credit Facility, restrict the ability of certain of our special purpose subsidiaries to pay dividends. In addition, future debt arrangements may contain prohibitions or limitations on the payment of dividends.

Equity Compensation Plans

Awards under our Amended and Restated 2010 Omnibus Incentive Plan (as amended, the "Omnibus Plan" may consist of incentive awards, stock options, stock appreciation rights, performance shares, performance units, and shares of common stock, restricted stock, restricted stock units or other stock-based awards as determined by the compensation committee of the Company's board of directors. The Omnibus Plan provides for an aggregate of 12,600,000 shares of common stock to be reserved for issuance under the Omnibus Plan, subject to adjustment as provided in the Omnibus Plan. See Item 12, "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" for additional information.

Recent Sales of Unregistered Securities

There are no recent sales of unregistered securities that have not been previously included in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.

Purchases of Equity Securities

There were no purchases during the twelve months ended November 30, 2019.

Item 6. Selected Financial Data

The following table sets forth our selected historical consolidated financial and operating data as of such dates and for such periods indicated below. These selected historical consolidated results are not necessarily indicative of results to be expected in any future period. You should read the following financial information together with the other information contained in this Annual Report on Form 10-K, including Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and related notes.

The selected historical statement of operations data and balance sheet data for the last five years were derived from our audited consolidated financial statements and reflect the retroactive revision to reflect the classification of our structured settlement business as discontinued operations.



	Historical
	Twelve Months Ended November 30,			Eleven Months Ended November 30,			Years Ended December 31,
	2019			2018			2017			2016			2015
	(in thousands, except share and per share data)
Income
(Loss) gain on life settlements, net	$	—		$	—		$	—		$	—		$	(41	)
Change in fair value of life settlements	(38		)	(46,879		)	51,551			864			46,717
Change in fair value of investment in limited partnership, net of distributions	1,361			—			—			—			—
Change in fair value of investment in deconsolidated subsidiaries	37,941			(150,894		)	—			—			—
Other income	2,261			1,351			322			251			215
Total income (loss)	41,525			(196,422		)	51,873			1,115			46,891
Expenses
Interest expense	11,220			30,845			32,797			29,439			27,286
Change in fair value of Revolving Credit Facilities	—			(70,900		)	4,501			(1,898		)	12,197
Loss on extinguishment of debt	—			—			2,018			554			8,782
Personnel costs	2,678			2,707			5,070			6,070			6,384
Legal fees	2,935			3,052			3,721			6,427			20,739
Professional fees	2,489			5,475			4,445			7,081			7,133
Insurance	929			734			783			835			1,275
Other selling, general and administrative expenses	649			1,562			1,776			2,036			2,194
Total expenses (income)	20,900			(26,525		)	55,111			50,544			85,990
Income (loss) from continuing operations before income taxes	20,625			(169,897		)	(3,238		)	(49,429		)	(39,099		)
Provision (benefit) for income taxes	3,766			45			—			—			(8,719		)
Net (loss) income from continuing operations	16,859			(169,942		)	(3,238		)	(49,429		)	(30,380		)
Discontinued Operations:
Income (loss) from discontinued operations, net of income taxes	(2,363		)	(29		)	(271		)	(260		)	(644		)
Provision (benefit) for income taxes	—			—			—			—			—
Net income (loss) from discontinued operations	(2,363		)	(29		)	(271		)	(260		)	(644		)
Net income (loss)	$	14,496		$	(169,971	)	$	(3,509	)	$	(49,689	)	$	(31,024	)
Income (loss) per share:
Basic income (loss) per share
Continuing operations	$	0.11		$	(1.09	)	$	(0.04	)	$	(1.79	)	$	(1.22	)
Discontinued operations	$	(0.02	)	$	—		$	—		$	(0.01	)	$	(0.03	)
Net income (loss) - basic	$	0.09		$	(1.09	)	$	(0.04	)	$	(1.80	)	$	(1.25	)
Diluted income (loss) per share
Continuing operations	$	0.11		$	(1.09	)	$	(0.04	)	$	(1.79	)	$	(1.22	)
Discontinued operations	$	(0.02	)	$	—		$	—		$	(0.01	)	$	(0.03	)
Net income (loss) - diluted	$	0.09		$	(1.09	)	$	(0.04	)	$	(1.80	)	$	(1.25	)
Weighted average shares outstanding:
Basic	156,994,105			155,949,444			82,323,050			27,660,711			24,851,178
Diluted	157,823,660			155,949,444			82,323,050			27,660,711			24,851,178


(1)	As of November 30, 2019, there were 158,365,275 and 157,757,275 shares of common stock issued and outstanding, respectively, and 608,000 shares of treasury stock.



	Historical
	November 30,						December 31,
	2019			2018			2017			2016			2015
	(In thousands except share data)
ASSETS
Assets
Cash and cash equivalents	$	24,283		$	1,209		$	18,131		$	2,246		$	12,946
Cash and cash equivalents (VIE)	—			—			13,136			9,072			7,395
Certificate of deposit	511			500			1,010			6,025			2,501
Prepaid expenses and other assets	377			657			617			1,112			1,017
Prepaid expenses and other assets (VIE)	—			—			53			—			—
Deposits—other	1,377			1,377			1,377			1,347			1,347
Investment in life settlements, at estimated fair value	1,297			1,172			750			680			11,946
Investment in life settlements, at estimated fair value (VIE)	—			—			566,742			497,720			449,979
Receivable for maturity of life settlements (VIE)	—			—			30,045			5,000			18,223
Fixed assets, net	18			78			145			232			322
Investment in limited partnership, at estimated fair value (Note 10)	137,849			—			—			—			—
Investment in deconsolidated subsidiaries (Note 3)	—			128,795			—			—			—
Investment in affiliates (VIE)	—			2,384			2,384			2,384			2,384
Deferred tax asset	—			576			—			—			—
Total assets	$	165,712		$	136,748		$	634,390		$	525,818		$	508,060
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Accounts payable and accrued expenses	1,651			2,446			2,015			2,590			3,051
Accounts payable and accrued expenses (VIE)	—			—			753			593			419
Other liabilities	86			194			451			359			360
Interest payable - 8.5% Convertible Notes (Note 12)	—			37			46			2,272			2,272
8.5% Convertible Notes, net of discount and deferred costs (Note 12)	—			1,173			1,098			60,535			56,812
Interest payable - 5.0% Convertible Notes (Note 13)	1,116			1,116			1,432			—			—
5.0% Convertible Notes, net of discount and deferred debt costs (Note 13)	71,022			69,742			68,654			—			—
Interest payable - 15.0% Senior Secured Notes	—			—			—			213			—
15.0% Senior Secured Notes, net of deferred debt costs	—			—			—			29,297			—
Interest payable - 8.5% Senior Secured Notes (Note 14)	854			628			132			—			—
8.5% Senior Secured Notes, net of deferred debt costs (Note 14)	45,675			34,170			33,927			—			—
White Eagle Revolving Credit Facility, at estimated fair value (VIE)	—			—			329,240			257,085			169,131
Red Falcon Revolving Credit Facility, at estimated fair value (VIE)	—			—			—			—			55,658
Income taxes payable	3,195			—			—			—			—
Total liabilities	123,599			109,506			437,748			352,944			287,703
Stockholders’ Equity
Common stock (par value $0.01 per share, 415,000,000 authorized at November 30, 2019 and November 30, 2018; 158,365,275 issued and 157,757,275 outstanding as of November 30, 2019; 158,733,928 issued and 158,125,928 outstanding as of November 30, 2018; 158,495,399 issued and 157,887,399 outstanding as of December 31, 2017; 29,021,844 issued and 28,413,844 outstanding as of December 31, 2016, 28,130,508 issued and 27,522,508 outstanding as of December 31, 2015, respectively)	1,584			1,587			1,585			290			281
Preferred stock, $0.01 par value (40,000,000 authorized; 0 issued and outstanding as of November 30, 2019, November 30, 2018, December 31, 2017, 2016 and 2015)	—			—			—			—			—
Treasury stock (608,000 shares as of November 30, 2019, November 30, 2018, December 31, 2017, 2016 and 2015)	(2,534		)	(2,534		)	(2,534		)	(2,534		)	(2,534		)
Additional paid-in-capital	334,576			334,198			333,629			307,647			305,450
Accumulated profit/deficit	(291,513		)	(306,009		)	(136,038		)	(132,529		)	(82,840		)
Total stockholders’ equity	42,113			27,242			196,642			172,874			220,357
Total liabilities and stockholders’ equity	$	165,712		$	136,748		$	634,390		$	525,818		$	508,060

Selected Operating Data (dollars in thousands):



	Twelve Months Ended November 30,		Eleven Months Ended November 30,		Twelve Months Ended December 31,		Twelve Months Ended December 31,
	2019		2018		2017		2016

End of Period—Policies Owned
Number of policies owned	2		2		608		621
Average age of insured	78.7		77.7		83.4		82.4
Average death benefit per policy	6,000		6,000		4,738		4,745
Average life expectancy—Calculated LE (Years)	11.4		12.2		8.3		9.0
Aggregate death benefit	$	12,000	$	12,000	$	2,880,487	$	2,946,511
Aggregate fair value	$	1,297	$	1,172	$	567,492	$	498,400
Monthly premium—average per policy	$	8.0	$	6.7	$	12.3	$	11.0

White Eagle Portfolio - Deconsolidated
End of Period—Policies Owned
Number of policies owned	—		586		—		—
Average age of insured	—		84.3		—		—
Average death benefit per policy	$	—	$	4,737	$	—	$	—
Average life expectancy—Calculated LE (Years)	—		8.9		—		—
Aggregate death benefit	$	—	$	2,775,916	$	—	$	—
Aggregate fair value	$	—	$	505,235	$	—	$	—
Monthly premium—average per policy	$	—	$	14.1	$	—	$	—
Proceeds collected	$	—	$	5,000	$	—	$	—

Period Maturities
Number of policies matured	—		20		13		12
Average age of insured at maturity	—		85.6		82.8		85.7
Average life expectancy - Calculated LE (Years)	—		4.7		4.5		3.4
Aggregate death benefit	$	—	$	93,435	$	67,177	$	37,460
Gains on maturity	$	—	$	53,265	$	35,891	$	17,876
Proceeds collected	$	—	$	90,780	$	42,131	$	50,460

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

*Information for deconsolidation is included up to August 16, 2019

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion in conjunction with the consolidated financial statements and accompanying notes and the information contained in other sections of this Annual Report on Form 10-K, particularly under the headings "Risk Factors," "Selected Financial Data" and "Business." This discussion and analysis is based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. The statements in this discussion and analysis concerning expectations regarding our future performance, liquidity and capital resources, as well as other non-historical statements in this discussion and analysis, are forward-looking statements. See "Cautionary Statement Regarding Forward-Looking Statements." These forward-looking statements are subject to numerous risks and uncertainties, including those described under "Risk Factors." Our actual results could differ materially from those suggested or implied by any forward-looking statements.

Business Overview

Emergent Capital, through its subsidiaries owns 2 life insurance policies, also referred to as life settlements, with a fair value of $1.3 million and an aggregate death benefit of approximately $12.0 million at November 30, 2019. Additionally, through a subsidiary, the Company owns a 27.5% equity investment, having an estimated fair value of approximately $137.8 million at November 30, 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 through change in fair value and death benefits from these two polices and change in fair value and distributions from its equity investment in White Eagle.

Change in Financial Year End

Voluntary Petitions for Relief Under Chapter 11 and De-consolidation of Subsidiaries

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. The effective period under the Standstill Agreement was extended several times, finally to December 13, 2018. On November 25, 2019, the Bankruptcy Court entered an order and final decree closing both of the Lamington and WEGP chapter 11 cases.

On November 25, 2019, the Bankruptcy Court entered an order and final decree closing both of the Lamington and WEGP chapter 11 cases.

Repayment and Termination of the White Eagle Revolving Credit Facility

On August 16, 2019, the Company entered into a subscription agreement (the "Subscription Agreement") with Lamington Road ("Class B Limited Partner"), White Eagle, WEGP ("Withdrawing General Partner"), and Palomino JV, L.P. ("Palomino" or "Class A Limited Partner"), in connection with the commitment letter signed on June 22, 2019 with Jade Mountain Partners, LLC ("Jade Mountain"), 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 (the "Manager") all of its general partnership interests (collectively, the "WE Investment") for a purchase price of 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 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 with a value of approximately $138.9 million on the closing date.

The proceeds of the WE Investment were used to satisfy in full (i) the White Eagle Revolving Credit Facility , and (ii) DIP Financing extended by CLMG, as Administrative Agent ("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 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 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 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 of the limited partnership, $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.

See Note 10, "Investment in Limited Partnership", to the accompanying consolidated financial statements for further information.

8.5% Senior Secured Notes Amendment

On December 10, 2018, the Company and Wilmington Trust, National Association, as indenture trustee, entered into a Second Supplemental Indenture (the "Second Supplemental Indenture") which amended the Amended and Restated Indenture, dated as of July 28, 2017, as amended by the First Supplemental Indenture dated as of January 10, 2018 (as so amended, the "Indenture"), relating to the Company’s 8.5% Senior Secured Notes due July 15, 2021 (the "8.5% Senior Secured Notes"). The Second Supplemental Indenture (i) increased the aggregate principal amount of Notes permitted to be issued under the Indenture from $40.0 million to $70.0 million and (ii) provided for interest on the Notes to be paid in kind, such that the principal amount of the relevant holder’s note is increased by the amount of interest, in lieu of cash payment ("PIK"). The Company may elect to pay PIK interest instead of cash interest for any Interest Period (as defined in the Indenture) to holders of Notes who consented to accept PIK interest. Each holder of outstanding Notes made an election with respect to some or all of the outstanding principal amount of such holder’s Notes as to whether or not to accept PIK interest whenever the Company elects to pay interest in PIK in lieu of cash. Any new holder of Notes, other than a transferee who is an affiliate of a transferring holder that did not elect to accept PIK interest, will be deemed to have elected to accept PIK interest. A holder receiving PIK interest shall also automatically receive, for each applicable Interest Period, an amount equal to 3.0% per annum of additional interest on the principal amount of such holder’s Notes for which the holder elected to accept PIK interest.

All terms of the Indenture that were not amended by the Second Supplemental Indenture remain in full force and effect.

On December 28, 2018, the Company entered into subscription agreements (the "Subscription Agreements) with several investors (the "Investors"), Pursuant to the Subscription Agreements, the Investors purchased from the Company an aggregate of $5.7 million principal amount of the Company’s 8.5% Senior Secured Notes for an aggregate purchase price of $4.3 million. The transactions were consummated on December 28, 2018.

On January 30, 2019, the Company entered into a Note Purchase Agreement (the "Note Purchase Agreement")with Ironsides Partners Special Situations Master Fund III L.P. (the "Investor"), which is affiliated with Robert Knapp, a member of the Company’s Board of Directors. Pursuant to the Note Purchase Agreement, the Investor purchased from the Company $2.0 million principal amount of the Company’s 8.5% Senior Secured Notes for a purchase price of $1.5 million.

On February 11, 2019, the Company entered into a Subscription Agreement (the "Subscription Agreement") with Brennan Opportunities Fund I LP (the "Investor"), which is affiliated with Patrick T. Brennan, a member of the Company’s Board of Directors. Pursuant to the Subscription Agreement, the Investor purchased from the Company $967,000 principal amount of the Company’s 8.5% Senior Secured Notes (the "Senior Notes") for a purchase price of $725,250. The transaction was consummated on February 14, 2019.

Litigation Settlement

Liquidity

Historically, the Company has incurred substantial losses, which has resulted in an accumulated deficit of approximately $291.5 million as of November 30, 2019. This amount includes $14.5 million of net income for the twelve months ended November 30, 2019 for which $37.9 million relates to a gain on change in fair value on the investment in deconsolidated subsidiaries as a result of the resolution of their emergence from bankruptcy. Cash flows used in operating activities were $12.4 million for the twelve months ended November 30, 2019 and $41.2 million for the eleven months ended November 30, 2018. As of November 30, 2019, we had approximately $24.3 million of cash and cash equivalents and certificates of deposit of $511,000.

Subsequent Events

Pursuant to the Settlement Agreement, 31 life insurance policies with face totaling $163.5 million issued by Sun Life were canceled in exchange for a lump sum payment of $36.1 million. The settlement included two policies held by the Company outside of White Eagle with an aggregate face value of $12.0 million, 28 policies held by White Eagle with an aggregate face value of $141.5 million and one policy with a face value of $10.0 million in receivable for maturity for White Eagle. Of this amount, approximately $12.7 million was received by the Company, $13.4 million was paid to White Eagle and $10.0 million was paid to Wilmington Trust for the maturity receivable. With this settlement, the Company no longer owns any life insurance policies and hence no future obligation for premium payments.

See Note 22, "Subsequent Events" of the accompanying consolidated financial statements for further information.

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 distributions from its investment in its equity investment in White Eagle, and cash on hand.

As of the filing date of this Form 10-K, we had approximately $22.2 million of cash and cash equivalents inclusive of certificates of deposit of $513,000. In considering our forecast for the next twelve months with the current cash balance as of the filing of this Form 10-K, the Company has sufficient resources to meet 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 our ability to continue as a going concern.

White Eagle Revolving Credit Facility Events

Repayment and Termination of the White Eagle Revolving Credit Facility

On August 16, 2019, the Company entered into a subscription agreement (the "Subscription Agreement") with Lamington Road ("Class B Limited Partner"), White Eagle, WEGP ("Withdrawing General Partner"), and Palomino JV, L.P. ("Palomino" or "Class A Limited Partner"), in connection with the commitment letter signed on June 22, 2019 with Jade Mountain Partners, LLC ("Jade Mountain"), 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 (the "Manager") all of its general partnership interests (collectively, the "WE Investment") for a purchase price of 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 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 with a value of approximately $138.2 million on the closing date.

The proceeds of the WE Investment were used to satisfy in full (i) the White Eagle Revolving Credit Facility , and (ii) DIP Financing extended by CLMG Corp., as Administrative Agent ("CLMG"), as agent, and LNV, LNV Corporation, as Lender ("LNV"), 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 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 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.

White Eagle received proceeds of approximately $366.2 million towards the sale of 72.5% of its life settlement and recognized gains of approximately $21.3 million which is included in gains on sale of life settlements in the condensed and consolidated financial statements.

See Note 4, "Condensed and Consolidated Financial Statements for Entities in Bankruptcy", to the accompanying consolidated financial statements for further information.

During the twelve months ended November 30, 2019, White Eagle experienced maturity of 18 life insurance policies with face amounts totaling $100.4 million, resulting in a net gain of approximately $70.3 million. The gains related to these maturities are included in income from changes in the fair value of life settlements in the deconsolidated subsidiaries statements of operations for the twelve months ended November 30, 2019. Proceeds from maturities totaling $92.5 million were received during the twelve months ended November 30, 2019 and were used solely for the purposes permitted under the budget approved by the Bankruptcy Court including repayment of the outstanding debt under the White Eagle Revolving Credit Facility.

See Note 11, "White Eagle Revolving Credit Facility", to the accompanying consolidated financial statements for further information.

Investment in Limited Partnership Events

In connection with the White Eagle Investment, the White Eagle 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 reserves sufficient to fund premiums, certain operating expenses of White Eagle 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's capital contribution to White Eagle was an estimated fair value of approximately $138.2 million. The Company performed a valuation at November 30, 2019 resulting in a value of approximately $137.8 million.

Reorganization and Consolidation

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.

On June 19, 2019, the Bankruptcy Court entered an order confirming the Plan of Reorganization for the Chapter 11 Cases. The Plan of Reorganization implemented the Settlement Agreement and the DIP Financing. In addition, the Plan of Reorganization provided for the payment of all other allowed third party creditor claims in full, including allowed professional fees and taxes. The effective date of the Plan of Reorganization was June 19, 2019.

On August 16, 2019, the White Eagle Revolving Credit Facility was paid in full and terminated, additionally, payment was made to all White Eagle vendors and intercompany liabilities were contributed by Emergent. 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. Pursuant to ASC 810, Consolidation, management took the position that given that all third party claims had been satisfied in the case, consolidation of Lamington and WEGP as of August 17, 2019 was appropriate. However, the consummation of the transaction under the Subscription Agreement resulted in the Company being a minority owner in White Eagle, the entity was not reconsolidated but rather treated as an equity investment.

On September 16, 2019, the Bankruptcy Court entered an order and final decree closing the White Eagle Chapter 11 Case. The Lamington and WEGP Chapter 11 Cases were dismissed on November 25, 2019.

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, the valuation of the investment in deconsolidated subsidiaries and the valuation of our equity investment in limited partnership 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,"Fair Value Measurements" to the accompanying 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 9, "Life Settlements (Life Insurance Policies)" and Note 15, "Fair Value Measurements" of the notes to 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 of 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 10, "Investment in Limited Partnership" and Note 15, "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. Our income recognition policies for these sources of income are 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. The Company recognizes income from monthly distribution from the limited 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"). Effective for tax years beginning after December 31, 2017, under certain circumstances, Section 245A enacted by the TCJA 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 tax on certain taxed foreign income under new Section 951A. Specifically, income earned in excess of a deemed return on tangible assets held by a controlled foreign corporation (such excess referred to as Global Intangible Low-Taxed Income ("GILTI") ) must now generally be included as U.S. taxable income on a current basis by its U.S. shareholders. Based on the Company’s life settlement assets held through Lamington’s ownership share in the WE Investment

, management expects the net income generated from these activities to qualify entirely as GILTI effective for its tax year beginning December 1, 2018. 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 its reporting period ended December 31, 2017, the Company 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 its 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 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 converting 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, the Bankruptcy Court entered an order and final decree closing the White Eagle Chapter 11 Case and on November 25, 2019, the Bankruptcy Court entered an order and final decree closing both of the Lamington and WEGP chapter 11 cases.

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 4 "Condensed and Consolidated Financial Statements For Entities in Bankruptcy" for all transactions between Emergent Capital and Lamington.

Accounting Changes

Note 2, "Summary of Significant Accounting Policies," of the Notes to Consolidated Financial Statements discusses accounting standards adopted in 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. There was no material impact of adoption during the period.

Consolidated Results of Operations

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

Additionally, as a result of our subsidiaries' Chapter 11 Cases, Lamington's and its subsidiaries' (White Eagle, WEGP and Lamington Road Bermuda Limited), financial results are included in the Company’s consolidated results through November 13, 2018, the day prior to the Petition Date. However, ASC 810, Consolidation require that an entity whose financial statements were previously consolidated with those of its parent that files for protection under the U.S. Bankruptcy Code, whether solvent or insolvent, generally must be prospectively deconsolidated from the parent and presented as an equity investment. Therefore, our 2019 results are not comparable with 2018, and the post-petition results are not included in our consolidated results for the twelve months ended November 30, 2019 which ended August 16, 2019. The results of White Eagle represented the Company's core business, and although the results are deconsolidated, the Company will analyze significant activities for the deconsolidated subsidiaries up to the point of deemed closure of the bankruptcy case of August 16, 2019.

Our results of operations are discussed below in three parts: (i) our consolidated results of continuing operations for 2019 compared to 2018 pre-petition date, (ii) our results of deconsolidated subsidiaries for 2019 up to August 16, 2019 compared to 2018 post-petition date, and (iii) our results of discontinued operations 2019 compared to 2018.

Results of Continuing Operations - Consolidated Subsidiaries

Twelve Months Ended November 30, 2019 Compared to Eleven Months Ended November 30, 2018

Net income from continuing operations for the twelve months ended November 30, 2019 was $16.9 million as compared to a loss of $169.9 million for the eleven months ended November 30, 2018. The following is our analysis of net income for the twelve months ended November 30, 2019 compared to eleven months ended November 30, 2018 (in thousands).



	Twelve Months Ended November 30,		Eleven Months Ended November 30,
	2019		2018			Change		% Change
Income (loss)	$	41,525	$	(196,422	)	$	237,947	(121	)%	increase
Expenses	20,900		(26,525		)	47,425		(179	)%	increase
Income tax provision (benefit)	3,766		45			3,721		8,269	%	increase
Net income (loss)	$	16,859	$	(169,942	)	$	186,801	(110	)%	increase

Income from continuing operations for the twelve months ended November 30, 2019 was significantly impacted by the reconsolidation of Lamington and related subsidiaries due to the closure of the Chapter 11 Cases on August 16, 2019 with the repayment and termination of the White Eagle Revolving Credit Facility.

Income for eleven months ended November 30, 2018 includes net gain on maturity of $53.3 million which is attributable to 20 policies maturity offset by a loss on the deconsolidation of Lamington and related subsidiaries. Income was significantly impacted by a negative change in fair value of life settlements as a result of changes made by the provider of life expectancy reports. This impact is approximately $124.0 million.

Historically, the Company procured the majority of its life expectancy reports from two life expectancy report providers (AVS Underwriting LLC and 21st Services, LLC) for valuation purposes and used an average or "blending," of the results of the two life expectancy reports to establish a composite mortality factor.

On October 18, 2018, 21st Services, LLC ("21st Services") announced revisions to its underwriting methodology, which revisions have generally been understood to lengthen the average reported life expectancy furnished by this life expectancy provider by 9%. On October 29, 2018, AVS Underwriting LLC ("AVS"), also announced revisions to its underwriting methodology without an estimated impact, which resulted in an average lengthening of the life expectancies by approximately 13%.

To account for the impact of the revisions by 21st Services and based off of market responses to the methodology change, the Company decided to lengthen the life expectancies, as furnished by 21st Services, by 9% as at November 30, 2018. The resulting impact was approximately $124.0 million reduction in the fair value of its life settlements.

Further, the Company decided to no longer utilize the results of life expectancy reports furnished by AVS for valuation purposes. The Company's decision was based on a series of events leading up to the announcement on October 29, 2018, which included AVS' inability to furnish timely reports to allow the Company to blend the results to facilitate timely quarterly reporting. Market participants also expressed concerns regarding their inability to connect the new AVS model to past models. Effective November 2018, the Company discontinued its blending approach. The resulting impact was approximately $23.1 million reduction in the fair value of its life settlements.

Approximately $37.9 million included in income for the twelve months ended November 30, 2019 represents a gain upon reconsolidation on our investments in previously deconsolidated subsidiaries, compared to a loss of approximately $150.9 million for the eleven months ended November 30, 2018. The amount is reflected in current earnings as change in fair value of investment in deconsolidated subsidiaries. At November 13, 2018, the pre-petition date, the Company valued its investment in Lamington to be $278.4 million, which was equivalent to the Company's book value. This valuation was determined by performing an internal fair value calculation of the assets and liabilities of Lamington under ASC 820, Fair Value Measurement. As a result of the Chapter 11 Cases, consistent with ASC 321, Investments - Equity Securities, the Company subsequently, measured its investment in Lamington at fair value as of November 30, 2018. Further, the Company engaged a third party to perform a quantitative assessment to determine the value of its investment in Lamington. The valuation report showed the fair value of the Company's investment in Lamington to be $128.8 million, which was $150.9 million lower than its pre-petition value. As a result, the Company recognized an impairment on its investment in Lamington at November 30, 2018, the amount is reflected in current earnings as change in fair value of investment in deconsolidated subsidiaries. The fair value of $128.8 million has inherent estimates including, but not limited to, when the Company will emerge from bankruptcy, the estimated discount rate, the value of the debt under the White Eagle Revolving Credit Facility, as well as other factors inherent in the valuation process.

On September 16, 2019, the Bankruptcy Court entered an order and a final decree closing the White Eagle Chapter 11 Case. The Lamington and WEGP case were dismissed on November 25, 2019. However pursuant to ASC 810, Consolidation, management took the position that given that all third party claims had been satisfied in the case, consolidation of Lamington and WEGP, as well as White Eagle, as of August 17, 2019 was appropriate. The Company further evaluated its investment at August 16, 2019 and recognized a gain of approximately $37.9 million, which amount is reflected in current earnings as change in fair value of investment in deconsolidated subsidiaries. The amount is associated with gains incurred by Lamington for the period up to August 16, 2019 in considering the proceeds received through the transactions for the subscription agreement, the actual payoff of the White Eagle Revolving Credit Facility and all other third party claims.

Income for the twelve months ended November 30, 2019, includes approximately $1.7 million which represents distribution for investment in limited partnership. As a result of the White Eagle Investment, the Company receives minimum class B interest monthly distribution equal to (i) for each month commencing prior to the third anniversary of the Effective Date, the greater of $667,000 and 1/12th of 1.50% of the Net Asset Value as determined by the most recent valuation report obtained on or prior to such Distribution Date and (ii) for each month commencing on or after the third anniversary of the Effective Date and prior to the tenth anniversary of the Effective Date, the greater of $333,000 and 1/12th of 0.75% of the net asset value as determined by the most recent valuation report obtained on or prior to such Distribution Date. The amount is included in change in fair value of investment in limited partnership, net of distributions on the consolidated statements of operations.

Total expenses from continuing operations for the twelve months ended November 30, 2019 were mainly comprised of interest on the 5% Convertible Notes of $5.1 million, $6.0 million on the 8.5% Senior Secured Notes and $93,000 on the 8.5% Convertible Notes.

Total expenses from continuing operations for the eleven months ended November 30, 2018 was positively impacted by change in fair of the White Eagle Revolving Credit Facility of approximately $70.9 million. The White Eagle Revolving Credit Facility incurred pre-petition gain, which was mainly attributable to the lengthening of the life expectancies furnished by 21st Services by 9% to determine the value of the life insurance policies pledged as collateral in the facility. This impacted the value of the debt by approximately $66.7 million. This amount is shown as a reduction to expenses on the statement of operations for the period ended November 30, 2018. Expense also included interest expense of approximately $22.8 million on the White Eagle Revolving Credit Facility; $4.6 million on the 5% Convertible Notes and $3.0 million on the 8.5% Senior Secured Notes.

Income for the twelve months ended November 30, 2019 was impacted by income tax expense of approximately $3.8 million.

See Note 21, "Income Taxes," to the accompanying consolidated financial statements for further information.

Change in fair value of life settlements (in thousands)



	Twelve Months Ended November 30,			Eleven Months Ended November 30,
	2019			2018			Change		% Change
Change in fair value of life settlements	$	(38	)	$	(46,879	)	$	46,841	(100	)%	increase

During the eleven months ended November 30, 2018, 20 life insurance policies with face amounts totaling $93.4 million matured. The net gain of these maturities was $53.3 million and is recorded as a change in fair value of life settlements in the consolidated statements of operations for the eleven months ended November 30, 2018. All 20 of the matured polices had served as collateral under the White Eagle Revolving Credit Facility. Proceeds from maturities totaling $95.8 million were received during the eleven months ended November 30, 2018. Of this amount, approximately $76.6 million inclusive of approximately $7.8 million collected during the year ended December 31, 2017 were utilized to repay borrowings, interest and credit facility expenses under the White Eagle Revolving Credit Facility. There were no maturities for the consolidated entities for the twelve months ended November 30, 2019.

As noted above, the Company decided to lengthen the life expectancies as furnished by 21st Services, by 9% as at November 30, 2018. The resulting impact was approximately $124.0 million reduction in the fair value of its life settlements. Further, the Company decided to no longer utilize the results of life expectancy reports furnished by AVS for valuation purposes and the resulting impact was approximately $23.1 million reduction in the fair value of its life settlements.

Other items impacting the change in fair value include updated life expectancies procured by the Company in respect to the insureds' lives and maturities. The updated life expectancy reports implied that in aggregate, the insureds’ health increased, therefore, lengthening their life expectancies relative to the prior life expectancies.

As of November 30, 2019, we owned two policies with an estimated fair value of $1.3 million compared to two policies with a fair value of $1.2 million at November 30, 2018, an increase of $125,000. As of November 30, 2019, the aggregate death benefit of these life settlements was $12.0 million.

Of these two policies owned as of November 30, 2019, all were previously premium financed and are valued using discount rates that range from 13.25% to 15.25%.

See Note 15, "Fair Value Measurements," to the accompanying consolidated financial statements.

Expenses (in thousands)



	Twelve Months Ended November 30,		Eleven Months Ended November 30,
	2019		2018			Change			% Change
Interest expense	$	11,220	$	30,845		$	(19,625	)	(64	)%	decrease
Change in fair value of Revolving Credit Facility	—		(70,900		)	70,900			(100	)%	increase
SG&A expenses	9,680		13,530			(3,850		)	(28	)%	decrease
Total Expense	$	20,900	$	(26,525	)	$	47,425		(179	)%	increase

Interest expense (in thousands)



	Twelve Months Ended November 30,		Eleven Months Ended November 30,
	2019		2018		Change			% Change
White Eagle Revolving Credit Facility	$	—	$	22,757	$	(22,757	)	(100	)%	decrease
8.5% Convertible Notes	93		169		(76		)	(45	)%	decrease
5% Convertible Notes	5,072		4,563		509			11	%	increase
8.5% Senior Secured Notes	6,043		3,004		3,039			101	%	increase
Participation Interest - White Eagle Revolving Credit Facility	—		340		(340		)	(100	)%	decrease
Other	12		12		—			—	%	decrease
Total Interest Expense	$	11,220	$	30,845	$	(19,625	)	(64	)%	decrease

Outstanding debt as of November 30, 2019 included $75.8 million of 5% Senior Unsecured Convertible Notes and $47.6 million of 8.5% Senior Secured Notes.

The White Eagle Revolving Credit Facility interest expense shows a decrease of approximately $22.8 million for the eleven months ended November 30, 2018 which is attributable to the deconsolidation of subsidiaries.

The Company's outstanding debt increased by $11.4 million from $112.0 million at eleven months ended November 30, 2018 to $123.4 million for the twelve months ended November 30, 2019. The increase is a combination of the repayment of the 8.5% Convertible Notes of $1.2 million, offset by the issue of 8.5% Senior Notes of approximately $6.5 million and interest paid in kind of approximately $4.0 million.

Of the interest expense of $11.2 million for the twelve months ended November 30, 2019, approximately $5.1 million represents interest on the 5% Convertible Notes and $6.0 million represents interest on 8.5% Senior Secured Notes.

Interest expense on the 8.5% Senior Unsecured Convertible Notes totaled approximately $93,000, including $73,000, $18,000 and $3,000 from interest, amortizing debt discounts and origination costs, respectively, during the twelve months ended November 30, 2019. The note was repaid during the twelve months ended November 30, 2019.

The Company recorded $5.1 million of interest expense on the 5.0% Senior Unsecured Convertible Notes, including $3.8 million, $1.1 million and $165,000 from interest, amortization of debt discount and origination costs, respectively, during the twelve months ended November 30, 2019.

The Company recorded approximately $6.0 million of interest expense on the 8.5% Senior Secured Notes, which includes $4.9 million of interest, $468,000 of amortizing debt issuance costs and $594,000 of amortizing of debt discount respectively, during the twelve months ended November 30, 2019.

Of the interest expense of $30.8 million for the eleven months ended November 30, 2018, approximately $22.8 million represents interest paid on the White Eagle Revolving Credit Facility. The increase in interest expense resulted from an increase in the principal balance of the White Eagle Revolving Credit Facility at November 30, 2018. Interest expense also includes approximately $340,000 for participation interest on the Facility paid during the eleven months ended November 30, 2018.

Interest expense on the 8.5% Convertible Notes totaled $169,000, including $93,000, $66,000 and $10,000 from interest, amortizing debt discounts and origination costs, respectively during the eleven months ended November 30, 2018.

The Company recorded $4.6 million of interest expense on the New Convertible Notes, including $3.5 million, $947,000 and $140,000 from interest, amortization of debt discount and origination costs, respectively, during the eleven months ended November 30, 2018.

The Company recorded approximately $3.0 million of interest expense on the 8.5% Senior Secured Notes, which includes $2.8 million of interest and $244,000 of amortizing debt issuance costs, respectively, during the eleven months ended November 30, 2018.

See Notes 11, "White Eagle Revolving Credit Facility,", 12, "8.50% Senior Unsecured Convertible Notes," 13, "5% Senior Unsecured Convertible Notes, and 14, "8.5% Senior Secured Notes," to the accompanying consolidated financial statements for further information.

Change in fair value of the White Eagle Revolving Credit Facility (in thousands)



	Twelve Months Ended November 30,		Eleven Months Ended November 30,
	2019		2018			Change		% Change
White Eagle Revolving Credit Facility	$	—	$	(70,900	)	$	70,900	(100	)%	decrease

For the eleven months ended November 30, 2018, the White Eagle Revolving Credit Facility showed a gain of $70.9 million. This gain is attributable to a combination of offsetting factors as discussed below:

During the eleven months ended November 30, 2018, the fair value of the White Eagle Revolving Credit Facility was impacted by increased borrowings, the lengthening of life expectancies of certain insureds' underlying policies pledged under the White Eagle Revolving Credit Facility and a slight increase in the discount rate used to value the facility.

The White Eagle Revolving Credit Facility incurred pre-petition gain of approximately $70.9 million, which is mainly attributable to the lengthening the life expectancies as furnished by 21st Services by 9% to determine the value of the life insurance policies pledged as collateral in the facility. This impacted the value of the debt by approximately $66.7 million. This amount is shown as a reduction to expenses on the statement of operations for the period ended November 30, 2018.

See Note 15, "Fair Value Measurements," to the accompanying consolidated financial statements.

Selling, general and administrative expenses (in thousands)



	Twelve Months Ended November 30,		Eleven Months Ended November 30,
	2019		2018		Change			% Change
Personnel costs	$	2,678	$	2,707	$	(29	)	(1	)%	decrease
Legal fees	2,935		3,052		(117		)	(4	)%	decrease
Professional fees	2,489		5,475		(2,986		)	(55	)%	decrease
Insurance	929		734		195			27	%	increase
Other SG&A	649		1,562		(913		)	(58	)%	decrease
Total SG&A Expense	$	9,680	$	13,530	$	(3,850	)	(28	)%	decrease

Significant decrease in SG&A expense was primarily a combination of an increase in insurance costs of $195,000 offset by a decrease in professional fees of $3.0 million, a decrease in other SG &A of $913,000 and a decrease in legal expense of $117,000.

Results of Operations for Deconsolidated Subsidiaries

Net loss from deconsolidated operations was $51.9 million for the period December 1, 2018 to August 16, 2019, compared to $61.1 million post-petition period November 14, 2018 to November 30, 2018 and comprise the below (in thousands):



	December 1, 2018 to August 16,			November 14, to November 30,
	2019			2018			Change		Change %
Income (loss)	$	20,556		$	(5,999	)	$	26,555	(443	)%	increase
Expenses	72,412			55,098			17,314		31	%	increase
Net income (loss)	$	(51,856	)	(61,097		)	$	9,241	(15	)%	increase

Total income for the deconsolidated subsidiaries was $20.6 million and mainly comprised gain on maturity of $70.3 million which is attributable to the maturity of 18 policies, gain on sale of life settlement of approximately $21.3 million associated with the sale of the limited partnership interests of White Eagle, change in fair value gain of investment in limited partnership of approximately $15.4 million which is attributable to the pickup in value for the assets contributed at closing of the Subscription Agreement, offset by change in fair value of life settlements loss of approximately $16.8 million.

Expense of approximately $72.4 million was significantly impacted by change in fair value of the White Eagle Revolving Credit Facility of approximately $17.1 million, interest expense of $28.3 million, reorganization cost of $14.0 million, loss on

extinguishment of debt of approximately $7.4 million associated with the early repayment of the White Eagle Revolving Credit Facility, administrative services fees of $2.8 million, professional fees of $1.5 million and legal fees of $890,000.

Total income for the period November 14, 2018 to November 30, 2018 was a loss of $6.0 million and mainly comprised change in fair value of life settlements loss of approximately $6.0 million.

Expense was significantly impacted by change in fair value of the White Eagle Revolving Credit Facility of approximately $53.6 million.

Change in fair value of life settlements - Deconsolidated Subsidiaries



	December 1, 2018 to August 16,			November 14, to November 30,
	2019			2018			Change			% Change
Change in fair value of life settlements	$	(16,841	)	$	(6,034	)	$	(10,807	)	179	%	increase

During the twelve months ended November 30, 2019, our deconsolidated subsidiaries had maturities of 18 life insurance policies with face amounts totaling $100.4 million. The net gain of these maturities was $70.3 million and is recorded as a change in fair value of life settlements in the deconsolidated statements of operations for the twelve months ended November 30, 2019. Proceeds from maturities totaling $92.5 million were received during the twelve months ended November 30, 2019. Of the amount collected, approximately $17.8 million was received after August 16, 2019, the Transaction Date and was distributed to the consolidated entities on August 16, 2019. There were no maturities for the period November 14, 2018 to November 30, 2018.

On May 22, 2019, a settlement in the amount of $21.3 million was signed among Lincoln Benefit Life Company ("Lincoln Benefit"), White Eagle and Emergent Capital pursuant to which Lincoln Benefit, agreed to 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 settlements relates to six separate legal actions pertaining to the validity of certain policies held by White Eagle and receivables for maturities of life settlement totaling $39.1 million. The settlement of the litigation, was approved by the Bankruptcy Court in June 2019, and, as such 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 for the twelve months ended November 30, 2019.

Other items impacting the change in fair value include updated life expectancies procured by our deconsolidated subsidiaries with respect to the insureds' lives and maturities. The updated life expectancy reports implied that in aggregate, the insureds’ health improved, therefore, lengthening their life expectancies relative to the prior life expectancies.

On October 18, 2018, 21st Services, announced revisions to its underwriting methodology, which revisions have generally been understood to lengthen the average reported life expectancy furnished by this life expectancy provider by 9%. On October 29, 2018, AVS also announced revisions to its underwriting methodology without an estimated impact, which resulted in an average lengthening of the life expectancies by approximately 13%.

In November 2018, White Eagle decided to no longer utilize the results of life expectancy reports furnished by AVS for valuation purposes and will procure its life expectancy reports solely from 21st Services on a periodic basis and expects to continue to lengthen life expectancies furnished by 21st Services that have not been re-underwritten using their updated methodology. Up to August 16, 2019, White Eagle received 326 updated life expectancy reports from 21st Services. These life expectancies reported an average lengthening of life expectancies of 23.45% based on this sample, which is significantly higher than the 9% impact first communicated by 21st Services and has significantly impacted the results for the twelve months ended November 30, 2019 by approximately $57.6 million.

As of November 30, 2018, White Eagle owned 586 policies with an estimated fair value of $505.2 million with an aggregate death benefit of these life settlements of $2.8 billion. All 586 policies were pledged as collateral for the White Eagle

Revolving Credit Facility. The Company also recorded a $27.7 million receivable for maturity of life settlements at November 30, 2018 relating to policies pledged as collateral the White Eagle Revolving Credit Facility.

Of these 586 policies owned as of November 30, 2018, 512 were previously premium financed and are valued using discount rates that range from 12.25% - 19.25%. The remaining 74 policies are valued using discount rates that range from 12.25% - 13.75%.

See Note 15 "Fair Value Measurements" to the accompanying consolidated financial statements for further information.

Change in fair value of investment in limited partnership



	Period ended August 16,		November 14, to November 30,
	2019		2018		Change		% Change
Change in fair value of investment in limited partnership	$	15,352	$	—	$	15,352	100	%	increase

On August 16, 2019, Lamington's capital contribution to White Eagle comprised the fair value of the life settlement assets based on the purchaser's valuation. The Company performed a fair value calculation to include various factors impacting the waterfall distribution as dictated by the Subscription Agreement, including but not limited to amounts advanced for the Class D Shares, the funding of the premium reserves on the Company's behalf and the expected return on the Class A Shares of 11%. The Company determined that the fair value was approximately $138.2 million which resulted in a change in fair value gain of approximately $15.4 million at August 16, 2019.

Change in fair value of White Eagle Revolving Credit Facility



	Period ended August 16,		November 14, to November 30,
	2019		2018		Change			% Change
Change in fair value of White Eagle Revolving Credit Facility	$	17,094	$	53,613	$	(36,519	)	(68	)%	decrease

For the twelve months ended November 30, 2019, the White Eagle Revolving Credit Facility incurred a loss of approximately $17.1 million which is mainly attributable the early repayment of the White Eagle Revolving Credit Facility.

The White Eagle Revolving Credit Facility incurred a loss of approximately $53.6 million, for the period November 14, 2018 to November 30, 2018, which is mainly attributable to assumptions incorporated due to the Chapter 11 filing of the entity. This amount is shown as an increase to White Eagle Credit Facility's expenses on the statement of operations for the period ended November 30, 2018. Outstanding principal under the White Eagle Credit Facility at November 30, 2018 was $363.8 million of outstanding principal.

The White Eagle Revolving Credit Facility was valued at November 30, 2018 using discount rates of 23.27%.

Refer to Note 3 "Deconsolidation of Subsidiaries", Note 4 "Condensed and Consolidated Financial Statements of Entities in Bankruptcy" and Note 5 "Consolidation of Variable Interest Entities", of the Notes to Consolidated Financial Statements, provided in this report.

Results of Continuing Operations

Eleven Months Ended November 30, 2018 Compared to Twelve Months Ended December 31, 2017

Net loss from continuing operations for the eleven months ended November 30, 2018 was $169.9 million as compared to a loss of $3.2 million for the twelve months ended December 31, 2017. The following is our analysis of net loss for the eleven months ended November 30, 2018 compared to twelve months ended December 31, 2017 (in thousands).



	Eleven Months Ended November 30,			Twelve Months Ended December 31,
	2018			2017			Change			% Change
Income	$	(196,422	)	$	51,873		$	(248,295	)	(479	)%	decrease
Expenses	(26,525		)	55,111			(81,636		)	(148	)%	decrease
Income tax (benefit) provision	45			—			45			100	%	increase
Net loss	$	(169,942	)	$	(3,238	)	$	(166,704	)	5,148	%	increase

Income included net gain on maturity of 20 life settlements of $53.3 million compared to a net gain of $35.9 million on maturity of 13 life settlements during the twelve months ended December 31, 2017.

Income from continuing operations for the eleven months ended November 30, 2018 was a loss, which was significantly impacted by a negative change in fair value of life settlements as a result of changes made by the provider of life expectancy reports. This impact is approximately $124.0 million.

Historically, the Company has procured the majority of its life expectancy reports from two life expectancy report providers (AVS Underwriting LLC and 21st Services, LLC) for valuation purposes and average or "blending," the results of the two life expectancy reports to establish a composite mortality factor.

On October 18, 2018, 21st Services, LLC ("21st Services") announced revisions to its underwriting methodology, these revisions have generally been understood to lengthen the average reported life expectancy furnished by this life expectancy provider by 9%. On October 29, 2018, AVS Underwriting LLC ("AVS"), also announced revisions to its underwriting methodology without an estimated impact, which resulted in an average lengthening of the life expectancies by approximately 13%.

To account for the impact of the revisions by 21st Services and based off of market responses to the methodology change, the Company decided to lengthen the life expectancies furnished by 21st Services by 9% as at November 30, 2018. The resulting impact is approximately $124.0 million reduction in the fair value of its life settlements.

Further, the Company has decide to no longer utilize the results of life expectancy reports furnished by AVS for valuation purposes. The Company's decision was based on a series of events leading up to the announcement on October 29, 2018, which includes AVS inability to furnish timely reports to allow the Company to blend the results to facilitate timely quarterly reporting. Market participants have expressed concerns regarding their inability to connect the new AVS model to past model. Effective November 2018, the Company discontinued its blending approach. The resulting impact is approximately $23.1 million reduction in the fair value of its life settlements.

Approximately $150.9 million included in income represents impairment of our investment in deconsolidated subsidiaries. At November 13, 2018, the pre-petition date, the Company valued its investment in Lamington to be$278.4 million, which is equivalent to the Company's book value. This valuation was determined by performing an internal fair value calculation of the assets and liabilities of Lamington under ASC 820, Fair Value Measurement. As a result of the Chapter 11 Cases, consistent with ASC 321, Investments - Equity Securities, the Company subsequently, measured its investment in Lamington at fair value as of November 30, 2018. Further, the Company engaged a third party to perform a quantitative assessment to determine the value of its investment in Lamington. The valuation report showed the fair value of the Company's investment in Lamington to be $128.8 million, which is $150.9 million lower than its pre-petition value. As a result, the Company recognized an impairment on its investment in Lamington at November 30, 2018, the amount is reflected in current earnings as change in fair value of investment in deconsolidated subsidiaries. The fair value of $128.8 million has inherent estimates including, but not limited to, when the Company will emerge from bankruptcy, the estimated discount rate, the value of the debt under the White Eagle Revolving Credit Facility, as well as other factors inherent in the valuation process.

Total expenses from continuing operations for the eleven months ended November 30, 2018 were mainly comprised of interest expense on the White Eagle Revolving Credit Facility of $22.8 million; $4.6 million on the 5% Convertible Notes and$3.0 million on the 8.5% Senior Secured Notes.

Expense was positively impacted by change in fair of the White Eagle Revolving Credit Facility of approximately $70.9 million. The White Eagle Revolving Credit Facility incurred pre-petition gain, which is mainly attributable to lengthen the life expectancies furnished by 21st Services by 9% to determine the value of the life insurance policies pledged as collateral in the facility. This impacted the value of the debt by approximately $66.7 million. This amount is shown as a reduction to expenses on the statement of operations for the period ended November 30, 2018.

Total expenses from continuing operations for the twelve months ended December 31, 2017 were mainly comprised of interest expense of $16.8 million on the White Eagle Revolving Credit Facility; $9.2 million on the 8.5% Convertible Notes; $2.1 million on the 5% Convertible Notes; $2.8 million on the 15% Senior Secured Notes; $1.4 million on the 8.5% Senior Secured Notes, $2.0 million loss on extinguishment of debt, and a change in the fair value of the White Eagle Revolving Credit Facility of $4.5 million.

Change in Fair Value of Life Settlements (in thousands)



	Eleven Months Ended November 30,			Twelve Months Ended December 31,
	2018			2017		Change			% Change
Change in fair value of life settlements	$	(46,879	)	$	51,551	$	(98,430	)	(191	)%	decrease

During the eleven months ended November 30, 2018, 20 life insurance policies with face amounts totaling $93.4 million matured, compared to 13 policies with face amounts of $67.2 million for the twelve months ended December 31, 2017. The net gain of these maturities was $53.3 million and $35.9 million for 2018 and 2017, respectively, and is recorded as a change in fair value of life settlements in the consolidated statements of operations for the eleven months ended November 30, 2018 and twelve months ended December 31, 2017. All 20 of the maturities served as collateral under the White Eagle Revolving Credit Facility. Proceeds from maturities totaling $95.8 million were received during the eleven months ended November 30, 2018. Of this amount, approximately $76.6 million inclusive of approximately $7.8 million collected during the year ended December 31, 2017 were utilized to repay borrowings, interest and credit facility expenses under the White Eagle Revolving Credit Facility.

Other items impacting the change in fair value include updated life expectancies procured by the Company in respect to the insureds' lives and maturities. The updated life expectancy reports implied that in aggregate, the insureds’ health improved, therefore, lengthening their life expectancies relative to the prior life expectancies.

Further, the Company decided to no longer utilize the results of life expectancy reports furnished by AVS for valuation purposes. The Company's decision was based on a series of events leading up to the announcement on October 29, 2018, which includes AVS inability to furnish timely reports to allow the Company to blend the results to facilitate timely quarterly reporting. Market participants have expressed concerns regarding their inability to connect the new AVS model to past model. Effective November 30, 2018, the Company discontinued its blending approach. The resulting impact is approximately $23.1 million reduction in the fair value of its life settlements.

The Company re-evaluates its discount rates at the end of each reporting period in order to reflect the estimated discount rates that could reasonably be used in a market transaction involving the Company's portfolio of life settlements. In doing so, consideration is given to the various factors influencing the rates, including risk tolerance, market activity, credit exposure of the insurance company that issued the life insurance policy, and the estimated risk premium an investor in the policy would require, among other factors. In considering these factors at November 30, 2018, the Company determined that the weighted average discount rate calculated based on death benefit was 13.43% compared to 15.95% at December 31, 2017 for all policies including those of the deconsolidated entities.

As of November 30, 2018, we owned two policies with an estimated fair value of $1.2 million compared to 608 policies with a fair value of $567.5 million at December 31, 2017, a decrease of $566.3 million due to the deconsolidation of White Eagle. As of November 30, 2018, the aggregate death benefit of these life settlements was $12.0 million.

Of these two policies owned as of November 30, 2018, all were previously premium financed and are valued using discount rates that range from 13.25% to 14.75%.

See Note 15, "Fair Value Measurements," to the accompanying consolidated financial statements.

Expenses (in thousands)



	Eleven Months Ended November 30,			Twelve Months Ended December 31,
	2018			2017		Change			% Change
Interest expense	$	30,845		$	32,797	$	(1,952	)	(6	)%	decrease
Extinguishment of Senior Notes	—			2,018		(2,018		)	(100	)%	decrease
Change in fair value of Revolving Credit Facilities	(70,900		)	4,501		(75,401		)	(1,675	)%	increase
SG&A expenses	13,530			15,795		(2,265		)	(14	)%	decrease
Total Expense	$	(26,525	)	$	55,111	$	(81,636	)	(148	)%	decrease

Interest expense (in thousands)



	Eleven Months Ended November 30,		Twelve Months Ended December 31,
	2018		2017		Change			% Change
White Eagle Revolving Credit Facility	$	22,757	$	16,819	$	5,938		35	%	increase
8.5% Convertible Notes	169		9,206		(9,037		)	(98	)%	decrease
15% Senior Secured Notes	—		2,784		(2,784		)	(100	)%	decrease
5% Convertible Notes	4,563		2,107		2,456			117	%	increase
8.5% Senior Secured Notes	3,004		1,370		1,634			119	%	increase
Participation Interest - White Eagle Revolving Credit Facility	340		467		(127		)	(27	)%	decrease
Other	12		44		(32		)	(73	)%	decrease
Total Interest Expense	$	30,845	$	32,797	$	(1,952	)	(6	)%	decrease

Outstanding debt as of November 30, 2018 included $1.2 million of 8.5% Senior Unsecured Convertible Notes, $75.8 million of 5% Senior Unsecured Convertible Notes and $35.0 million of 8.5% Senior Secured Notes.

Of the interest expense of $30.8 million for the eleven months ended November 30, 2018, approximately $22.8 million represents interest paid on the White Eagle Revolving Credit Facility prior to its deconsolidation. The increase in interest expense resulted from an increase in the principal balance of the facility. Interest expense also includes approximately $340,000 for participation interest on the White Eagle Revolving Credit Facility paid during the eleven months ended November 30, 2018.

Interest expense on the 8.5% Senior Unsecured Convertible Notes totaled $169,000, including $93,000, $66,000 and $10,000 from interest, amortizing debt discounts and origination costs, respectively, during the eleven months ended November 30, 2018.

The Company recorded $4.6 million of interest expense on the 5.0% Senior Unsecured Convertible Notes, including $3.5 million, $947,000 and $140,000 from interest, amortization of debt discount and origination costs, respectively, during the eleven months ended November 30, 2018.

The Company recorded approximately $3.0 million of interest expense on the 8.5% Senior Secured Notes, which includes $2.8 million of interest and $244,000 of amortizing debt issuance costs respectively, during the eleven months ended November 30, 2018.

Of the interest expense of $32.8 million for the twelve months ended December 31, 2017, approximately $16.8 million represents interest paid on the White Eagle Revolving Credit Facility. The increase in interest expense resulted from an increase in the principal balance of the facility at December 31, 2017. Interest expense also includes approximately $467,000 for participation interest on the Facility paid during the twelve months ended December 31, 2017.

Interest expense on the 8.5% Convertible Notes totaled $9.2 million, including $4.2 million, $2.5 million, $2.1 million and $314,000 from interest, one time debt modification cost, amortizing debt discounts and origination costs, respectively. Interest for the twelve months ended December 31, 2017 included approximately $522,000 of additional interest paid in kind to note holders.

The Company recorded approximately $2.8 million of interest expense on the 15% Senior Secured Notes, which includes $2.6 million of interest and $184,000 of amortizing debt issuance costs, respectively, during the twelve months ended December 31, 2017. The 15% Senior Secured Notes were repaid and canceled on July 28, 2017 in connection with the 2017 recapitalization.

The Company recorded $2.1 million of interest expense on the New Convertible Notes, including $1.6 million, $432,000 and $64,000 from interest, amortization of debt discount and origination costs, respectively, during the twelve months ended December 31, 2017.

The Company recorded approximately $1.4 million of interest expense on the 8.5% Senior Secured Notes, which includes $1.3 million of interest and $98,000 of amortizing debt issuance costs, respectively, during the twelve months ended December 31, 2017.

See Notes 11, "White Eagle Revolving Credit Facility," ," 12, "8.50% Senior Unsecured Convertible ," 13, "5% Senior Unsecured Convertible," and 14, "8.5% Senior Secured Notes," to the accompanying consolidated financial statements for further information.

Extinguishment of debt (in thousands)



	Eleven Months Ended November 30,		Twelve Months Ended December 31,
	2018		2017		Change			% Change
Loss on extinguishment of debt	$	—	$	2,018	$	(2,018	)	(100	)%	decrease

During the twelve months ended December 31, 2017, approximately $2.0 million was recorded in loss on the extinguishment of debt for the 15.0% Senior Secured Notes, including $1.5 million and $518,000 related to prepayment penalty and write off of origination cost, respectively.

Change in fair value of the Revolving Credit Facilities (in thousands)



	Eleven Months Ended November 30,			Twelve Months Ended December 31,
	2018			2017		Change			% Change
White Eagle Revolving Credit Facility	$	(70,900	)	$	4,501	$	(75,401	)	(1,675	)%	decrease

For the eleven months ended November 30, 2018, the White Eagle Revolving Credit Facility shows a gain of approximately $70.9 million compared to a loss of $4.5 million for the twelve months ended December 31, 2017. This loss is attributable to a combination of offsetting factors as discussed below:

The Facility incurred pre-petition gain of approximately $70.9 million, which is mainly attributable to lengthen the life expectancies furnished by 21st Services by 9% to determine the value of the life insurance policies pledged as collateral in the facility. This impacted the value of the debt by approximately $66.7 million. This amount is shown as a reduction to expenses on the statement of operations for the period ended November 30, 2018

During the twelve months ended December 31, 2017, the fair value of the White Eagle Revolving Credit Facility was impacted by increased borrowings, the lengthening of life expectancies of certain insureds' underlying policies pledged under the White Eagle Revolving Credit Facility and a slight increase in the discount rate used to value the facility.

See Note 15, "Fair Value Measurements," to the accompanying consolidated financial statements.

Selling, General and Administrative Expenses (in thousands)



	Eleven Months Ended November 30,		Twelve Months Ended December 31,
	2018		2017		Change			% Change
Personnel costs	$	2,707	$	5,070	$	(2,363	)	(47	)%	decrease
Legal fees	3,052		3,721		(669		)	(18	)%	decrease
Professional fees	5,475		4,445		1,030			23	%	increase
Insurance	734		783		(49		)	(6	)%	decrease
Other SG&A	1,562		1,776		(214		)	(12	)%	decrease
Total SG&A Expense	$	13,530	$	15,795	$	(2,265	)	(14	)%	decrease

The decrease in SG&A expense was primarily the result of a decrease in personnel costs of $2.4 million, a decrease in legal expense of $669,000, a decrease in other SG &A of $214,000, and a decrease in insurance costs of $49,000 offset by an increase in professional fees $1.0 million.

On August 3, 2017 and August 11, 2017, as a reduction in force, the Company reduced its headcount from 20 employees to 12 employees. The Company recognized a onetime severance cost of approximately $1.0 million related to this reduction, the amounts were included in personnel cost and were being paid over a period of twelve months.

Results of Discontinued Operations

2019 Compared to 2018



	Twelve Months Ended November 30,			Eleven Months Ended November 30,
	2019			2018			Change			% Change
Change in fair value of investment in affiliates	$	(2,384	)	$	—		$	(2,384	)	100	%	increase
Other income	—			17			(17		)	(100	)%	decrease
	(2,384		)	17			(2,401		)
Total expenses	(21		)	46			(67		)	(146	)%	decrease
Loss before income taxes	(2,363		)	(29		)	(2,334		)	8,048	%	increase
Income tax benefit	—			—			—			—	%	decrease
Net loss, net of income taxes	$	(2,363	)	$	(29	)	$	(2,334	)	8,048	%	increase

Net income from our discontinued structured settlement operations for the twelve months ended November 30, 2019 was a loss of approximately $2.4 million as compared to a net loss of $29,000 for the eleven months ended November 30, 2018. Total income from our discontinued structured settlement operations was $2.4 million compared to $17,000 for the twelve months ended November 30, 2019 and eleven months ended November 30, 2018, respectively. Income for fiscal 2019 was negatively impacted by change in fair value of investment in affiliates of approximately $2.4 million. This investment was held by our structured settlement subsidiary whose primary activities were discontinued in 2013 with the sale of the structured settlement assets and this investment in affiliates was the only portion remaining. The remaining $2.4 million was written off as a result of ongoing restructuring plans in the fourth quarter of fiscal 2019, the Company decided not to continue to pursue this line of investment.

Total expenses from our discontinued structured settlement operations were income of $21,000 for the twelve months ended November 30, 2019 compared to expense of $46,000 incurred during the eleven months ended November 30, 2018.

2018 Compared to 2017



	Twelve Months Ended November 30,			Eleven Months Ended November 30,
	2018			2017			Change			% Change
Total income (loss)	17			33			$	(16	)	(48	)%	decrease
Total expenses	46			304			(258		)	(85	)%	decrease
Net income (loss), net of income taxes	$	(29	)	$	(271	)	$	242		(89	)%	decrease

Net loss from our discontinued structured settlement operations for the eleven months ended November 30, 2018 was $29,000 as compared to a net loss of $271,000 for the twelve months ended December 31, 2017. Total income from our discontinued structured settlement operations was $17,000 compared to $33,000 for the eleven months ended November 30, 2018 and twelve months ended December 31, 2017, respectively.

Total expenses from our discontinued structured settlement operations were $46,000 for the eleven months ended November 30, 2018 compared to $304,000 incurred during the twelve months ended December 31, 2017. This decrease was mainly attributable to an $180,000 decrease in other SG&A and a $78,000 decrease in legal fees.

Liquidity and Capital Resources

Our consolidated financial statements have been prepared assuming the realization of assets and the satisfaction of liabilities in the normal course of business, as well as continued compliance with the covenants contained in the indentures governing our 5% Convertible Notes, 8.5% Senior Secured Notes and other financing arrangements.

Previously the payment of premiums to maintain the life insurance policies we owned represented our most significant requirement for cash disbursement. On a quarterly basis, we calculated the minimum premium payments required to maintain the policies in-force. Over time, as an insured ages, the relevant premium payments will increase. Nevertheless, the probability we will actually be required to pay the premium decreases as mortality becomes more likely. In addition to premiums, we incurred policy servicing costs, including updated medical records, updated life expectancies and securities intermediaries' fees; in most cases, these amounts were determined by the number of policies we owned. The majority of these costs relates to the policies previously pledged as collateral under the White Eagle Revolving Credit Facility with the termination of such facility and the sale of 72.5% of the ownership interests in the holder of the assets, the Company's exposure to these risks has been significantly reduced.

Additionally, on December 4, 2019 the Company and certain of its subsidiaries entered into a Settlement Agreement and Mutual Release (the "Settlement Agreement") with Sun Life Assurance Company of Canada ("Sun Life") and Wilmington Trust, N.A. as securities intermediary ("Wilmington Trust").

Historically, the Company has incurred substantial losses, which has resulted in an accumulated deficit of approximately $291.5 million as of November 30, 2019. This amount include $14.5 million of net income for the twelve months ended November 30, 2019 for which $37.9 million relates to gain on change in fair value on the investment in deconsolidated subsidiaries as a result of the resolution of their emergence from bankruptcy. Cash flows used in operating activities were $12.4 million for the twelve months ended November 30, 2019 and $41.2 million for the eleven months ended November 30, 2018. As of November 30, 2019, we had approximately $24.3 million of cash and cash equivalents and certificates of deposit of $511,000.

For the twelve months ended November 30, 2019, we paid $70.0 million in premiums to maintain our policies in force in our consolidated and deconsolidated subsidiaries. Of this amount, $69.8 million was paid by White Eagle through its pre-petition borrowings and maturity proceeds.

In connection with the WE Investment, the A&R LPA provides generally that holders of the Class A and Class B Interest holders 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 utilized 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).

Although the WE Investment provides guaranteed payments of $8.0 million per year for the first three (3) years and $4.0 million for the subsequent seven (7) years to the Company, irrespective of maturities, there can be no assurance as to when proceeds from maturities of the policies in the WE Investment will be distributed to the Company. Delays will impact the timing of distribution since the Class A Shares must meet their 11% return as well as repayments for any advance to the premium reserve on the Company's behalf.

The following table illustrates the total amount of face value of life insurance policies owned up to August 16, 2019, the date of the WE Investment, the trailing 12- months of life insurance policy maturities realized and premiums paid on our portfolio. The trailing 12-month maturities/premium coverage ratio indicates the ratio of policy maturities realized to premiums paid over the trailing 12-month period from our portfolio of life insurance policies.



Quarter End Date	Portfolio Face Amount ($)	12-Month Trailing Maturities Realized ($)	12-Month Trailing Premiums Paid ($)	12-Month Trailing Maturities/Premiums Coverage Ratio (%)
March 31, 2015	3,001,987	27,188	57,723	47	%
June 30, 2015	2,982,416	63,768	59,990	106	%
September 30, 2015	2,997,903	67,468	63,124	107	%
December 31, 2015	2,979,352	67,403	64,923	104	%
March 31, 2016	2,969,670	67,195	66,049	102	%
June 30, 2016	2,966,388	34,815	67,843	51	%
September 30, 2016	2,953,796	43,915	69,430	63	%
December 31, 2016	2,946,511	37,460	71,681	52	%
March 31, 2017	2,908,876	62,330	75,609	82	%
June 30, 2017	2,903,899	63,353	79,378	80	%
September 30, 2017	2,887,827	67,053	82,032	82	%
December 30, 2017	2,880,487	67,176	84,751	79	%
March 31, 2018	2,852,803	57,026	86,561	66	%
June 30, 2018	2,826,863	78,039	87,650	89	%
September 30, 2018	2,794,652	94,039	89,263	105	%
November 30, 2018	2,787,916	93,435	91,601	102	%
February 28, 2019	2,765,250	93,735	88,235	106	%
May 31, 2019	2,719,976	108,105	97,602	111	%
August 31, 2019	2,688,556	125,623	100,697	125	%

We believe that the life insurance policy maturities we receive will continue to increase over time in relation to the premiums we are required to pay on the remaining policies in the portfolio but do expect that our portfolio cash flow on a period-to-period basis will remain inconsistent given its dependence on actual maturities.

Financing Arrangements Summary

White Eagle Revolving Credit Facility

White Eagle is the borrower under a $370.0 million (as amended on December 29, 2016) revolving credit facility, with Imperial Finance and Trading, LLC, as the initial servicer, the initial portfolio manager and guarantor, Lamington Road Bermuda Ltd., as portfolio manager, LNV Corporation, as initial lender, the other financial institutions party thereto as lenders, and CLMG Corp., as administrative agent for the lenders. Effective August 16, 2019, all outstanding principal and interest under the White Eagle Revolving Credit Facility was repaid.

See Note 11, "White Eagle Revolving Credit Facility," of the notes to the accompanying consolidated financial statements.

8.50% Senior Unsecured Convertible Notes

At November 30, 2019, no principal amount of the Company’s 8.50% Senior Unsecured Convertible Notes due 2019 (the “Convertible Notes”) was outstanding.

For a description of the Convertible Notes see Note 12, "8.50% Senior Unsecured Convertible Notes," of the accompanying consolidated financial statement.

5.0% Senior Unsecured Convertible Notes

At November 30, 2019, there was $75.8 million in aggregate principal amount of the Company’s 5.0% Senior Unsecured Convertible Notes due 2023 (the "New Convertible Notes" or "5% Convertible Notes") outstanding. For a description of the New Convertible Notes see Note 12, "5.0% Senior Unsecured Convertible Notes," of the accompanying consolidated financial statements for further information.

In July 2017, the Company caused to be issued the New Convertible Notes in an aggregate amount of approximately $75.8 million pursuant to the New Convertible Note Indenture. The terms of the New Convertible Notes are governed by the New Convertible Note Indenture, which provides, among other things, that the New Convertible Notes are unsecured senior obligations of the Company and will mature on February 15, 2023. The New Convertible Notes bear interest at a rate of 5% per annum from the issue date, payable semi-annually on August 15 and February 15 of each year, beginning on August 15, 2017.

Holders of New Convertible Notes may convert their New Convertible Notes at their option on any day prior to the close of business on the second scheduled trading day immediately preceding February 15, 2023. Upon conversion, the Company will deliver shares of Common Stock, together with any cash payment for any fractional share of Common Stock. The initial conversion rate for the New Convertible Notes denominated in $1,000 increments will be 500 shares of Common Stock per $1,000 principal amount of New Convertible Notes, which corresponds to an initial conversion price of approximately $2.00 per share of Common Stock. The initial conversion rate for the New Convertible Notes denominated in $1.00 increments will be 0.5 shares of Common Stock per $1.00 principal amount of New Convertible Notes, which corresponds to an initial conversion price of approximately $2.00 per share of Common Stock. The conversion rate will be subject to adjustment in certain circumstances.

The Company may redeem, in whole but not in part, the New Convertible Notes at a redemption price of 100% of the principal amount of the New Convertible Notes to be redeemed, plus accrued and unpaid interest and additional interest, if any, if and only if the last reported sale price of the Common Stock equals or exceeds 120% of the conversion price for at least 15 trading days in any period of 15 consecutive trading days. The Company may, at its election, pay or deliver as the case may be, to all Holders of the New Convertible Notes, either (a) solely cash, (b) solely shares of Common Stock, or (c) a combination of cash and shares of Common Stock.

The New Convertible Note Indenture provides for customary events of default, which include (subject in certain cases to customary grace and cure periods), among others: nonpayment of principal or interest; breach of covenants or other agreements in the New Convertible Note Indenture; defaults or failure to pay certain other indebtedness; and certain events of bankruptcy or insolvency. Generally, if an event of default occurs and is continuing under the New Convertible Note Indenture, the trustee or the holders of at least 25% in aggregate principal amount of the New Convertible Notes then outstanding may declare all unpaid principal plus accrued interest on the New Convertible Notes immediately due and payable, subject to certain conditions set forth in the New Convertible Note Indenture. In addition, holders of the New Convertible Notes may require the Company to repurchase the New Convertible Notes upon the occurrence of certain designated events at a repurchase price of 100% of the principal amount of the New Convertible Notes, plus accrued and unpaid interest.

8.5% Senior Secured Notes

At November 30, 2019, there was $47.6 million in aggregate principal amount of the Company’s 8.5% Senior Secured Notes due 2021 outstanding (the "8.5% Senior Secured Notes"). For a description of the 8.5% Senior Secured Notes see Note 14, "8.5% Senior Secured Notes," of the accompanying consolidated financial statements for further information.

In July 2017, the Note Purchase Investors and the Senior Secured Note Holders representing 100% of the aggregate outstanding principal amount of the Company’s 15.0% Senior Secured Notes entered into the Note Purchase Agreement. Pursuant to the Note Purchase Agreement, the Note Purchase Investors purchased 100% of the 15% Senior Secured Notes held by each Senior Secured Note Holder for an aggregate purchase price equal to the face amount of such purchased 15.0% Senior Secured Notes. The Note Purchase Agreement contained customary representations, warranties, and covenants.

In connection with the Transaction Closing, the Company paid each Senior Secured Note Holder 5% of the face amount of the 15% Senior Secured Notes held by such Senior Secured Note Holder as of immediately prior to the Transaction Closing, plus all accrued but unpaid interest of such 15% Senior Secured Notes through the date of the Transaction Closing, pursuant to

that certain Exchange Participation Agreement dated April 7, 2017 among the Company and Senior Secured Note Holders representing 100% of the aggregate outstanding principal amount of the 15% Senior Secured Notes.

In connection with the Transaction Closing, the Company and the Senior Secured Note Trustee entered into the Amended and Restated Senior Secured Indenture to amend and restate the Senior Secured Indenture between the Company and the Senior Secured Note Trustee following the Company’s receipt of requisite consents of the holders of the 15% Senior Secured Notes. Pursuant to the terms of the Amended and Restated Senior Secured Indenture, the Company caused the cancellation of all outstanding 15% Senior Secured Notes and the issuance of 8.5% Senior Secured Notes in an aggregate amount of $30.0 million. The Amended and Restated Senior Secured Indenture provides, among other things, that the 8.5% Senior Secured Notes will be secured senior obligations of the Company and will mature on July 15, 2021. The 8.5% Senior Secured Notes will bear interest at a rate of 8.5% per annum, payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning on September 15, 2017.

The Amended and Restated Senior Secured Indenture provides that the 8.5% Senior Secured Notes may be optionally redeemed in full by the Company at any time and must be redeemed in full upon additional issuances of debt by the Company in each case, at a price equal to 100% of the principal amount redeemed plus (i) accrued and unpaid interest on the 8.5% Senior Secured Notes redeemed up to the date of redemption, and (ii) the Applicable Premium, if any, as defined in the Amended and Restated Senior Secured Indenture. Upon a change of control, the Company will be required to make an offer to holders of the 8.5%Senior Secured Notes to repurchase the 8.5% Senior Secured Notes at a price equal to 107.5% of their principal amount, plus accrued and unpaid interest up to the date of redemption.

The Amended and Restated Senior Secured Indenture contains negative covenants restricting additional debt incurred by the Company, creation of liens on the collateral securing the 8.5%Senior Secured Notes, and restrictions on dividends and stock repurchases, among other things. The 8.5% Senior Secured Notes are secured by settlement proceeds, if any, received from certain litigation involving the Company, certain notes issued to the Company, and pledges of 65% of the equity interests in Blue Heron Designated Activity Company, OLIPP IV, LLC and Red Reef Alternative Investments, LLC.

On August 11, 2017, the Company entered into a Securities Purchase Agreement with Brennan Opportunities Fund

I LP ("Brennan") pursuant to which Brennan purchased from the Company (i) 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 and (ii) $5.0 million principal amount of the Company’s 8.5% Senior Secured Notes (the "Brennan Notes," and together with the Brennan Shares, the "Brennan Securities"). The Securities Purchase Agreement contained customary representations, warranties, and covenants.

The sale of the Brennan Securities was consummated on August 11, 2017, as to 8,750,000 shares of Common Stock and $3.5 million principal amount of 8.5% Senior Secured Notes, and on August 14, 2017, as to 3,750,000 shares of Common Stock and $1.5 million principal amount of 8.5% Senior Secured Notes.

On January 10, 2018, the Company dissolved Red Falcon Trust, an indirect subsidiary of the Company ("Red Falcon"). On the same date, the Company also commenced the process of appointing a liquidator to liquidate Blue Heron Designated Activity Company, a direct subsidiary of the Company ("Blue Heron"). The completion of liquidation formalities of Blue Heron under Irish law is took several months. Both Red Falcon and Blue Heron were inactive subsidiaries of the Company.

The Company had pledged 65% of the equity and certain other assets of Blue Heron in favor of the secured parties under the Amended and Restated Senior Secured Indenture. In connection with liquidation of Blue Heron, the Company and Wilmington Trust, National Association, as trustee under the Amended and Restated Senior Secured Indenture (the "Trustee"), entered into (i) the First Supplemental Indenture (the "First Supplemental Indenture"), dated as of January 10, 2018, to implement certain amendments to the Indenture and (ii) the Amendment to Pledge and Security Agreement ("Pledge and Security Amendment"), dated as of January 10, 2018, to implement certain amendments to the Pledge and Security Agreement ("Pledge and Security Agreement"), dated as of March 11, 2016, between the Company and Trustee. The First Supplemental Indenture and the Pledge and Security Amendment amend the Indenture and Pledge and Security Agreement, respectively, to:

(i) remove from the assets pledged to the secured parties under the Amended and Restated Senior Secured Indenture, 65% of the equity and certain other assets of Blue Heron; and (ii) reflect the pledge by the Company, in favor of the secured parties under the Indenture, of the promissory note dated as of December 29, 2016 in the principal sum of $69.6 million issued by OLIPP IV, LLC to Blue Heron and subsequently assigned to the Company.

8.5% Senior Secured Notes Amendment

On December 28, 2018, the Company entered into subscription agreements (the "Subscription Agreements") with several investors (the "Investors"), Pursuant to the Subscription Agreements, the Investors purchased from the Company an aggregate of $5.7 million principal amount of the Company’s 8.5% Senior Secured Notes for an aggregate purchase price of $4.3 million. The transactions were consummated on December 28, 2018.

On December 28, 2018, the Company received a commitment letter (the "Commitment Letter") from Ironsides Partners LLC, an entity affiliated with Robert Knapp, a member of the Board, for an aggregate investment, at the Company’s election, of up to $2.0 million principal amount of 8.5% Senior Secured Notes for an aggregate purchase price of up to $1.5 million no later than January 31, 2019. The Commitment Letter contains certain conditions precedent to Ironsides’ obligations to purchase such Senior Notes. On January 30, 2019, the Company entered into a Note Purchase Agreement (the "Note Purchase Agreement")with Ironsides Partners Special Situations Master Fund III L.P. (the "Investor"), which is affiliated with Robert Knapp, a member of the Company’s Board of Directors. Pursuant to the Note Purchase Agreement, the Investor purchased from the Company $2.0 million principal amount of the Company’s 8.5% Senior Secured Notes for a purchase price of $1.5 million.

On February 11, 2019, the Company entered into a Subscription Agreement (the "Subscription Agreement") with Brennan Opportunities Fund I LP (the "Investor"), which is affiliated with Patrick T. Brennan, a member of the Company’s Board of Directors. Pursuant to the Subscription Agreement, the Investor purchased from the Company $967,000 principal amount of the Company’s 8.5% Senior Secured Notes (the "Senior Notes") for a purchase price of $725,000. The transaction was consummated on February 14, 2019.

At November 30, 2019, the outstanding principal of the 8.5% Senior Secured Notes was $47.6 million with a carrying value of $45.7 million, net of unamortized debt issuance cost of $362,000.

Cash Flows

The following table summarizes our cash flows, which includes both continuing and discontinued operations, from operating, investing and financing activities for the year ended November 30, 2019, the eleven months ended November 30, 2018 and the year ended December 31, 2017 (in thousands):



	Twelve Months Ended November 30,			Eleven Months Ended November 30,			Twelve Months Ended December 31,
	2019			2018			2017
Statement of Cash Flows Data:
Total cash (used in) provided by:
Operating activities	$	(12,380	)	$	(41,225	)	$	(34,847	)
Investing activities	30,172			(17,425		)	(37,566		)
Financing activities	5,282			28,592			92,362
(Decrease)/increase in cash and cash equivalents	$	23,074		$	(30,058	)	$	19,949

Operating Activities

During the twelve months ended November 30, 2019, operating activities used cash of $12.4 million. Our net income of $14.5 million was adjusted for the following: change in fair value of investment in deconsolidated subsidiaries of approximately $37.9 million, attributable to the reconsolidation of Lamington and its subsidiaries gain due to the resolutions Chapter 11 Cases up to August 16, 2019, change in fair value of investment in affiliates of approximately $2.4 million, change in fair value of investment in limited partnership gain of approximately $1.4 million, interest paid in kind on 8.5% Senior Secured Notes of approximately $4.0 million, amortization of discount and deferred cost for the 5% Convertible Notes of $1.3

million, amortization of discount and deferred cost for the 8.5% Senior Secured Notes of $1.1 million, amortization of discount and deferred cost for the 8.5% Convertible Notes of $21,000, stock based compensation of $375,000, and a net positive change in the components of operating assets and liabilities of $2.9 million. This $2.9 million change in operating assets and liabilities is partially attributable to a $168,000 decrease in other liabilities, a $835,000 decrease in accounts payable and accrued expenses, offset by a $3.2 million increase in current tax liabilities, a $226,000 increase in interest payable on the 8.5% Senior Secured Noted and a $516,000 increase in prepaid and other assets.

During the eleven months ended November 30, 2018, operating activities used cash of $41.2 million. Our net loss of $170.0 million was adjusted for the following: change in fair value of investment in deconsolidated subsidiaries of approximately $150.9 million, attributable to the deconsolidation of Lamington and its subsidiaries due to the Chapter 11 cases, White Eagle Revolving Credit Facility financing costs and fees of $927,000, which represent fees associated with the White Eagle Revolving Credit Facility withheld by the lender and added to the outstanding loan balance, amortization of discount and deferred cost for the 5% Convertible Notes of $1.1 million, amortization of discount of deferred cost for the 8.5% Senior Secured Notes of $244,000, amortization of discount and deferred cost for the 8.5% Convertible Notes of $76,000, stock based compensation of $562,000, change in fair value of life settlement gains of $46.9 million that is mainly attributable to maturities of 20 policies, change in fair value of White Eagle Revolving Credit Facility gain of $70.9 million that is mainly attributable to increased borrowings, the lengthening of life expectancies of certain insureds underlying policies pledged as collateral in the facility and an increase in the discount rates, and a net negative change in the components of operating assets and liabilities of $10,000. This $10,000 change in operating assets and liabilities is partially attributable to a $316,000 decrease in interest payable on the 5.0% Convertible Notes, a $1.0 million decrease in other liabilities, offset by a $877,000 increase in accounts payable and accrued expenses, and a $496,000 increase in interest payable on the 8.5% Senior Secured Noted.

Investing Activities

Net cash used in investing activities for the twelve months ended November 30, 2019 was $30.2 million. This includes $17.8 million in proceeds from maturity of life settlement, $10.9 million in cash from consolidated of subsidiaries that were previously deconsolidated due to the Chapter 11 Cases and $1.7 million in distribution from investment in limited partnership, offset by $163,000 for premiums paid on life settlements.

Net cash used in investing activities for the eleven months ended November 30, 2018 was $17.4 million and included proceeds of $90.8 million from maturity of 20 life settlements and $516,000 for certificates of deposit. This was offset by $78.7 million for premiums paid on life settlements and $30.0 million in deconsolidation of subsidiaries cash.

Financing Activities

Net cash provided by financing activities for the twelve months ended November 30, 2019 was $5.3 million resulted from proceeds from the issue of 8.5% Senior Secured Notes of approximately $6.5 million offset by repayment of outstanding principal under the 8.5% Convertible Notes of approximately $1.2 million.

Net cash provided by financing activities for the eleven months ended November 30, 2018 was $28.6 million and included $81.3 million of borrowings from the White Eagle Revolving Credit Facility offset by $52.7 million in repayment of borrowings under the White Eagle Revolving Credit Facility.

Contractual Obligations

The following table summarizes our contractual obligations as of November 30, 2019 (in thousands):



	Total		Due in Less than 1 Year		Due 1-3 Years		Due 3-5 Years		More than 5 Years
Operating leases	$	217	$	217	$	—	$	—	$	—
Interest payable	1,971		1,971		—		—		—
8.5% Senior Secured Notes	47,600		—		47,600		—		—
5% Senior Unsecured Convertible Notes	75,837		—		—		75,837		—
	$	125,625	$	2,188	$	47,600	$	75,837	$	—

Inflation

Our assets and liabilities are, and will be in the future, interest-rate sensitive in nature. As a result, interest rates may influence our performance far more than inflation. Changes in interest rates do not necessarily correlate with inflation or changes in inflation rates. We do not believe that inflation had any material impact on our results of operations in the periods presented in our financial statements presented in this report.

Off-Balance Sheet Arrangements

At November 30, 2019, there were no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to shareholders.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of potential economic loss principally arising from adverse changes in the fair value of financial instruments. The major components of market risk are credit risk, interest rate risk and foreign currency risk. As of November 30, 2019, we did not hold a material amount of financial instruments for trading purposes.

Credit Risk

Credit risk consists primarily of the potential loss arising from adverse changes in the financial condition of the issuers of the life insurance policies that we own. Although we may purchase life settlements from carriers rated below investment grade, to limit our credit risk, we generally only purchase life settlements from companies that are investment grade.

The following table provides information about the life insurance issuer concentrations that exceed 10% of total death benefit and 10% of total fair value of our life settlements as of November 30, 2019:



Carrier - Consolidated	Percentage of Total Fair Value		Percentage of Total Death Benefit		Moody’s Rating	S&P Rating
Sun Life Assurance Company of Canada	100.0	%	100.0	%	Aa3	AA

Interest Rate Risk

At November 30, 2019, fluctuations in interest rates did not impact interest expense in the life finance business.

We earn income on the changes in fair value of the life insurance policies we own. However, if the fair value of the life insurance policies we own decreases, we record this reduction as a loss.

As of November 30, 2019, we owned two life settlements with a fair value of $1.3 million. However, these policies were disposed of subsequent to the year end.

Foreign Currency Exchange Rate Risk

Changes in the exchange rate between transactions denominated in a currency other than our foreign subsidiaries’ functional currency are immaterial to our operating results. Exposure to foreign currency exchange rate risk may increase over time as our business evolves.

Item 8. Financial Statements and Supplementary Data

The financial statements required by this Item are included in Item 15 of this Annual Report on Form 10-K and are presented beginning on page F-1.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not Applicable.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of November 30, 2019. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to management, including to the chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the fourth quarter ended November 30, 2019 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Management’s report set forth on page F-2 is incorporated herein by reference.

Item 9B. Other Information

PART III

Item 10. Directors, Executive Officers and Corporate Governance

DIRECTORS

Our Articles of Incorporation provide that our Board is to be comprised of a minimum of three (3) and a maximum of fifteen (15) directors, as determined from time to time in accordance with our Bylaws. Currently, our Board consists of nine (9) directors.

The table below provides information about our current directors. Each director serves for a one-year term and until his successors is elected and qualified.



Name	Age	Position
Patrick J. Curry	54	Chief Executive Officer and Chairman of the Board
Patrick T. Brennan	44	Director
Matthew Epstein	37	Director
Matthew D. Houk	38	Director
James Hua	37	Director
Robert Knapp	53	Director
Roy J. Patterson	36	Director
Joseph E. Sarachek	58	Director
James G. Wolf	64	Director

Set forth below is a brief description of the business experience of each of our directors.

Patrick J. Curry

Mr. Curry became a member of our Board in July 2017 (the "Recapitalization"). In addition to serving as our Chief Executive Officer, Mr. Curry currently serves as the President and Chief Executive Officer of PJC Investments, LLC. Previously, from 1997 to 2003, Mr. Curry served as Executive Vice President and a director of Central Freight Lines, Inc. From 1994 to 1997, Mr. Curry was the President and Chief Executive Officer of Universal Express Limited, LLC. From 1991 to 1993, Mr. Curry served as President and Chief Executive Officer of Lortex, Inc. Prior to these roles, Mr. Curry was also a licensed stock and bond broker for Legg Mason Wood Walker, Inc. and a financial analyst for Hercules Aerospace, Inc. Mr. Curry has previous experience in investing in entities in the life settlement business. Mr. Curry is designated as a nominee to our Board pursuant to the Board Designation Agreement (the "Investors Agreement") among the Company, PJC Investors, LLC ("PJC") and JSARCo, LLC ("JSARCo" and, with PJC, the "Investors") in connection with our 2017 recapitalization. Subject to the terms and conditions set forth in such agreement, the Investors shall have the right to designate to the Board at each meeting of the Company’s shareholders at which the election of directors is to be considered (x) three directors, one of whom shall be designated pursuant to the Opal Sheppard Agreement while that agreement is in effect, so long as the Investors, together with any affiliates, collectively hold at least 30% of the outstanding shares of Common Stock, (y) two directors so long as the Investors, together with any affiliates, collectively hold at least 20% but less than 30% of the outstanding shares of Common Stock, and (z) one director so long as the Investors, together with any affiliates, collectively hold at least 10% but less than 20% of the outstanding shares of Common Stock.

Patrick T. Brennan

Mr. Brennan became a member of the Board in December 2018. Mr. Brennan is the founder and portfolio manager, since 2015, of Brennan Asset Management, LLC (BAM), a Registered Investment Advisory firm based in Napa, CA, which utilizes a concentrated value investing strategy. Prior to founding Brennan Asset Management, Mr. Brennan managed portfolios and led research efforts at two value investing firms in California: Hutchinson Capital Management, from 2013 to 2014, and RBO & Co., from 2009 to 2012. Previously, Mr. Brennan worked at Mark Boyar & Company, where he led the firm’s research team and helped manage assets across individual portfolios, institutional accounts and a mutual fund. Mr. Brennan also worked for

six years in investment banking and equity research with Deutsche Bank, CIBC World Markets and William Blair & Company covering financial services, media and telecom and business services. Mr. Brennan graduated summa cum laude from the University of Notre Dame with a degree in economics and was inducted into Phi Beta Kappa.

Matthew Epstein

Mr. Epstein became a member of the Board in July 2017. Mr. Epstein currently serves as Assistant Portfolio Manager for Evermore Global Advisors, LLC, an investment management firm. Previously, from 2005 to 2014, Mr. Epstein worked at W.R. Huff Asset management, LLC, most recently serving as Senior Analyst. Mr. Epstein has Bachelor of Science degrees in Finance and International Business from New York University and an MBA from Columbia University. Mr. Epstein is a CFA Charter holder. Mr. Epstein is designated as a nominee to our Board pursuant to the Board Designation Agreement (the "Evermore Agreement") between the Company and Evermore Global Advisors, LLC ("Evermore") in connection with the Recapitalization. Subject to the terms and conditions set forth in such agreement, Evermore shall have the right to designate one director to the Board at each meeting of the Company’s shareholders at which the election of directors is to be considered so long as Evermore, together with investors identified in the Evermore Agreement, holds at least 9,375,000 shares of Common Stock.

Matthew D. Houk

Mr. Houk became a member of the Board in December 2018. Mr. Houk has served since 2008 in various capacities, including most recently as Portfolio Manager and Research Analyst, for Horizon Kinetics LLC ("Horizon"), an investment management firm, where he is involved in the identification, analysis, and monitoring of certain investment opportunities for Horizon. Mr. Houk is also a Co-Portfolio Manager for several registered investment companies at Horizon. Mr. Houk also serves as the Co-Chairman, Co-Chief Executive Officer and Chief Financial Officer of Winland Holdings Corporation, a diversified holding company focused on environmental monitoring solutions that trades on the OTC Pink® marketplace under the symbol WELX. Previously, from 2005 to 2008, Mr. Houk was with Goldman, Sachs & Co., a global investment banking, securities and investment management firm. Mr. Houk has a B.A. in Economics and Political Science from Yale University.

James Hua

Mr. Hua became a member of the Board in July 2017. Mr. Hua currently serves as Portfolio Manager for Opal Advisors and as Chief Investment Officer for Sheppard Wealth Management. Previously, from 2011 to 2012, Mr. Hua served as Investment Analyst for Freestone Capital. From 2009 to 2011, Mr. Hua served as Controller of Liberty Capital. Mr. Hua has a Bachelor of Arts in Business Administration with a concentration in Accounting from the University of Washington. Mr. Hua is designated as a nominee to our Board pursuant to the Board Designation Agreement (the "Opal Sheppard Agreement") between the Company and Opal Sheppard Opportunities Fund I LP ("Opal Sheppard") in connection with the Recapitalization. Subject to the terms and conditions set forth in such agreement, Opal Sheppard shall have the right to designate one director to the Board at each meeting of the Company’s shareholders at which the election of directors is to be considered so long as (x) the Investors have the right to designate three directors to the Board and (y) Opal Sheppard, together with any affiliates, collectively holds at least $525,000 principal amount of the Company’s 8.5% senior secured notes due 2021 (the "Senior Notes").

Robert Knapp

Mr. Knapp became a member of the Board in July 2017. Mr. Knapp is the Founder and CIO of Ironsides Partners LLC, a Boston based investment manager specializing in closed-end funds, holding companies, and asset value investing generally. Ironsides and related entities serve as the manager and general partner to various funds and managed accounts for institutional clients. Mr. Knapp is an independent, non-executive director of several investment-related companies, including Castle Private Equity AG (SWX: CPEN) based in Switzerland, the Pacific Alliance Asia Opportunity Fund and Pacific Alliance Group Asset Management Ltd., based in Hong Kong, and was formerly a director of MPC Containerships (OSX: MPCC NO) based in Oslo. Mr. Knapp is also a principal and director of Africa Opportunity Partners Limited ("AOP"), a Cayman Islands company that serves as the investment manager to Africa Opportunity Fund Limited ("AOF"), a closed-end investment company incorporated in the Cayman Islands that trades on the London Stock Exchange. Mr. Knapp serves on the Board of Directors of AOF. Mr. Knapp also serves as a member of the Board of Managers of Veracity Worldwide LLC. In addition to his directorships named above, Mr. Knapp serves as a director of the Massachusetts Eye and Ear Infirmary, and is a Trustee of the Children’s School of Science and the Sea Education Association, both of Woods Hole, MA. Prior to founding Ironsides, Mr. Knapp was a managing director for over ten years with Millennium Partners, based in New York. Mr. Knapp is designated as a nominee to our Board pursuant to the Board Designation Agreement (the "Ironsides Agreement") between the Company and Ironsides P Fund L.P.

and Ironsides Partners Special Situations Master Fund II L.P. (together, "Ironsides") in connection with the Recapitalization. Subject to the terms and conditions set forth in such agreement, Ironsides shall have the right to designate one director to the Board at each meeting of the Company’s shareholders at which the election of directors is to be considered so long as Ironsides, together with any affiliates, collectively holds at least $4.5 million principal amount of the Senior Notes.

Roy J. Patterson

Mr. Patterson became a member of the Board in October 2017. Mr. Patterson has been the Managing Member of River City Management LLC since 2019 where he has responsibility for investment decisions and asset allocation. Prior to that, Mr. Patterson managed a private investment company for eight years where he was primarily responsible for alternative investments. Mr. Patterson served as an Analyst from 2009 to 2011 for a lower middle market private equity firm as a member of the deal team evaluating a wide spectrum of industries and business models, executing transactions, and overseeing portfolio companies. From 2007 to 2009, Mr. Patterson served as an Associate and Vice President for a boutique investment bank where he was a member of a deal team and actively participated in all aspects of sourcing and executing transactions.

Joseph E. Sarachek

Mr. Sarachek became a member of the Board in July 2017. Mr. Sarachek is the principal of Triax Capital Advisors, which he founded in 2011, and is currently the principal and manager of TopCo 1, LLC, which is the manager of JSARCo. Prior to forming Triax, Mr. Sarachek worked for Balfour Investors, an investment firm focused on bankruptcies and turnarounds and, prior to that, was a partner at the law firm of McDermott Will & Emery. He is an attorney and investment professional with considerable experience in the trading of privately held distressed debt and in restructuring cases. He first published on trading in claims almost 30 years ago and has lectured at Harvard Business School, Harvard Law School, Cornell University, the American Bankruptcy Institute, and the Turnaround Management Association. Mr. Sarachek has a J.D. from New York Law School and a B.S. in Economics & Public Policy from Cornell University. Mr. Sarachek is a director of Kominox, a Korean experimental cancer research corporation. Mr. Sarachek is designated as a nominee to our Board pursuant to the Investors Agreement. Subject to the terms and conditions set forth in such agreement, the Investors shall have the right to designate to the Board at each meeting of the Company’s shareholders at which the election of directors is to be considered (x) three directors, one of whom shall be designated pursuant to the Opal Sheppard Agreement while that agreement is in effect, so long as the Investors, together with any affiliates, collectively hold at least 30% of the outstanding shares of Common Stock, (y) two directors so long as the Investors, together with any affiliates, collectively hold at least 20% but less than 30% of the outstanding shares of Common Stock, and (z) one director so long as the Investors, together with any affiliates, collectively hold at least 10% but less than 20% of the outstanding shares of Common Stock.

James G. Wolf

Mr. Wolf became a member of the Board in February 2019. Mr. Wolf was most recently a Managing Director with Houlihan Lokey from 2017 - 2018 and was a Managing Director at BVA Group from 2016 - 2017. However, he spent most of his career at Ernst & Young, LLP, from which he retired in 2015 after 30 years as a Principal in EY’s Transaction Advisory Services - Valuation, Modeling and Economic after have served in various capacities including advising on matters surrounding valuations for transactions, strategic alternatives, financial reporting, tax, litigation and regulatory matters. Mr. Wolf led the Fairness Opinion Practice and was Managing Partner of EY’s Center for Strategic Transactions. His sector experience at Ernst & Young included a lifetime specialty in financial services, especially insurance and asset management, as well as chemicals, consumer and industrial, construction, automotive, and business services. Prior to EY, he was a VP in a bank trust department and an investment analyst reporting directly to the CFO of a multi-line insurance company. Mr. Wolf is a director of HemaCare Corp. (OTC Pink: HEMA). Mr. Wolf received a B.B.A. in finance from the University of Notre Dame and an MBA from the University of Texas at Austin. He holds the CFA designation.

EXECUTIVE OFFICERS

Set forth below is information regarding the Company’s current executive officers who are not also directors. There are no family relationships among any of our current directors or executive officers.



Miriam Martinez		Senior Vice President, Chief Financial Officer and Secretary
Age: 63		Executive Officer Since: 2012

Ms. Martinez has served as our Senior Vice President and Chief Financial Officer since October of 2016, and as Secretary since September 2017. Prior to that, she was our Senior Vice President of Finance and Operations from September 2010 until October 2016. She primarily oversees the day to day financial, accounting and human resource activities of the Company. Ms. Martinez joined the Company in September 2010 prior to our initial public offering. From the period of 2006 to February 2010, Ms. Martinez served as Regional President and Chief Financial Officer of Qimonda N.A. a U.S. subsidiary of a German memory chip manufacturer. From 2000 to 2006, Ms. Martinez was Chief Financial Officer of Infineon N.A., a U.S. subsidiary of a German-based global semiconductor company. Ms. Martinez has also held executive positions at Siemens and White Oak Semiconductor, a joint venture between Siemens and Motorola. Ms. Martinez has a Bachelor of Accounting degree from Pace University and an MBA from Nova University. She has also completed the Siemens Executive MBA Program with Duke University.



Harvey Werblowsky		Vice President, Chief Legal Officer and General Counsel
Age: 72		Executive Officer Since: 2017

Mr. Werblowsky has served as our Vice President, Chief Legal Officer and General Counsel since October of 2017. Prior to that, from 2008 to 2017, he served as co-portfolio manager of Hamilton Capital LLC. Prior to that, he was Of Counsel to Weiss Zarett Brofman Sonnenklar & Levy, P.C. and, previously, a partner at McDermott Will & Emery, representing public and private healthcare companies, hospitals, and physician groups in various corporate, litigation and regulatory matters. Before entering private practice, Mr. Werblowsky served as senior counsel to the Office of the Inspector General at the U.S. Department of Health and Human Services, as Deputy Attorney General for the State of New Jersey and as Deputy Attorney General for the State of New York.

CORPORATE GOVERNANCE

The Board of Directors

The Board is presently comprised of nine (9) directors. Our common stock is listed on the OTCQX Tier of the OTC Markets Group, Inc. ("OTCQX"). The OTCQX does not have any director independence standards. Pursuant to the regulations promulgated by the SEC under the Securities Exchange Act of 1934, as amended, we have adopted the definition of independent director as described under Rule 303A.02 of the New York Stock Exchange ("NYSE"). Our Board has determined that eight (8) directors are independent under the rules of the NYSE. The independent directors are Patrick T. Brennan, Matthew Epstein, Matthew D. Houk, James Hua, Robert Knapp, Roy J. Patterson, Joseph E. Sarachek and James G. Wolf. The Board has set the number of directors at nine (9).

Board Leadership Structure and Role in Risk Oversight

The Board is responsible for the overall stewardship of the Company. The Board discharges this responsibility directly and indirectly through delegation of specific responsibilities to its committees, the Chairman of the Board and officers of the Company. The Board has established three standing committees to assist with its responsibilities: the Audit Committee, the Compensation Committee, and the Corporate Governance and Nominating Committee.

The Company’s Bylaws require the Board to elect a Chair, who presides at the meetings of the Board. If the Chair is an employee of the Company, the Company’s Bylaws require the Board to elect a Lead Director as well, who presides at executive sessions of our independent directors. Mr. Curry, our Chief Executive Officer, is currently the Chair of the Board, and Mr. Sarachek, a non-employee director, is currently the Lead Director. We believe our current leadership structure is the optimal structure for us at this time and recognize that different board leadership structures may be appropriate in different situations.

The Board recognizes the importance of appropriate oversight of potential business risks in running a successful operation and meeting its fiduciary obligations to our business and our shareholders. While our senior executives, including the Chief Executive Officer and Chief Financial Officer, are responsible for the day-to-day assessment and management of business risks, the Board maintains responsibility for creating an appropriate culture of risk management and setting a proper "tone at the top". In this role, the Board, directly and through its committees, takes an active role in overseeing our aggregate risk potential and in assisting our executives with addressing specific risks, including competitive, legal, regulatory, operational and financial risks. The Board does not believe that its role in the oversight of the Company’s risks affects the Board’s leadership structure. Previously, the Board had a standing Strategic Risk Oversight Committee that was responsible for reviewing actions proposed and taken by management in any areas of strategic risk as deemed appropriate by such committee;

and reviewing other areas of material risk, including litigation, as appropriate or as requested by the Board. The Board has determined that it, as a whole, should handle such oversight going forward, and such committee has been disbanded.

Majority Voting Policy

Directors are elected by a plurality of votes cast by shares entitled to vote at each Annual Meeting. However, our Board has adopted a "majority voting policy." Under this policy, any nominee for director in an uncontested election who receives a greater number of votes "withheld" from his or her election than votes “for” such election is required to tender his or her resignation following certification of the shareholder vote. The Corporate Governance and Nominating Committee will promptly consider the tendered resignation and make a recommendation to the Board whether to accept or reject the resignation.

Factors that the Corporate Governance and Nominating Committee and Board will consider under this policy may include:


•	the stated reasons, if any, why votes were withheld from the director and whether those reasons can be cured;


•	the director’s length of service, qualifications and contributions as a director;


•	OTCQX listing requirements; and


•	our Corporate Governance Guidelines.

Any director who tenders his or her resignation under this policy will not participate in the committee recommendation or Board action regarding whether to accept the resignation offer. If all of the members of the Corporate Governance and Nominating Committee receive a majority withheld vote at the same election, then the independent directors who do not receive a majority withheld vote will appoint a committee from among themselves to consider the resignation offers and recommend to the Board whether to accept such resignations.

Resignation Tendered In Advance

Our Bylaws provide that, as a condition to being nominated to the Board or re-nominated for continued service on the Board, the director or director nominee must sign and deliver to the Board an irrevocable letter of resignation. The letter will be deemed tendered upon its acceptance by a majority of the disinterested members of the Board after a finding that, in connection with the performance of the director’s duties to the Company, the director either substantially participated in a breach of fiduciary duty arising from a material violation of a United States federal or state law or a regulation, or recklessly disregarded his or her duty to exercise reasonable oversight.

Board Committee Composition

Each of the standing committees maintains a written charter detailing its authority and responsibilities. These charters are reviewed and updated periodically as legislative and regulatory developments and business circumstances warrant. These committee charters are available on our website at www.emergentcapital.com in the Investors/Newsroom section, under the Corporate Governance tab. Certain of our corporate governance policies continue to refer to and generally apply listing rules of the NYSE. On January 24, 2017, we filed a Form 25 with the Securities and Exchange Commission formally delisting our common stock from the NYSE. Since then, our common stock has continued trading, first on the OTCQB Tier of the OTC Markets Group, Inc. and, since May 29, 2018, on the OTCQX. References to NYSE and the NYSE listing rules in this Proxy Statement or our corporate governance policies do not imply any connection to the NYSE or any prospect that our common stock will commence trading on the NYSE in the future.



Name	Audit Committee	Compensation Committee	Corporate Governance and Nominating Committee
Patrick T. Brennan	X
Matthew Epstein	X	X	CHAIR
Matthew D. Houk
James Hua	CHAIR
Robert Knapp
Roy Patterson		X	X
Joseph Sarachek		CHAIR	X
James G. Wolf	X

The following table sets forth the membership of the Board’s committees at November 30, 2019:

Meetings

The Board and the standing committees met and acted by unanimous written consent as follows during the fiscal year ended November 30, 2019:



Name	Number of Meetings
Board of Directors	19
Audit Committee	4
Compensation Committee	4
Corporate Governance and Nominating Committee	4

The non-management directors also meet routinely in executive session in connection with regular meetings of the Board.

Currently, we do not maintain a formal policy regarding director attendance at the Annual Meeting of Shareholders; however, it is expected that absent compelling circumstances directors will attend. During fiscal year 2019, each director then serving attended at least 75% of the board meetings and meetings of committees on which the director served.

The Audit Committee

The Audit Committee consists of Messrs. Hua, Epstein, Brennan and Wolf with Mr. Hua serving as chair. Our Board has determined that each of Mr. Hua and Mr. Epstein qualifies as an audit committee financial expert as defined under the rules of the SEC, and all Audit Committee members are independent under the applicable listing standards of the NYSE and applicable rules of the SEC. The Audit Committee oversees our accounting and financial reporting processes and the audits of our financial statements.

The Audit Committee has sole authority for the appointment, compensation and oversight of the work of our independent registered public accounting firm, and responsibility for reviewing and discussing with management and our independent registered public accounting firm our audited consolidated financial statements included in our Annual Report on Form 10-K, our interim financial statements and our earnings press releases. The Audit Committee also reviews the independence and quality control procedures of our independent registered public accounting firm, reviews management’s assessment of the effectiveness of internal controls, discusses with management the Company’s policies with respect to risk assessment and risk management and reviews the adequacy of its charter on an annual basis.

The Compensation Committee

The Compensation Committee consists of Messrs. Sarachek, Epstein and Patterson, with Mr. Sarachek serving as chair. Our Board has determined that all Compensation Committee members are independent under the applicable listing standards of the NYSE and applicable rules of the SEC. The Compensation Committee establishes, administers and reviews our policies, programs and procedures for compensating our executive officers and directors.

The Compensation Committee is generally responsible for: (a) assisting our Board in fulfilling its fiduciary duties with respect to the oversight of the Company’s compensation plans, policies and programs, including assessing our overall

compensation structure, reviewing all executive compensation programs, incentive compensation plans and equity-based plans, and determining executive compensation; (b) reviewing the adequacy of the Compensation Committee Charter on an annual basis; (c) evaluating the Chief Executive Officer’s performance in light of corporate goals and objectives relevant to compensation; (d) reviewing the performance of the Company’s executive officers and determining and approving such executive officers’ compensation; (e) making recommendations to the Board with respect to incentive-compensation plans and equity-based plans; (f) administering the Company’s equity compensation plans, and granting awards under such plans; (g) overseeing the administration of the Company’s employee benefit plans; (h) overseeing regulatory compliance with respect to compensation matters; and (i) reviewing and approving employment or severance arrangements with senior management.

The Compensation Committee has in prior years considered the potential effects of Section 162(m) of the Internal Revenue Code (the "Code") on compensation matters, and will continue to do so with respect to outstanding grandfathered awards made prior to 2018, when amendments to the Code eliminated the availability of the performance-based compensation exemption component of Section 162(m) for future grants. For a discussion of the Compensation Committee’s processes and procedures for considering and determining compensation for our executive officers, please see the "Compensation Discussion and Analysis" section below.

The Corporate Governance and Nominating Committee

The Corporate Governance and Nominating Committee (the "CGN Committee") consists of Messrs. Epstein, Patterson and Sarachek, with Mr. Epstein serving as chair.

The CGN Committee is responsible for: (a) developing and recommending corporate governance principles and procedures applicable to our board and employees; (b) recommending committee composition and assignments; (c) overseeing periodic self-evaluations by the board, its committees, individual directors and management with respect to their respective performance; (d) identifying individuals qualified to become directors; (e) recommending director nominees; (f) assisting in board succession planning; (g) recommending whether incumbent directors should be nominated for re-election to our board; and (h) reviewing the adequacy of its charter on an annual basis.

The CGN Committee considered whether to engage a third party to assist in the oversight of the evaluations under the CGN Committee’s purview and, based on the Company’s present circumstances, believes that the Company and its shareholders are currently best served without engaging a third party.

Selection and Evaluation of Director Candidates

In searching for qualified director candidates for election to the Board and to fill vacancies on the Board, the CGN Committee may solicit current directors for the names of potentially qualified candidates and may ask directors to pursue their own business contacts for the names of potentially qualified candidates. The CGN Committee may also consult with outside advisors or retain search firms to assist in the search for qualified candidates and will consider suggestions from shareholders for nominees for election as directors and evaluate such suggested nominees on the same terms as candidates identified by directors, outside advisors or search firms selected by the CGN Committee. The CGN Committee and the Board have not established a formal policy with regard to the consideration of director candidates recommended by shareholders. This is due to the following factors: (i) the limited number of such recommendations, (ii) the need to evaluate such recommendations on a case-by-case basis, and (iii) the expectation that recommendations from shareholders would be considered in the same manner as recommendations by a director or an officer of the Company.

Any shareholder who wishes to recommend a candidate to the CGN Committee for consideration as a director nominee should provide the Company with the following information: (a) the suggested candidate’s biographical data (including business experience, service on other boards, and academic credentials), (b) all transactions and relationships, if any, between the recommending shareholder or such candidate, on the one hand, and the Company or its management, on the other hand, as well as any relationships or arrangements, if any, between the recommending shareholder and the candidate and any other transactions or relationships of which the Board should be aware in order to evaluate such candidate’s potential independence as a director, (c) details of whether the candidate or the recommending shareholder is involved in any on-going litigation adverse to the Company or is associated with an entity which is engaged in such litigation and (d) whether the candidate or any company for which the candidate serves or has served as an officer or director is, or has been, the subject of any bankruptcy, SEC or criminal proceedings or investigations, any civil proceedings or investigations related to fraud, accounting or financial misconduct, or any other material civil proceedings or investigations. The notice must also contain a written consent confirming the candidate’s (a) consent to be nominated and named in the Company’s proxy statement and, if elected, to serve as a director of the Company and (b) agreement to be interviewed by the CGN Committee and submit additional information if requested to do so. This information should be delivered to the Company sufficiently in advance of the Company’s annual meeting to permit the CGN Committee to complete its review in a timely fashion.

The Board and the CGN Committee have not established a formal policy on the consideration of diversity in director candidates. The CGN Committee selects nominees on the basis of their character, expertise, sound judgment, ability to make independent analytical inquiries, business experience, understanding of the Company’s business environment, ability to make time commitments to the Company, demonstrated teamwork and the ability to bring unique and diverse perspectives and understandings to the Board. These criteria center on finding candidates who have the highest level of integrity, are financially literate, have motivation and sufficient time to devote themselves to Company matters and who have skills that complement the skills and knowledge of the current directors.

Once potential candidates are identified, the CGN Committee reviews the backgrounds of those candidates, conducts interviews of candidates and establishes a list of final candidates. To the extent practical, final candidates are then to be interviewed by each member of the CGN Committee, the Chair of the Board and the Chief Executive Officer. Reasonable efforts are made to have all remaining directors interview final candidates.

Under the Company’s Bylaws, a shareholder may propose a director candidate for nomination at the 2020 annual meeting if the shareholder delivers the proposal to the Company on or before December 3, 2018. Please see “Other Matters-Shareholder Proposals for the 2020 Annual Meeting.”

Report of the Audit Committee

The primary purpose of the Audit Committee is to assist the Board of Directors’ oversight of the integrity of the Company’s financial statements, the qualifications, independence and performance of the Company’s independent registered public accounting firm and the performance of the Company’s internal controls and procedures.

In addition to fulfilling its responsibilities as set forth in its charter and further described above in "Corporate Governance-Board Committees and Meetings-The Audit Committee," the Audit Committee has reviewed the Company’s audited financial statements for fiscal year 2019. Discussions about the Company’s audited financial statements included its independent registered public accounting firm’s judgments about the quality, not just the acceptability, of the Company’s accounting principles and underlying estimates used in its financial statements, as well as other matters, as required by audit standards and by our Audit Committee Charter. In conjunction with the specific activities performed by the Audit Committee in its oversight role, it issued the following report:


1.	The Audit Committee has reviewed and discussed the audited financial statements as of and for the year ended November 30, 2018 with the Company’s management.


2.	The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees, adopted by the Public Company Accounting Oversight Board (the "PCAOB") as then modified or supplemented.

The Audit Committee has received from the independent registered public accounting firm the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accounting firm’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed with the independent registered public accounting firm their independence from the Company.

Based on the review and discussions referred to in paragraphs (1) through (3) above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10K for the fiscal year ended November 30, 2019 for filing with the SEC.



	James Hua (Chair)
	Matthew Epstein
	Patrick Brennan
	James Wolf

Communications with the Board

Any interested party wishing to communicate with the Board, the non-management directors or a specific Board member, may do so by writing to the Board, the non-management directors or the particular Board member, and delivering the

communication in person or mailing it to: Emergent Capital, Inc., 5355 Town Center Road, Suite 701, Boca Raton, Florida 33486, Attention: Secretary. Communications will be distributed to specific Board members as requested by the shareholder in the communication. If addressed generally to the Board, communications may be distributed to specific members of the Board as appropriate, depending on the material outlined in the communication. For example, if a communication relates to accounting, internal accounting controls or auditing matters, the communication will be forwarded to the Chair of the Audit Committee unless otherwise specified. The Company will forward all such communications, unless the communication is clearly of a marketing nature or is unduly hostile, threatening, illegal or similarly inappropriate.

Code of Ethics

Our Board has adopted Corporate Governance Guidelines, including a Code of Ethics for our directors, officers and employees. Copies of the Corporate Governance Guidelines and Code of Ethics are available on the Company’s website at www.emergentcapital.com in the Investors/Newsroom section, under the Corporate Governance tab. The Company will post amendments to or waivers from the Code of Ethics to the extent applicable to the Company’s principal executive officer, principal financial officer and principal accounting officer on its website.

Delinquent Section 16(a) Reports

Section 16(a) of the Securities Exchange Act of 1934 requires that our executive officers, directors and greater than 10% shareholders file reports of ownership and changes of ownership of common stock with the Securities and Exchange Commission (the "Commission"). Officers, directors and greater than ten percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) reports they file. Based solely on a review of copies of Forms 3, 4 or 5 filed by with the Commission, other than as described below, the Company believes that during and with respect to the fiscal year ended November 30, 2019, its officers, directors and greater than 10% shareholders complied with all applicable Section 16(a) filing requirements. Mr. Sarachek filed one Form 4 late to disclose one transaction and Mr. Patterson filed one Form 4 late to disclose one transaction.

Item 11. Executive Compensation

COMPENSATION DISCUSSION AND ANALYSIS

Overview

This section describes the objectives and components of our 2019 executive compensation program for named executive officers. Our named executive officers, or NEOs, for 2019 were:


•	Patrick J. Curry, our Chairman and Chief Executive Officer;


•	Miriam Martinez, our Chief Financial Officer and Secretary;


•	Harvey Werblowsky, our Vice President, Chief Legal Officer and General Counsel; and


•	Jack Simony, our former Vice President and Chief Investment Officer.

Executive Summary

Prior to the Recapitalization the Committee continued a pay-for-performance program emphasizing executive share ownership that provided competitive rewards for executives based on:


•	effective deployment of capital and further refinement of the Company’s business model;


•	continued improvement in expense and cash management; and


•	resolution of certain legal and regulatory issues.

Since the Recapitalization, the Committee has modified the pay program to be more aligned with (1) the dynamic environment within which the executive team must deliver results and (2) the increased importance of leadership continuity as the Company transitions its business model. The above principles continue to serve as an overall foundation for linking rewards to performance. For 2019, the Committee translated the principles into specified financial, operational, and individual objectives for the Annual Bonus Plan. Actual results relative to 2019 financial and operational goals were mixed, in part because exogenous events and factors required the leadership team to redirect its focus on other urgent matters, including the bankruptcies of three of Emergent Capital’s subsidiaries and the WE Investment.

Pay was delivered by a market competitive annual base salary and a bonus earned based on Company goals achievement and individual executive performance contributions. The Committee determined 2019 bonus amounts based on their formal informed judgment of the contributions of each executive and the overall Company performance to goals. There was no bonus payment during 2019 pursuant to this program. However, retention payments and certain extended benefits were awarded to our some of our NEOs in recognition of their contributions to consummating the WE Investment. Specifically, toward the end of or shortly after the end of fiscal 2019, Ms. Martinez, Mr. Werblowsky and Mr. Simony received retention payments of $700,000, $500,000 and $1.0 million, respectively. After the end of fiscal 2019, Mr. Curry received a bonus in recognition of his ongoing work for the Company, consisting of: (i) $400,000 in cash, payable promptly after the grant, and 1,000,000 shares of restricted common stock of Emergent, vesting in thirds upon the first three anniversaries of the grant date, (ii) up to $300,000 in cash, as determined by the Compensation Committee, payable upon the consummation of the Company’s contemplated restructuring (the "Restructuring"), and (iii) up to $300,000 in cash, as determined by the Compensation Committee, if the Company effects the Restructuring at least $600,000 under the budget for such Restructuring that is approved by the Board within 45 days of the date hereof, measured as of 30 days after the date of the Restructuring. See "Employment Agreements - Named Executive Officers" below.

The Company did not utilize equity as an award vehicle for NEOs in 2019.

Compensation Philosophy

The primary objective of our compensation programs and policies is to attract, retain and motivate employees whose knowledge, skills and performance are critical to our success. We believe that compensation is unique to each individual, and that it should reflect individual leadership, performance and also company results. We believe, given the nature of our business and the very small employee base required, this is best achieved through individual determination by our chief executive officer based on objective performance results as well as discretionary and subjective factors relevant to the particular named executive officer. In the instance of our chief executive officer’s compensation, this assessment is best performed by the Compensation Committee.

Determination of Compensation Awards

The Compensation Committee has the primary authority to determine and approve the compensation awards available for the Company’s executive officers. The Compensation Committee is charged with reviewing executive officer compensation policies and practices and making recommendations to the full Board of Directors to ensure adherence to our compensation philosophies and to ensure that the total compensation paid to our NEOs is fair, reasonable and competitive, taking into account the Company’s performance as well as the individual performance, level of expertise and experience of our NEOs, as determined by the Compensation Committee based upon the judgment of its members. The Compensation Committee also determines salary increases for each of the NEOs, reflecting their relative skills and responsibilities, individual performance, and leadership roles within the Company.

In making compensation determinations, the Compensation Committee considers recommendations from its independent compensation consultant, as appropriate. The Compensation Committee also considers the chief executive officer’s assessment of the performance of executive officers other than himself as well as the Chief Executive Officer’s recommendations regarding base salaries and annual bonus awards. The Compensation Committee evaluates the performance of our executive officers annually, including the chief executive officer, based on enterprise-wide financial and non-financial results, individual achievements, leadership and other factors the Compensation Committee’s members determine to be appropriate. The chief executive officer generally attends Compensation Committee meetings, but is not present during executive sessions of the Compensation Committee at which his performance and compensation are discussed. Other members of senior management may also attend meetings at the Compensation Committee’s request, for example, to provide reports and information on agenda topics. The Compensation Committee has not established a peer group for compensation purposes.

Stock Ownership Guidelines

In 2014, the Company adopted a policy whereby each non-employee director is required to own common stock or common stock equivalents, including restricted stock, at least equal in acquisition basis to, or a fair market value of, $100,000 within five years of when the director joined the Board. For purposes of the ownership guidelines, unexercised stock options are not counted towards the ownership guidelines, and shares held jointly by a director and his or her spouse and shares held by an investment entity with which a director is affiliated are counted toward the ownership guidelines. The Company does not currently have similar ownership guidelines in effect for executive officers.

Use of Compensation Consultants

During the fall of 2018, the Compensation Committee undertook an evaluation its independent executive compensation consulting advisory needs and to select an advisor for assisting the Compensation Committee in its executive compensation oversight duties. After a formal process of reviewing multiple candidates, the Compensation Committee selected Aon Consulting, Inc. as its independent advisor to the Compensation Committee for 2019 and thereafter, subject to the discretion of the Compensation Committee.

Aon Consulting reports solely to the Compensation Committee. As such, the Compensation Committee has the sole authority to direct all of Aon Consulting’s activities and relationship related to Emergent Capital. This includes the power to terminate or replace any compensation consultant and to authorize payment of fees to any compensation consultant. From time to time, the Compensation Committee may direct Aon Consulting to work with members of Emergent Capital’s management to obtain information necessary for it to form its recommendations and evaluate management’s recommendations. Aon Consulting is expected to attend the Compensation Committee’s regular meetings, with the Committee Chair and other members of the Compensation Committee outside of regular meetings as requested by the Compensation Committee.

Aon Consulting, Inc. provides no services to and earns no fees from the Company outside of its engagement with the Compensation Committee. The Compensation Committee determined that Aon Consulting is independent from management based upon the consideration of relevant factors, including the following:


•	Aon Consulting does not provide any services to the Company except advisory services to the Committee;


•	Aon Consulting has and adheres to policies and procedures that are designed to prevent conflicts of interest;


•	Aon Consulting and its employees who provide services to the Compensation Committee do not have any business or personal relationship with any member of the Committee or any executive officer of the Company;


•	Aon Consulting’s employees providing services to the Committee do not own any stock of the Company; and


•	Aon’s revenue exceeds $10.0 billion; revenue for future advisory services will be tiny fraction of Aon’s revenue, insufficient to have any impact on the Aon’s overall results.

Compensation Elements and Committee Actions

We compensated our NEOs for 2019 through base salary and cash awards in the form of an annual cash bonus and various broad-based benefits provided to employees generally. The Company maintains a shareholder-approved 2010 Omnibus Incentive Plan (the "Plan"), which allows for the award of equity to NEOs and other employees.

Base Salaries. Annual base salaries compensate our NEOs for performing their functional duties with us. We believe base salaries should be competitive based upon an NEO’s scope of responsibilities, the market compensation of similarly situated executives, and the relative talent of the individual officer. When establishing base salary for an executive, we also consider other factors such as internal consistency and, for new hires, salary paid by a former employer. In 2017, upon the Recapitalization, the Committee set salaries for each of the Company's executive officers. As a result, and after considering additional data from its compensation consultant, the Compensation Committee set the salary for Mr. Curry at $335,000. In addition, Ms. Martinez’s annual salary was reduced from $352,229 to $275,000. The remaining NEOs recruited to the Company upon or shortly after the Recapitalization had salaries determined commensurate with the criteria above, as also described in the Summary Compensation Table, below. Additional NEO annual salaries are as follows: Mr. Werblowsky, $250,000 and Mr. Simony, $275,000. No salary adjustments were made for NEO for 2018, so salaries set upon the Recapitalization were the annual salaries payable to NEOs for 2019.

Annual Cash Bonus. Beginning in 2014, the Committee established a pay-for-performance program that included an annual cash bonus for NEOs and other key management based on company and individual performance during the fiscal year performance period. For 2019 no amounts were earned by any executive under the annual cash bonus based on an assessment of individual leadership and performance and Company results. The determination was based on an informed assessment, made by the Compensation Committee, of the Company’s performance relative to established financial and operational goals and each NEO’s individual objectives and actual contributions. The program is intended to serve to motivate higher of performance by recognizing individual and team contributions while sharing in overall Company results. Following the Recapitalization, the bonus plan was modified to provide the Compensation Committee with a set of performance goals and performance categories as a foundation for evaluating performance.

Equity-Based Awards. The Company maintains an equity plan for key management, including our NEOs. The program is intended to be an important part of providing an attractive and competitive total pay opportunity for our NEOs, and also to provide an ownership interest in the Company. As indicated before, no equity awards were made to Named Executive Officers for 2019.

Retirement Benefits. We provide retirement benefits to our employees through the opportunity to participate in our 401(k) savings plan. We believe the 401(k) savings plan provides an important benefit to assist our employees and executives in long-term personal financial planning, improving their personal financial security and their relationship with the Company. We believe a 401(k) plan is necessary in constructing an overall compensation program that is competitive with other employers and helps us attract prospective employees. We have historically not made any contributions or otherwise matched any employee contributions to the 401(k) plan. We do not provide any supplemental executive retirement benefits or other non-qualified deferred compensation arrangements for our executives.

Other Benefits and Executive Perquisites. We also provide certain other customary benefits to our employees, including the NEOs, which are intended to be part of a competitive compensation program. These benefits, which are offered to all full-time employees, include medical, dental, life and disability insurance as well as paid leave during the year.

Advisory Vote on Executive Compensation

The Company conducted its advisory vote on executive compensation last year at its 2019 Annual Meeting. While this vote was not binding on the Company, its Board of Directors or its Compensation Committee, the Company believes that it is important for its shareholders to have an opportunity to vote on this proposal on an annual basis as a means to express their views regarding the Company’s executive compensation philosophy, the Company’s compensation policies and programs, and the Company’s decisions regarding executive compensation, all as disclosed in this proxy statement. The Company’s Board of Directors and its Compensation Committee value the opinions of its shareholders and, to the extent there is any significant vote against the compensation of the Named Executives as disclosed in the proxy statement, the Company will consider its shareholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.

At the 2019 Annual Meeting, 97% of the votes cast on the advisory vote on executive compensation proposal (Item 2) were in favor of the named executive compensation as disclosed in the proxy statement, and as a result our named executive compensation was approved. The Board of Directors and Compensation Committee reviewed these final vote results and

determined that, given the level of support, no changes to our executive compensation policies and decisions were necessary at this time based on the vote results.

The Company has determined that its shareholders should vote on a say-on-pay proposal each year, consistent with the preference expressed by its stockholders at the 2019 Annual Meeting.

Employment Agreements and Retention Arrangements

We believe that employment agreements with executives are appropriate in many instances to ensure clarity and improve trust in the employment relationship, and to provide the Company with non-compete/non-solicitation protective covenants on the part of its executive officers. We do not have any general policies regarding the use of employment agreements. The Company expects that from time to time it may enter into employment agreements with employees, including NEOs, whether at the time of hire or thereafter. Since the formation of the Committee, the Committee has reviewed and approved all NEO employment agreements and severance agreements prior to execution.

The employment agreements with our NEOs are discussed in more detail under "Executive Compensation-Employment Agreements."

Accounting and Tax Implications

The accounting and tax treatment of particular forms of compensation has not, historically, materially affected our compensation decisions. We have in prior years reviewed the potential effect of Section 162(m) of the Code and will continue to do so with respect to outstanding grandfathered awards made prior to 2018, when amendments to the Code eliminated the availability of the performance-based compensation exemption component of Section 162(m) for future grants.

Risk Management Implications of Executive Compensation

In connection with its oversight of compensation related risks, the Compensation Committee and management annually evaluate whether our Company’s compensation policies and practices create risks that are reasonably likely to have a material adverse effect on our Company. We believe the structure of our current bonus program mitigates risks by avoiding employees placing undue emphasis on any particular performance metric at the expense of other aspects of our business. Further, a substantial portion of our executive incentives are in the form of equity and, coupled with ownership and share retention guidelines, provides further incentive for long-term value creation and prudent risk-taking. We believe our employee and executive assessment process is well aligned with creating long-term value and does not create an incentive for excessive risk taking or unusual pressure on any single operating measure. For 2019, the Compensation Committee determined that our compensation programs do not encourage risk taking that is reasonably likely to have a material adverse effect on the Company.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis set forth in this proxy statement, and based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.



	Joseph Sarachek (Chair)
	Matthew Epstein
	Roy Patterson

Compensation Committee Interlocks and Insider Participation

None of the members of our Compensation Committee will be, or will have been, employed by us. None of our executive officers currently serves, or in the past three years has served, as a member of the board of directors, compensation committee or other board committee performing equivalent functions of another entity that has one or more executive officers serving on our Board or Compensation Committee.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table summarizes the compensation earned by our NEOs for the fiscal years ending December 31, 2017, November 2018 and November 30, 2019 (as applicable).



Name and Title	Year	Salary		Bonus		Restricted Stock ⁽¹⁾		Retention		Total
Patrick J. Curry ⁽²⁾	2019	$	330,000	$	—	$	—	$	—	$	330,000
Chief Executive Officer	2018	$	304,615	$	—	$	—	$	—	$	304,615
	2017	$	114,231	$	—	$	—	$	—	$	114,231

Miriam Martinez ⁽³⁾	2019	$	275,000	$	—	$	—	$	466,666	$	741,666
SVP, Chief Financial Officer & Secretary	2018	$	255,331	$	27,500	$	—	$	—	$	282,831
	2017	$	349,811	$	25,000	$	190,000	$	—	$	564,811

Harvey Werblowsky ⁽⁴⁾
Vice President, Chief Legal Officer & General Counsel	2019	$	250,000	$	—	$	—	$	333,333	$	583,333
	2018	$	230,769	$	25,000	$	—	$	—	$	255,769
	2017	$	38,462	$	—	$	185,000	$	—	$	223,462

Jack Simony ⁽⁵⁾
VP & CIO	2019	$	275,000	$	—	$	—	$	666,667	$	941,667
	2018	$	253,846	$	—	$	—	$	—	$	253,846
	2017	$	42,308	$	—	$	370,000	$	—	$	412,308

Represents the grant date fair value of restricted stock awards computed in accordance with FASB ASC 718. 2017 Awards are based on a fair market value on the date of grant of $0.40. Ms. Martinez’s 2017 award vested 50% on December 21 of each of 2018 and 2019, in each case contingent upon continued service by the executive. Awards for Messrs. Werblowsky and Simony vested 50% on October 29 of each of 2018 and 2019.


2.	Mr. Curry became Interim Chief Executive Officer on August 15, 2017 and Chief Executive Officer on October 25, 2017.


3.	Ms. Martinez's salary was reduced to $275,000 from$352,229 effective January 1, 2018. Ms. Martinez has served as Chief Financial Officer since May 7, 2016 and as Secretary since September 25, 2017.


4.	Mr. Werblowsky began employment with the Company on October 30, 2017.


5.	Mr. Simony began employment with the Company on October 30, 2017 and terminated his employment on February 7, 2020.

GRANTS OF PLAN-BASED AWARDS

No grants of plan-based awards were made to NEOs during fiscal year 2019.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2019

The following table shows outstanding equity awards at November 30, 2019:

Option Awards

Stock Awards

Name

Number of

Securities

Underlying

Unexercised

Options (#)

Exercisable

Number of

Securities

Underlying

Unexercised

Options (#)

Unexercisable

Option

Exercise

Price

($)

Option

Expiration

Date

Equity Incentive

Plan Awards:

Number of

Unearned Shares,

Units or Other

Rights That Have

Not Vested (#)

Equity Incentive

Plan Awards:

Market or Payout

Value of Unearned

Shares, Units or

Other Rights That

Have Not Vested ($) (1)

Miriam Martinez (1)

250,000

27,500

45,000

$6.94

6/6/2020


1.	Ms. Martinez’s stock award was granted December 22, 2017 and vests 50% on December 21 of each of 2018 and 2019.

Fiscal Year 2019 Option Exercises and Stock Vested

The following table shows the vesting of restricted stock units for NEOs during fiscal year 2019. No NEOs had any other type of award vest or become exercised during fiscal year 2019.



	Stock Awards
Name	Number of Shares Acquired on Vesting (#)	Value Realized On Vesting ($)(1)
Miriam Martinez	250,000	$	49,625
Harvey Werblowsky	250,000	$	59,000
Jack Simony	500,000	$	118,000


1.	Calculated by multiplying the number of shares acquired on vesting by market value of the shares on the vesting date using the closing market price of Company stock on the vesting date.

EMPLOYMENT AGREEMENTS

Named Executive Officers

Miriam Martinez

Effective as of January 1, 2014, Ms. Martinez entered into an employment agreement with the Company (the "2014 Martinez Agreement"). The 2014 Martinez Agreement had an initial term of three years with one-year renewal periods thereafter unless either party to an Employment Agreement provided a non-renewal notice at least 60 days prior to the end of the applicable term. The 2014 Martinez Agreement provided for an initial base salary of $298,000, subject to upward adjustment at the discretion of the Board from time to time. Ms. Martinez was also eligible to receive a cash bonus each year with a target value of 40% of her then-base salary and a maximum value of 80% of her then-base salary. In addition, she was entitled to participate in the Company’s long term incentive plan and any other benefit plan, and perquisite programs adopted by the Company.

The 2014 Martinez Agreement provided that, upon termination of employment by the Company without cause or by the officer for good reason, in addition to accrued benefits, Ms. Martinez would be entitled to receive a pro-rated portion of the bonus for the year in which she was terminated and a severance payment equal to one year of her then-base salary. Following a change of control, upon termination of employment by the Company without cause or by the officer for good reason, in addition to accrued benefits, she would be entitled to receive a lump-sum severance payment consisting of the pro-rated portion of the bonus for the year in which she was terminated and two-times her then-base salary. In either case, unless she was entitled to receive coverage from a new employer, Ms. Martinez would be reimbursed for the cost of continuation coverage of group health insurance for a maximum of twelve months.

The 2014 Martinez Agreement permitted us to terminate Ms. Martinez for "cause" if she (i) failed, neglected, or refused to perform the lawful employment duties related to her position or as from time to time was assigned to her (other than due to disability); (ii) committed any willful, intentional, or negligent act having the effect of materially injuring the interest, business, or reputation of the Company; (iii) violated or failed to comply in any material respect with the Company’s published rules, regulations, or policies, as in effect or amended from time to time; (iv) committed an act constituting a felony or misdemeanor involving moral turpitude, fraud, theft, or dishonesty; (v) misappropriated or embezzled any property of the Company; or (vi) breached any material provision of the employment agreement or any other applicable confidentiality, non-compete, non-solicit, general release, covenant not-to-sue, or other agreement with the Company.

Ms. Martinez was subject to non-competition and non-solicitation covenants that expire twelve months after termination of employment. The 2014 Martinez Agreement includes a provision that allowed us to reduce Ms. Martinez’s severance payments and any other payments to which they become entitled as a result of our change in control to the extent needed for the executive to avoid paying an excise tax under Internal Revenue Code Section 280G.

In 2016, the Committee approved the renewal of the 2014 Martinez Agreement effective January 1, 2017 for an additional Initial Term of three years.

On March 13, 2018, Imperial Finance and Trading, Inc., a wholly-owned subsidiary of the Company ("Imperial"), entered into a new employment agreement with Ms. Martinez (the "2018 Martinez Agreement"), pursuant to which Ms. Martinez will continue to serve as our Senior Vice President and Chief Financial Officer. The term of the Martinez Agreement commenced on March 13, 2018 and continues for one year, with automatic one-year extensions unless (x) either Ms. Martinez or Imperial gives written notice not to extend at least sixty (60) days’ prior to the end of the then-current term or (y) Ms. Martinez’s employment is terminated in accordance with the terms of the 2018 Martinez Agreement. The 2018 Martinez Agreement supersedes the 2014 Martinez Agreement.

Pursuant to the Martinez Agreement, Ms. Martinez will receive an annual base salary of $275,000 subject to reviews and increases by the Board. Ms. Martinez may receive an annual bonus at the determination of the Board based on Company performance with goals to be established annually by the Board or as otherwise determined by the Board. The 2018 Martinez Agreement further provides that Ms. Martinez is entitled to participate in all benefit plans provided to executives of the Company. If Imperial terminates Ms. Martinez’s employment without cause or she resigns with Good Reason (as defined in the Martinez Agreement), the 2018 Martinez Agreement provides that 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 Imperial 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 his base salary as described above, 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.

Jack Simony

On March 13, 2018, Imperial 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 Imperial 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 Imperial 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 Imperial continue to pay its portion of healthcare premiums for plans in which he is participating immediately prior to the termination through the Simony Severance Period.

Harvey Werblowsky

On March 13, 2018, Imperial 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 Imperial 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.

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 Imperial continue to pay its portion of healthcare premiums for plans in which he is participating immediately prior to the termination through the Werblowsky Severance Period.

Retention Agreements

On November 12, 2019, the Company entered into a retention agreement with each of Mr. Simony, (the "Simony Retention Agreement"), and Mr. Werblowsky, (the "Werblowsky Retention Agreement"). Each of the Simony Retention Agreement and the Werblowsky Retention Agreement provides for a cash retention payment (each, a "Retention Payment") and certain extended benefits to each of Mr. Simony and Mr. Werblowsky (the "Benefits") in recognition of his significant contributions to consummating the WE Investment, which allowed the Company and White Eagle to refinance an onerous credit facility and improve the Company’s overall financial position, and in consideration of Mr. Simony’s and Mr. Werblowsky’s continued support and assistance with the Restructuring.

The Simony Retention Agreement and the Werblowsky Retention Agreement provide that in exchange for the Retention Payment and Benefits, each of Mr. Simony and Mr. Werblowsky will remain employed by Imperial pursuant to the Simony Agreement and the Werblowsky Agreement, respectively, and that each of the Simony Retention Agreement and the Werblowsky Retention Payment is in lieu of any severance otherwise payable to Mr. Simony or Mr. Werblowsky under the Simony Agreement or the Werblowsky Agreement, respectively. In addition, each of Mr. Simony and Mr. Werblowsky will not be eligible to receive any portion of his Retention Payment if he is terminated for Cause (as defined in the relevant employment agreement) or resigns without Good Reason (as defined in the relevant employment agreement). The Retention Payments consist of $1.0 million for Mr. Simony and $500,000 for Mr. Werblowsky. The Benefits consist of, for each of Mr. Simony and Mr. Werblowsky, 12 months of (x) COBRA health insurance coverage reimbursement from the company and (x) other benefits to which he would be entitled upon an involuntary termination without Cause under the relevant employment agreement. The Retention Payments are payable as to two-thirds upon entering into the Retention Agreements and one-third within three (3) business days of the consummation of the Restructuring, so long as the WE Investment remains in full force and effect and White Eagle and its limited partnership agreement remain operative and in good standing.

On January 29, 2020, Mr. Simony notified the Company of his resignation, effective on February 7, 2020. Also on January 29, 2020, the Company and Mr. Simony entered into an amendment to the Simony Retention Agreement pursuant to which the remaining one-third of the retention payment is accelerated and will be paid within seven (7) days of the date of the Amendment.

On December 10, 2019, the Company, entered into a retention agreement with Ms. Martinez (the "Martinez Retention Agreement").The Martinez Retention Agreement provides for a cash retention payment (the "Martinez Retention Payment") and certain extended benefits to Ms. Martinez (the "Martinez Benefits) in recognition of the significant contributions to consummating the WE Investment, which allowed the Company and White Eagle to refinance the White Eagle Revolving Credit Facility and improve the Company’s overall financial position, and in consideration of Ms. Martinez’s continued support and assistance with the Restructuring.

The Martinez Retention Agreement provides that in exchange for the Martinez Retention Payment and Martinez Benefits, Ms. Martinez will remain employed by Imperial pursuant to the 2018 Martinez Agreement, and that the Martinez Retention Payment is in lieu of any severance otherwise payable to Ms. Martinez under the 2018 Martinez Agreement. In addition, Ms. Martinez will not be eligible to receive any portion of the Martinez Retention Payment if she is terminated for Cause (as defined in the 2018 Martinez Agreement) or resigns without Good Reason (as defined in the 2018 Martinez Agreement). The Martinez Retention Payment consists of $700,000. The Martinez Benefits consist of 18 months of (x) COBRA health insurance coverage reimbursement from the Company and (x) other benefits to which she would be entitled upon an involuntary termination without Cause under the 2018 Martinez Agreement. The Martinez Retention Payment is payable as to two-thirds upon entering into the Martinez Retention Agreement and one-third within three (3) business days of the consummation of the Restructuring, so long as the WE Investment remains in full force and effect and White Eagle and its limited partnership agreement remain operative and in good standing. In the event that the Company files for bankruptcy prior to the payment of any portion of the Martinez Retention Payment or Martinez Benefits, the Company will file with the bankruptcy court a motion to approve a Key Employee Retention Plan to preserve each of Ms. Martinez’s rights under the Martinez Retention Agreement to the full Martinez Retention Payment and Martinez Benefits provided that she must comply with all of the provisions of the Martinez Retention Agreement.

CEO Bonus

On January 27, 2020, the Company granted a bonus to Mr. Curry in recognition of his ongoing work for the Company. The Bonus consists of: (i) $400,000 in cash, payable promptly after the grant, and 1,000,000 shares of restricted common stock of Emergent, vesting in thirds upon the first three anniversaries of the grant date, (ii) up to $300,000 in cash, as determined by the Compensation Committee, payable upon the consummation of the Restructuring, and (iii) up to $300,000 in cash, as determined by the Compensation Committee, if the Company effects the Restructuring at least $600,000 under the budget for such Restructuring that is approved by the Board within 45 days of the date of grant, measured as of 30 days after the date of the Restructuring.

Potential Payments Upon Termination

In light of the Retention Agreements, there are no provisions to provide for any of our NEOs with any severance upon termination of employment.

Resignation - Chief Investment Officer

On January 29, 2020, Jack Simony, the Company’s Chief Investment Officer, notified the Company of his resignation, effective on February 7, 2020. Also on January 29, 2020, the Company and Mr. Simony entered into an amendment (the "Amendment") to the Retention Agreement dated as of November 12, 2019 with Jack Simony, the Company’s Chief Investment Officer (the "Simony Retention Agreement"). The Simony Retention Agreement provided for, among other things, a retention payment to Simony by the Company in the amount of $1.0 million, two-thirds of which has already been paid and the remaining one-third to be paid within three (3) business days of the closing of the current restructuring under consideration by the Company. Pursuant to the Amendment, the remaining one-third of the retention payment is accelerated and will be paid within seven (7) days of the date of the Amendment.

DIRECTOR COMPENSATION

Directors who are employees of the Company or its subsidiaries receive no compensation for their service on our Board of Directors. Effective as of the date of the Recapitalization, our outside directors were compensated solely through a $35,000 annual retainer, paid quarterly. Outside directors received no other compensation for their services in 2019.

Directors do not receive meeting fees or fees for executing written consents in lieu of meetings of the Board or its committees. All retainers are paid in quarterly installments. The Company reimburses directors for their travel and lodging expenses if they do not live in the area where a meeting is held. Directors receive no other compensation, perquisite or benefit from the Company.

The table below summarizes the compensation earned by non-employee directors for the fiscal year ended November 30, 2019.

2019 DIRECTOR COMPENSATION



Name	Fees Earned or Paid in Cash
Patrick T. Brennan	$	35,000
Matthew Epstein (1)	$	—
Matthew D. Houk	$	35,000
James Hua	$	35,000
Robert Knapp	$	35,000
Roy Patterson	$	35,000
Joseph E Sarachek	$	35,000
James G. Wolf (2)	$	29,000

(1) Mr. Epstein elected to waive fees.

(2) Mr. Wolf's compensation was prorated based on his commencement date.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding beneficial ownership of the Company’s common stock, as of March 12, 2020, by each person known by the Company to own more than 5% of our common stock, each director, nominees and each of the executive officers identified in the Summary Compensation Table and by all of its directors, nominees and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the SEC and includes any shares over which a person exercises sole or shared voting or investment power. Under these rules, beneficial ownership also includes any shares as to which the individual or entity has the right to acquire beneficial ownership of within 60 days March 12, 2020, through the exercise or conversion of any note, stock option or other right. As of March 12, 2020, the Company had 159,270,553 shares of common stock outstanding. Accordingly, the percentages in the table that follows are calculated using the 159,270,553 outstanding shares that were eligible to vote at March 12, 2020. Except as otherwise noted, the information presented for persons known to own more than 5% of our common stock is derived from filings made by such persons with the Securities and Exchange Commission.



Name of Beneficial Owner	Number of Shares Beneficially Owned	Percent of Class
5% Stockholders
Evermore Global Advisors, LLC (1)	37,500,000	23.5	%
PJC Investments, LLC (2)	23,192,716	13.8	%
Ironsides Partners LLC (3)	19,332,332	10.8	%
InvestCo 1, LLC (4)	17,700,000	11.1	%
JSARCo, LLC (5)	16,070,038	9.6	%
Opal Sheppard Opportunities Fund I LP (6)	10,510,000	6.6	%
Brennan Opportunities Fund I LP (7)	10,200,000	6.4	%

Executive Officers and Directors
Patrick J. Curry (2)(8)	24,745,147	14.7	%
Patrick T. Brennan (7)	10,200,000	6.4	%
Matthew Epstein (1)	—	—
Matthew D. Houk (9)	292,442	*
James Hua (6)	10,510,000	6.6	%
Robert C. Knapp (3)	19,332,332	10.8	%
Roy J. Patterson (10)	7,946,584	4.9	%
Joseph E. Sarachek (5)	16,570,038	9.9	%
James G. Wolf (11)	9,662,701	6.1	%
Miriam Martinez (12)	461,111	*
Jack Simony (13)	457,295	*
Harvey Werblowsky	303,647	*
All Executive Officers and Directors as a group (11 people) (14)	100,451,297	51.2	%

* Less than one percent.

Evermore Global Advisors, LLC is a registered investment advisor that has sole power to dispose or vote, or to direct the disposition or voting, of the shares. The business address is 89 Summit Avenue, Summit, NJ 07901. Mr. Epstein is an Assistant Portfolio Manager of Evermore Global Advisors, LLC but does not have voting or dispositive control over securities beneficially owned by Evermore Global Advisors, LLC.


2.	Includes 15,442,716 shares of Common Stock and 8,750,000 shares of Common Stock subject to currently exercisable warrants. Of such securities, 1,000,000shares are owned by Mr. Curry directly and the remaining securities are owned by PJC Investments, LLC of which Mr. Curry is the principal and manager. The business address is 204 Woodhew Drive, Waco, TX 76712.

Consists of 19,332,332 shares of Common Stock underlying New Convertible Notes. The securities are owned by various accounts managed by Ironsides Partners LLC, of which Mr. Knapp is the President and Managing Director, and by RCK Holdings LLC, of which Mr. Knapp is the sole managing member. Mr. Knapp disclaims beneficial ownership of the securities, except to the extent of his pecuniary interest therein. The conversion of the New Convertible Notes is subject to a limitation imposed by Florida State law that voids any such to the extent that, after such conversion, the holder thereof would, directly or indirectly, own more than 10% of the outstanding shares of Common Stock, unless such holder has first applied for and obtained regulatory approval from the Florida Office of Insurance Regulation. Mr. Knapp, Ironsides Partners LLC and RCK Holdings LLC have not sought, and have no intention to seek, such approval, and as such, they may convert the New Convertible Notes into no more than such number of shares equal to 9.99% of the outstanding shares of Common Stock at any time. The business address is 100 Summer Street, Suite 2705, Boston, MA 02110.


4.	Steven L. Key is the manager of InvestCo 1, LLC. The business address is 204 Woodhew Drive, Waco, TX 76712.

Includes (i) 7,720,038 shares of Common Stock, (ii) 8,750,000 shares of common stock subject to currently exercisable warrants, and (iii) 100,000 shares subject to currently exercisable stock appreciation rights. The stock appreciation rights are owned by Mr. Sarachek and the remaining securities are owned by JSARCo, LLC. Mr. Sarachek is the principal and manager of TopCo 1, LLC, which is the manager of JSARCo, LLC. The business address is 101 Park Avenue, New York, NY 10178.

Includes 10,000,000 shares of Common Stock owned by Opal Sheppard Opportunities Fund I LP and 510,000 shares of Common Stock owned by Opal Capital Partners, LP. Mr. Hua may be deemed to be a control person of Opal Sheppard Opportunities Fund I LP and of Opal Capital Partners, LP and disclaims beneficial ownership of all securities held by each entity, except to the extent of any indirect pecuniary interest therein. The business address is 40 Lake Bellevue Drive, Bellevue, WA 98108.


7.	Brennan Opportunities Fund I LP, its manager Brennan Asset Management, LLC, and Patrick T. Brennan, who controls Brennan Asset Management, LLC, are deemed to have beneficial ownership of the securities listed above. The business address is 1 Sea Breeze Court, Napa, CA 94559.


8.	Includes 552,431 shares of Common Stock owned by Mr. Curry’s spouse.


9.	Includes the following shares of Common Stock over which Mr. Houk has voting and dispositive control: (i) 32,137 owned by Mr. Houk’s spouse, (ii) 207,119 owned by Mr. Houk’s parents, (iii) 7,978 owned by Mr. Houk’s brother, and (iv) 7,292 owned by Mr. Houk’s father-in-law and mother-in-law.


10.	Includes (i) 616,583 shares owned by Mr. Patterson and (ii) 7,300,000 shares controlled by River City Management LLC. Mr. Patterson is the Managing Member of River City Management LLC.


11.	Includes 8,862,701 shares of Common Stock owned by Mr. Wolf’s adult children and brother, over which Mr. Wolf has shared voting and dispositive power.


12.	Includes options to purchase 45,000 shares of Common Stock.


13.	Based on Form 4 filed on November 27, 2019.


14.	Includes (i) 17,500,000 shares of common stock subject to currently exercisable warrants, (ii) 45,000 shares of common stock subject to currently exercisable stock options, (iii) 100,000 shares of common stock subject to currently exercisable stock appreciation rights and (iv)19,332,332 shares of common stock subject to currently convertible New Convertible Notes.

Shown below is certain information as of November 30, 2019 regarding equity compensation plans:



Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted- average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in other column)
Equity compensation plans approved by security holders	85,000	$	6.94	9,511,785
Equity compensation plans not approved by security holders	N/A	N/A		N/A
Total	85,000	$	6.94	9,511,785

Item 13. Certain Relationships and Related Transactions, and Director Independence

CERTAIN RELATIONSHIPS

Related Party Transactions Policy and Procedure

The Audit Committee has adopted a written policy for the committee to review and approve or ratify related party transactions involving us, any of our executive officers, directors or 5% or more shareholders of the Company or any of their family members. These transactions include:


•	transactions that must be disclosed in proxy statements under SEC rules; and


•	transactions that could potentially cause a non-employee director to cease to qualify as independent under New York Stock Exchange listing requirements.

Certain transactions are generally deemed pre-approved under these written policies and procedures, including transactions with a company with which the sole relationship with the other company is as a non-employee director and the total amount involved does not exceed 1% of the other company’s total annual revenues.

Criteria for Audit Committee approval or ratification of related party transactions include:


•	whether the transaction is on terms no less favorable to us than terms generally available from an unrelated third party;


•	the extent of the related party’s interest in the transaction;


•	whether the transaction would interfere with the performance of the officer’s or director’s duties to us;


•	in the case of a transaction involving a non-employee director, whether the transaction would disqualify the director from being deemed independent under New York Stock Exchange listing requirements; and


•	such other factors that the audit committee deems appropriate under the circumstances.

Since December 1, 2018, there have been no transactions of more than $120,000 between us and any 5% or more shareholder of the Company, director or executive officer or any of their family members other than as described below.

On December 28, 2018, January 30, 2019 and February 14, 2019, the Company issued and sold an aggregate of $8.6 million principal amount of its 8.5% Senior Secured Notes (the "Senior Notes") to purchasers affiliated with certain members of the Board, as set forth in the following table. The aggregate purchase price for the Senior Notes was $6.5 million. The Senior Notes bear interest at 8.5% per annum payable in cash or, at the Company’s election, in kind ("PIK") with an additional 3% per annum interest when PIK is elected.



Related Party	Purchaser	Principal Amount of Notes		Purchase Price		Date of Purchase
Matt Epstein	The Regents of the University of Michigan	$	930,000	$	697,500	December 28, 2018
Matt Epstein	Evermore Global Value Fund	$	2,228,000	$	1,671,000	December 28, 2018
Matt Epstein	Sirius International Insurance Corporation (Publ) (a/c xxx140)	$	975,000	$	731,250	December 28, 2018
Matt Epstein	Sirius International Insurance Corporation (Publ) (a/c xxx138)	$	867,000	$	650,250	December 28, 2018
James Hua	Opal Sheppard Opportunities Fund I LP	$	667,000	$	500,250	December 28, 2018
Robert Knapp	Ironsides Partners Special Situations Master Fund III L.P.	$	2,000,000	$	1,500,000	January 30, 2019
Patrick Brennan	Brennan Opportunities Fund I LP	$	967,000	$	725,250	February 14, 2019

Item 14. Principal Accountant Fees and Services

Independent Registered Public Accounting Firm Fees and Services

Grant Thornton LLP served as our independent registered public accounting firm and audited our financial statements for the fiscal years ended November 30, 2018 and December 31, 2017. Aggregate fees for professional services rendered to us by our independent registered public accounting firm are set forth below.



	Twelve Months Ended November 30, 2019		Eleven Months Ended November 30, 2018

Audit Fees	$	579,000	$	757,000
Audit-Related Fees	—		—
Tax Fees	—		—
All Other Fees	—		—
Total	$	579,000	$	757,000

Audit Fees

The fees in this category were for professional services and expenses rendered in connection with (1) the audits of the Company’s annual financial statements, which also included the Company’s Annual Report on Form 10-K, (2) the review of the Company’s quarterly financial statements, (3) audits of the Company’s subsidiaries that are required by statute, contract or regulation, (4) comfort letters and (5) consents issued in connection with our registration statements filed with the SEC.

All Other Fees

The fees in this category include all other services that generally only the Company’s independent registered public accounting firm reasonably can provide.

Pre-Approval Policies and Procedures

It is our Board of Directors’ policy to pre-approve all audit and permissible non-audit services performed by the independent registered public accounting firm. Our Board of Directors has approved all services that our independent accountants provided to us in the past two fiscal years.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)(1) Financial Statements:

Our consolidated financial statements identified in the accompanying Index to Financial Statements at page F-1 herein are filed as part of this Annual Report on Form 10-K.

(a)(2) Financial Statement Schedules: The schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

(a)(3) Exhibits:

The accompanying Exhibit Index on page E-1 sets forth the exhibits that are filed as part of this Annual Report on Form 10-K.

EXHIBIT INDEX

In reviewing the agreements included as exhibits to this report, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company, its subsidiaries or other parties to the agreements. The Agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:


•	should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;


•	have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;


•	may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and


•	were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. The Company acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this report not misleading. Additional information about the Company may be found elsewhere in this report and the Company’s other public files, which are available without charge through the SEC’s website at http://www.sec.gov.



Exhibit Number	Exhibit Description	Form	Exhibit	Filing Date	Filed Herewith	SEC File #
3.1	Articles of Incorporation of Registrant, as amended.	10-K	3.1	03/14/18		001-35064
3.2	Amended and Restated Bylaws of Registrant, as amended.	10-Q	3.1	11/16/18		001-35064
4.1	Form of Common Stock Certificate.	S-1/A	4.1	11/10/10		333-168785
4.2	Indenture, dated as of February 21, 2014, by and among the Registrant and U.S. Bank, National Association, as indenture trustee.	8-K	4.1	02/21/14		001-35064
4.2.1	First Supplemental Indenture, dated as of March 13, 2017, by and among Emergent Capital, Inc. and U.S. Bank National Association.	8-K	4.2	03/17/17		001-35064
4.2.2	Second Supplemental Indenture, dated as of July 28, 2017, by and among Emergent Capital, Inc. and U.S. Bank National Association.	8-K	4.2	08/01/17		001-35064
4.3	Indenture, dated as of July 28, 2017, by and among Emergent Capital, Inc. and U.S. Bank National Association.	8-K	4.3	08/01/17		001-35064
4.4	Amended and Restated Indenture, dated as of July 28, 2017, by and among Emergent Capital, Inc. and Wilmington Trust, National Association.	8-K	4.4	08/01/17		001-35064
4.4.1	First Supplemental Indenture, dated January 10, 2018, by and among Emergent Capital, Inc. and Wilmington Trust, National Association.	10-Q	4.1	08/20/18		001-35064

4.4.2

Second Supplemental Indenture, dated as of December 10, 2018, by and among Emergent Capital, Inc. and Wilmington Trust, National Association.

8-K

10.1

12/14/18

001-35064

4.5

Form of Common Stock Purchase Warrant, dated as of July 28, 2017.

8-K

4.1

08/01/17

001-35064

4.6

Form of Warrant to purchase common stock.

S-1/A

4.2

01/12/11

333-168785

4.7

Warrant Agreement related to Class Action Settlement.

10-K

4.3

03/14/16

001-35064

4.8

Special Dividend Note, dated as of July 28, 2017, made by Lamington Road Designated Activity Company in favor of Markley Asset Portfolio, LLC.

8-K

4.5

08/01/17

001-35064

4.9

Description of Securities

10.1†

Amended & Restated Imperial Holdings 2010 Omnibus Incentive Plan.

Def 14A

04/08/15

001-35064

10.1.1†

Amendment to Amended & Restated Imperial Holdings 2010 Omnibus Incentive Plan.

Def 14A

06/09/17

001-35064

10.1.2†

2010 Omnibus Incentive Plan Form of Stock Option Award Agreement.

10-Q

10.7

08/13/13

001-35064

10.1.3†

2010 Omnibus Incentive Plan Form Performance Share Award Agreement.

8-K

10.1

06/09/14

001-35064

10.1.4†

2010 Omnibus Incentive Plan Form Restricted Stock Unit Award Agreement.

10-K

10.2.4

03/14/18

001-035064

10.1.5†

2010 Omnibus Incentive Plan as Amended and Restated Stock Appreciation Rights Award Agreement.

10-Q

10.2

08/20/18

001-35064

10.2††

Second Amended and Restated Loan and Security Agreement, dated as of January 31, 2017, by and among White Eagle Asset Portfolio, LP, as borrower, Imperial Finance and Trading, LLC, Lamington Road Bermuda, LTD, as Portfolio Manager, CLMG Corp., as Administrative Agent, and LNV Corporation, as Lender.

10-K

10.18

03/21/17

001-35064

10.2.1

First Amendment, dated as of October 4, 2017, to Second Amended and Restated Loan and Security Agreement dated January 31, 2017, by and among white Eagle Asset Portfolio, LP, as borrower, Imperial Finance and Trading, LLC, Lamington Road Bermuda, LTD, as Portfolio Manager, CLMG Corp., as Administrative Agent, and LNV Corporation, as Lender.

10-K

10.3.4

03/14/18

001-35064

10.3

Second Amended and Restated Securities Account Control and Custodian Agreement, dated January 31, 2017, among White Eagle Asset Portfolio, LP, as borrower, Wilmington Trust, National Association, as securities intermediary and custodian, and CLMG Corp, as the administrative agent.

10-K

10.19

03/21/17

001-35064



10.4.†	Employment Agreement between Imperial Finance and Trading, LLC and Miriam Martinez dated as of March 13, 2018.	10-K	10.5.1	03/14/18	001-35064
10.5	Master Trust Indenture dated as of September 24, 2010 by and among Imperial Settlements Financing 2010, LLC as the Issuer, Portfolio Financial Servicing Company as the Initial Master Servicer, and Wilmington Trust Company as the Trustee and Collateral Trustee.	S-1/A	10.15	11/10/10	333-168785
10.5.1	Series 2010-1 Supplement dated as of September 24, 2010 to the Master Trust Indenture dated as of September 24, 2010 by and among Imperial Settlements Financing 2010, LLC as the Issuer, Portfolio Financial Servicing Company as the Initial Servicer, and Wilmington Trust Company as the Trustee and Collateral Trustee.	S-1/A	10.16	11/10/10	333-168785
10.6	Registration Rights Agreement, dated as of July 28, 2017, by and among Emergent Capital, Inc., and the holders party thereto.	8-K	10.3	08/01/17	001-35064
10.7	Board Designation Agreement, dated as of July 28, 2017, by and between Emergent Capital, Inc. and Evermore Global Advisors, LLC.	8-K	10.4	08/01/17	001-35064
10.8	Board Designation Agreement, dated as of July 28, 2017, by and among Emergent Capital, Inc., PJC Investments, LLC and JSARCo, LLC.	8-K	10.5	08/01/17	001-35064
10.9	Board Designation Agreement, dated as of July 28, 2017, by and between Emergent Capital, Inc. and Opal Sheppard Opportunities Fund I LP.	8-K	10.6	08/01/17	001-35064
10.10	Board Designation Agreement, dated as of July 28, 2017, by and among Emergent Capital, Inc., Ironsides P Fund L.P. and Ironsides Partners Special Situations Master Fund II L.P.	8-K	10.7	8/1/2017	001-35064
10.11	Board Designation Agreement, dated as of July 28, 2017, by and between Emergent Capital, Inc. and Nantahala Capital Management, LLC.	8-K	10.8	8/1/2017	001-35064
10.12	Registration Rights Agreement, dated as of August 11, 2017, be and between Emergent Capital, Inc. and Brennan Opportunities Fund I LP.	10-Q	10.32	8/14/2017	001-35064
10.13†	Employment Agreement between Imperial Finance and Trading, LLC and Jack Simony dated as of March 13, 2018.	10-K	10.26	3/14/2018	001-35064
10.14†	Employment Agreement between Imperial Finance and Trading, LLC and Harvey Werblowsky dated as of March 13, 2018.	10-K	10.27	3/14/2018	001-35064
10.15	Commitment Letter from PJC Investments, LLC dated March 13, 2018.	10-K	10.28	3/14/2018	001-35064



10.15.1	Commitment Letter from PJC Investments, LLC dated May 9, 2018.	10-Q	10.1	5/10/2018	001-35064
10.15.2	Commitment Letter from PJC Investments, LLC dated August 20, 2018.	10-Q	10.3	8/20/2018	001-35064
10.16	Commitment Letter from Evermore Global Advisors, LLC dated May 9, 2018.	10-Q	10.2	5/10/2018	001-35064
10.16.1	Commitment Letter from Evermore Global Advisors, LLC dated August 20, 2018.	10-Q	10.5	8/20/2018	001-35064
10.17	Commitment Letter from River City Capital, LLC dated May 9, 2018.	10-Q	10.3	5/10/2018	001-35064
10.17.1	Commitment Letter River City Capital, LLC dated August 20, 2018.	10-Q	10.4	8/20/2018	001-35064
10.18	Commitment Letter Ironsides Partners LLC dated December 28, 2018.	8-K	10.2	1/3/2018	001-35064
10.19	Form of Subscription Agreement, dated as of December 28, 2018, by and between Emergent Capital, Inc. and each Investors party thereto.	8-K	10.2	1/3/2019	001-35064
10.20	Note Purchase Agreement dated as of January 30, 2019, by and between Emergent Capital, Inc. and Ironsides Partners Special Situations Master Fund III L.P.	8-K	10.1	2/4/2019	001-35064
10.21†	Retention agreement between Emergent Capital, Inc and Miriam Martinez dated December 10, 2019.	8-K	10.1	12/16/2019	001-35064
10.22†	Retention agreement between Emergent Capital, Inc and Jack Simony dated November 8, 2019.	8-K	10.1	11/18/2019	001-35064
10.23†	Retention agreement between Emergent Capital, Inc and Harvey Werblowsky dated November 8, 2019.	8-K	10.2	11/18/2019	001-35064
10.24	Settlement Agreement dated as of May 24, 2019 by and among LNV Corporation, CLMG Corp., White Eagle Assets Portfolio, LP, Lamington Road Designated Activity Company, White Eagle General Partner, LLC, Emergent Capital, Inc., Imperial Finance and Trading, LLC, Lamington Road Bermuda, LTD, OLIPP IV, LLC and Markley Asset Portfolio LLC.	8-K	10.1	6/14/2019	001-35064
10.25	Debtor-in-Possession Credit Agreement dated as of May 24, 2019 among White Eagle Asset portfolio, LP, LNV Corporation, as DIP Lender, CLMG Corp., as DIP Agent, and the Guarantors named therein.	8-K	10.2	6/14/2019	001-35064



10.26	Second Amended Joint Plan of Reorganization of White Eagle Asset Portfolio, LP, et al., dated as of June 19, 2019.	8-K	10.1	6/24/2019		001-35064
10.27	Commitment Letter dated as of July 18, 2019 among Emergent Capital, Inc., Lamington Road Designated Activity Company, White Eagle Asset Portfolio, LP and Jade Mountain Partners.	8-K	10.1	7/24/2019		001-35064
10.28	Subscription Agreement dated as of August 16, 2019 among Emergent Capital, Inc., Lamington Road Designated Activity Company, White Eagle Asset Portfolio, LP and Jade Mountain Partners.	8-K	10.1	8/21/2019		001-35064
10.29	Amended and Restated Limited Partnership Agreement of White Eagle Asset Portfolio, LP dated as of August 16, 2019.***	8-K	10.2	8/21/2019		001-35064
10.30	Master Termination Agreement dated as of August 16, 2019 among White Eagle General Partner, LLC, Lamington Road Designated Activity Company, White Eagle Asset Portfolio, LP, Markley Asset Portfolio, LLC, CLMG Corp., as administrative agent, LNV Corporation, as initial lender, Wilmington Trust, National Association, in its capacities as securities intermediary, custodian and agent, and Palomino JV, L.P.	8-K	10.3	8/21/2019		001-35064
10.31	Pledge Agreement dated as of August 16, 2019 between Lamington Road Designated Activity Company and Palomino JV, L.P.	8-K	10.4	8/21/2019		001-35064
10.32	Assumption Agreement dated as of August 16, 2019 among White Eagle Asset Portfolio, LP, Lamington Road Designated Activity Company, Emergent Capital Inc. and White Eagle General Partner, LLC.	8-K	10.5	8/21/2019		001-35064
10.33	Indemnification Agreement dated as of August 16, 2019 between Emergent Holdings, Inc. and Wilmington Trust, National Association.	8-K	10.6	8/21/2019		001-35064
10.34	Subscription Agreement dated as of February11, 2019, by and between Emergent Capital.	8-K	10.1	2/15/2019		001-35064
21.1	Subsidiaries of the Registrant.				*
23.1	Consent of Grant Thornton LLP				*
31.1	Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				*
31.2	Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				*
32.1	Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				*
32.2	Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				*

101

Interactive Data Files.

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.TAX

XBRL Taxonomy Definition Linkbase Document 10.1 & 10.2

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

SBRL Taxonomy Extension Presentation Linkbase Document


††	Certain portions of the exhibit have been omitted pursuant to a confidential treatment order. An unredacted copy of the exhibit has been filed separately with the United States Securities and Exchange Commission pursuant to the request for confidential treatment.


*	Filed herewith.


†	Management compensatory arrangement.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




EMERGENT CAPITAL, INC.

By:	/S/ PATRICK CURRY
Name:	Patrick Curry
Title:	Chief Executive Officer

Date: March 13, 2020

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below hereby constitutes and appoints Patrick J. Curry, Miriam Martinez and Harvey Werblowsky, and each of them individually, his or her true and lawful agent, proxy and attorney-in-fact, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments to this Report together with all schedules and exhibits thereto, (ii) act on, sign and file with the Securities and Exchange Commission any and all exhibits to this Report and any and all exhibits and schedules thereto, (iii) act on, sign and file any and all such certificates, notices, communications, reports, instruments, agreements and other documents as may be necessary or appropriate in connection therewith and (iv) take any and all such actions which may be necessary or appropriate in connection therewith, granting unto such agents, proxies and attorneys-in-fact, and each of them individually, full power and authority to do and perform each and every act and thing necessary or appropriate to be done, as fully for all intents and purposes as he or she might or could do in person, and hereby approving, ratifying and confirming all that such agents, proxies and attorneys-in-fact, any of them or any of his, her or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.




Signature	Title	Date

/S/ PATRICK CURRY	Chief Executive Officer and Chairman of the Board of Director (Principal Executive Officer)	March 13, 2020
Patrick Curry		March 13, 2020

/S/ MIRIAM MARTINEZ	Chief Financial Officer (Principal Financial Officer)	March 13, 2020
Miriam Martinez	Chief Financial Officer (Principal Financial Officer)	March 13, 2020

/S/ PATRICK T. BRENNAN	Director	March 13, 2020
Patrick T. Brennan	Director	March 13, 2020

/S/ MATTHEW EPSTEIN	Director	March 13, 2020
Matthew Epstein	Director	March 13, 2020

/S/ MATTHEW HOUK	Director	March 13, 2020
Matthew Houk	Director	March 13, 2020

/S/ JAMES HUA	Director	March 13, 2020
James Hua		March 13, 2020

/S/ ROBERT KNAPP	Director	March 13, 2020
Robert Knapp		March 13, 2020

/S/ ROY PATTERSON	Director	March 13, 2020
Roy Patterson	Director	March 13, 2020

/S/ JOSEPH SARACHEK	Director	March 13, 2020
Joseph Sarachek	Director	March 13, 2020

/S/ JAMES G. WOLF	Director	March 13, 2020
James Wolf	Director	March 13, 2020

INDEX TO FINANCIAL STATEMENTS

Audited Consolidated Financial Statements as of November 30, 2019 and November 30, 2018 and for the twelve months ended November 30, 2019 and the eleven months ended November 30, 2018 and the twelve months ended 2017 of Emergent Capital, Inc.



Managements’ Report on Internal Controls Over Financial Reporting	F-2

Report of Grant Thornton LLP, Independent Registered Public Accounting Firm	F-3

Consolidated Balance Sheets as of November 30, 2019 and November 30, 2018	F-4

Consolidated Statements of Operations for the twelve months ended November 30, 2019, the eleven months ended November 30, 2018 and the twelve months ended December 31, 2017	F-5

Consolidated Statements of Stockholders’ Equity for the twelve months ended November 30, 2019, the eleven months ended November 30, 2018 and the twelve months ended December 31, 2017	F-6

Consolidated Statements of Cash Flows for the twelve months ended November 30, 2019, the eleven months ended November 30, 2018 and the twelve months ended December 31, 2017	F-7

Notes to Consolidated Financial Statements	F-8

F-1

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined under Rule 13a-15(f) in the Securities Exchange Act of 1934. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements prepared for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of management, including the Company’s principal executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework in 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the Company’s evaluation under the framework in Internal Control—Integrated Framework, management concluded that the Company’s internal control over financial reporting was effective as of November 30, 2019.

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

Board of Directors and Stockholders

Emergent Capital, Inc.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Emergent Capital, Inc. (a Florida corporation) and subsidiaries (the "Company") as of November 30, 2019 and 2018, the related consolidated statements of operations, stockholders’ equity, and cash flows for the twelve months ended November 30, 2019, the eleven months ended November 30, 2018, and the twelve months ended December 31, 2017, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2019 and 2018, and the results of its operations and its cash flows for the twelve months ended November 30, 2019, the eleven months ended November 30, 2018, and the twelve months ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2008

Fort Lauderdale, Florida

March 13, 2020

F-3

Emergent Capital, Inc.

CONSOLIDATED BALANCE SHEETS



	November 30,			November 30,
	2019			2018
	(In thousands except share data)
ASSETS
Assets
Cash and cash equivalents	$	24,283		$	1,209
Certificate of deposit	511			500
Prepaid expenses and other assets	377			657
Deposits - other	1,377			1,377
Life settlements, at estimated fair value (Note 9)	1,297			1,172
Fixed assets, net	18			78
Investment in limited partnership, at estimated fair value (Note 10)	137,849			—
Investment in deconsolidated subsidiaries, at estimated fair value (Note 3)	—			128,795
Investment in affiliates	—			2,384
Deferred tax asset	—			576
Total assets	$	165,712		$	136,748
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Accounts payable and accrued expenses	$	1,651		$	2,446
Other liabilities	86			194
Interest payable - 8.5% Convertible Notes (Note 12)	—			37
8.5% Convertible Notes, net of discount and deferred costs (Note 12)	—			1,173
Interest payable - 5.0% Convertible Notes (Note 13)	1,116			1,116
5.0% Convertible Notes, net of discount and deferred debt costs (Note 13)	71,022			69,742
Interest payable - 8.5% Senior Secured Notes (Note 14)	854			628
8.5% Senior Secured Notes, net of deferred debt costs (Note 14)	45,675			34,170
Current tax liability	3,195			—
Total liabilities	123,599			109,506
Commitments and Contingencies (Note 17)
Stockholders’ Equity
Common stock (par value $0.01 per share, 415,000,000 authorized at November 30, 2019 and November 30, 2018; 158,365,275 issued and 157,757,275 outstanding as of November 30, 2019; 158,733,928 issued and 158,125,928 outstanding as of November 30, 2018)	1,584			1,587
Preferred stock, $0.01 par value (40,000,000 authorized; 0 issued and outstanding as of November 30, 2019 and November 30, 2018)	—			—
Treasury stock (608,000 shares as of November 30, 2019 and November 30, 2018)	(2,534		)	(2,534		)
Additional paid-in-capital	334,576			334,198
Accumulated deficit	(291,513		)	(306,009		)
Total stockholders’ equity	42,113			27,242
Total liabilities and stockholders’ equity	$	165,712		$	136,748

The accompanying notes are an integral part of this financial statement.

F-4

Emergent Capital, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Twelve Months Ended November 30, 2019, the Eleven Months Ended November 30, 2018 and the Twelve Months Ended December 31, 2017



	2019			2018			2017
	(in thousands, except share and per share data)
Income (Loss)
Change in fair value of life settlements (Notes 9 & 15)	$	(38	)	$	(46,879	)	$	51,551
Change in fair value of investment in limited partnership, net of distributions (Notes 10 & 15)	1,361			—			—
Change in fair value of investment in deconsolidated subsidiaries (Notes 4 & 15)	37,941			(150,894		)	—
Other income	2,261			1,351			322
Total income (loss)	41,525			(196,422		)	51,873
Expenses
Interest expense	11,220			30,845			32,797
Change in fair value of Revolving Credit Facilities (Notes 11 & 15)	—			(70,900		)	4,501
Loss on extinguishment of debt	—			—			2,018
Personnel costs	2,678			2,707			5,070
Legal fees	2,935			3,052			3,721
Professional fees	2,489			5,475			4,445
Insurance	929			734			783
Other selling, general and administrative expenses	649			1,562			1,776
Total expenses (income)	20,900			(26,525		)	55,111
Income (loss) from continuing operations before income taxes	20,625			(169,897		)	(3,238		)
Provision (benefit) for income taxes	3,766			45			—
Net income (loss) from continuing operations	$	16,859		$	(169,942	)	$	(3,238	)
Discontinued Operations:
Income (loss) from discontinued operations, net of income taxes	$	(2,363	)	$	(29	)	$	(271	)
Benefit for income taxes	—			—			—
Net income (loss) from discontinued operations	(2,363		)	(29		)	(271		)
Net income (loss)	$	14,496		$	(169,971	)	$	(3,509	)
Income (loss) per share:
Basic income (loss) per share
Continuing operations	$	0.11		$	(1.09	)	$	(0.04	)
Discontinued operations	(0.02		)	—			—
Net income (loss) - basic	$	0.09		$	(1.09	)	$	(0.04	)
Diluted income (loss) per share
Continuing operations	$	0.11		$	(1.09	)	$	(0.04	)
Discontinued operations	(0.02		)	—			—
Net income (loss) - diluted	$	0.09		$	(1.09	)	$	(0.04	)
Weighted average shares outstanding:
Basic	156,994,105			155,949,444			82,323,050
Diluted	157,823,660			155,949,444			82,323,050

The accompanying notes are an integral part of this financial statement.

F-5

Emergent Capital, Inc.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Twelve Months Ended November 30, 2019, the Eleven Months Ended November 30, 2018 and the Twelve Months Ended December 31, 2017



	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, 2017	29,021,844		$	290		608,000	$	(2,534	)	$	307,647		$	(132,529	)	$	172,874
Net income (loss)	—		—			—	—			—			(3,509		)	(3,509		)
Stock-based compensation	1,991,132		20			—	—			388			—			408
Common stock issued, net	127,500,000		1,275			—	—			25,614			—			26,889
Retirement of common stock	(17,577	)	—			—	—			(20		)	—			(20		)
Balance, December 31, 2017	158,495,399		$	1,585		608,000	$	(2,534	)	$	333,629		$	(136,038	)	$	196,642
Net income (loss)	—		—			—	—			—			(169,971		)	(169,971		)
Stock-based compensation	550,000		—			—	—			562			—			562
Common stock issued, net	25,000					—	—			9			—			9
Retirement of common stock	(336,471	)	2			—	—			(2		)	—			—
Balance, November 30, 2018	158,733,928		$	1,587		608,000	$	(2,534	)	$	334,198		$	(306,009	)	$	27,242
Net income (loss)	—		—			—	—			—			14,496			14,496
Stock-based compensation	—		—			—	—			375			—			375
Retirement of common stock	(368,653	)	(3		)	—	—			3			—			—
Balance, November 30, 2019	158,365,275		$	1,584		608,000	$	(2,534	)	$	334,576		$	(291,513	)	$	42,113

F-6

Emergent Capital, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Twelve Months Ended November 30, 2019, the Eleven Months Ended November 30, 2018 and the Twelve Months Ended December 31, 2017



	2019				2018				2017
					(In thousands)
Cash flows from operating activities
Net income (loss)	$	14,496			$	(169,971	)		$	(3,509	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	140				81				102
White Eagle Revolving Credit Facility financing cost and fees withheld by lender	—				927				931
Debt modification costs 8.5% Convertible Notes	—				—				2,537
Amortization of discount and deferred debt costs for 8.5% Convertible Notes	21				76				2,433
Amortization of deferred debt costs for 15.0% Senior Secured Notes	—				—				184
Amortization of deferred cost for 5.0% Convertible Notes	1,280				1,087				496
Amortization of deferred costs for 8.5% Senior Secured Notes	1,062				244				98
Stock-based compensation	375				562				388
Change in fair value of life settlements	38				46,879				(51,551		)
Change in fair value of investment in limited partnership, net of distributions	(1,361		)		—				—
Change in fair value of investment in affiliates	2,384				—				—
Change in fair value of investment in deconsolidated subsidiaries	(37,941		)		150,894				—
Change in fair value of White Eagle Revolving Credit Facility	—				(70,900		)		4,501
Interest income	(311		)		(517		)		(76		)
Loss on extinguishment of debt	—				—				2,018
Interest Paid in Kind on 8.5% Senior Secured Notes	3,967			—	—			—	—
Interest Paid in Kind on Senior Unsecured Convertible Notes	—				—				6,288
Deferred tax asset	576				(576		)		—
Change in assets and liabilities:
Deposits—other	—				—				(30		)
Prepaid expenses and other assets	516				(59		)		323
Accounts payable and accrued expenses	(835		)		877				779
Other liabilities	(171		)		(1,001		)		116
Current tax liability	3,195				—				—
Interest payable- 8.5 % Convertible Notes	(37		)		(8		)		(2,226		)
Interest payable - 15.0% Senior Secured Notes	—				—				(213		)
Interest payable - 5.0% Convertible Notes	—				(316		)		1,432
Interest payable - 8.5% Senior Secured Notes	226				496				132
Net cash provided by (used in) operating activities	(12,380		)		(41,225		)		(34,847		)
Cash flows from investing activities
Purchase of fixed assets, net of disposals	(5		)		(5		)		(4		)
Certificate of deposit	—				516				5,025
Premiums paid on life settlements	(163		)		(78,706		)		(84,718		)
Consolidation (deconsolidation) of subsidiaries cash	10,905				(30,010		)		—
Proceeds from maturity of life settlements	17,768				90,780				42,131
Distributions from investment in limited partnership	1,667				—				—
Net cash provided by/(used in) investing activities	30,172				(17,425		)		(37,566		)
Cash flows from financing activities
Repayment of borrowings under White Eagle Revolving Credit Facility	—				(52,683		)		(19,633		)
Borrowings from White Eagle Revolving Credit Facility	—				81,275				86,356
Borrowings under 15.0% Promissory Note	—				—				2,763
Proceeds from issue of common stock, net	—				—				19,188
Proceeds from 8.5% Senior Secured Notes	6,476				—				5,000
Repayment from issue of 8.5% senior Unsecured Convertible	(1,194		)		—				—
Payment under finance lease obligations	—				—				(25		)
Payment of Recapitalization Transaction Closing Cost	—				—				(1,287		)
Net cash provided by financing activities	5,282				28,592				92,362
Net increase/(decrease) in cash and cash equivalents	23,074				(30,058		)		19,949
Cash and cash equivalents, at beginning of the year	1,209				31,267				11,318
Cash and cash equivalents, at end of the year	$	24,283			$	1,209			$	31,267
Supplemental disclosures of cash flow information:
Cash paid for interest during the period	$	4,608			$	29,255			$	21,379
Supplemental disclosures of non-cash investing activities:
Deconsolidation of life settlement, November 13, 2018	$	—			$	504,712			$	—
Supplemental disclosures of non-cash financing activities:
Repayment of 15.0 % Senior Secured Notes Principal, Interest and Penalty through Recapitalization Transaction	$	—			$	—			$	31,675
Issue of 8.5% Senior Secured Notes through Recapitalization Transaction	$	—			$	—			$	30,000
Repayment of 15.0% Promissory Note Principal and Interest through Recapitalization Transaction	$	—			$	—			$	2,799
Recapitalization Transaction Closing Cost and Other Costs withheld from Proceeds	$	—			$	—			$	4,338
Deconsolidation of White Eagle Revolving Credit Facility, November 13, 2018	$	—			$	287,859			$	—

The accompanying notes are an integral part of this financial statement.

F-7

Emergent Capital, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2019

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS ACTIVITIES

Emergent Capital, through its subsidiaries, owns two life insurance policies, also referred to as life settlements, with a fair value of $1.3 million and an aggregate death benefit of approximately $12.0 million at November 30, 2019. Additionally, through a subsidiary, the Company owns a 27.5% equity investment, having an estimated fair value of approximately $137.8 million at November 30, 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 through change in fair value and death benefits from these two polices and change in fair value and distributions from its equity investment in White Eagle.

Change in Financial Year End

Voluntary Petitions for Relief Under Chapter 11 and De-consolidation of Subsidiaries

On November 14, 2018 (the "Petition Date"), Lamington Road Designated Activity Company (formerly known as Lamington Road Limited), the Company’s wholly-owned indirect Irish subsidiary ("Lamington" or "Lamington Road DAC"), and White Eagle General Partner, LLC, the Company’s 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 "Bankruptcy Court"). 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 Lamington and WEGP filings are referred to as the "November Chapter 11 Cases."

F-8

provisions of the Standstill Agreement, until 12:00 p.m. noon Pacific time on November 26, 2018, to facilitate negotiations. The effective period under the Standstill Agreement was extended several times, finally to December 13, 2018.

Beal Litigation

On January 25, 2019, the Company, White Eagle, Lamington, and WEGP , the ("Plaintiffs"), filed suit (the "Suit") against LNV Corporation ("LNV"), Silver Point Capital L.P. ("Silver Point") and GWG Holdings, Inc. ("GWG" and, with LNV and Sliver Point, the "Defendants") in the United States Bankruptcy Court for the District of Delaware (the "Court"), where the Suit will be administered together with the previously filed and announced petitions for relief under Chapter 11 of the United States Bankruptcy Code of White Eagle, Lamington and WEGP (the "Chapter 11 Cases" and White Eagle, Lamington and WEGP, the "Debtors"). LNV, a subsidiary of Beal Bank ("Beal"), is the lender under White Eagle’s outstanding revolving credit facility (the "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 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.

In connection with the White Eagle Chapter 11 Case, on January 15, 2019, the Court authorized the Debtors to use the proceeds of pre-petition cash collateral for a period of twenty (20) weeks (the "Cash Collateral'). The Cash Collateral may be used solely for the purposes permitted under the budget approved by the Court, including (i) to provide working capital needs of the Debtors and general corporate purposes of the Debtors, (ii) to make the payments or fund amounts otherwise permitted in the final order that authorized such uses and such budget, (iii) to fund amounts necessary to pay certain fees; and (iv) to fund amounts necessary to pay certain professional fees in accordance with such Budget.

Global Settlement Agreement in Principle in Bankruptcies

Pursuant to the Proposed Settlement, among other things:

•


•	If White Eagle satisfies such obligations after September 17, 2019 and by December 30, 2019, the amount due on the outstanding principal would increase to 104%;

F-9

•

In the event LNV has not received the payoff described above by September 17, 2019, the court-appointed liquidation trustee, together with investment banking assistance from Maple Life Financial, LLC, shall have full authority to sell White Eagle’s life insurance policy portfolio (which constitutes collateral under the Credit Facility) for the maximum amount achievable through an orderly sale process, taking into account that the transaction must be closed no later than December 30, 2019; in connection with this authority, the liquidation trustee and the investment banker may work prior to September 17, 2019 to prepare the portfolio for sale, but may not take actions to actually commence a sale including, but not limited to, marketing the portfolio or contacting potential buyers about the portfolio, prior to such date.


•	If the portfolio is sold in whole or in part, LNV shall only have the right to step in to bid for such sale if, and to the extent, the total amounts generated through the sale thereof do not fully satisfy the payoff amount.

•

Repayment and Termination of the White Eagle Revolving Credit Facility

On August 16, 2019, the Company entered into a subscription agreement (the "Subscription Agreement") with Lamington Road ("Class B Limited Partner"), White Eagle, WEGP ("Withdrawing General Partner"), and Palomino JV, L.P. ("Palomino" or "Class A Limited Partner"), in connection with the commitment letter signed on June 22, 2019 with Jade Mountain , 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 (the "Manager") all of its general partnership interests (collectively, the "WE Investment") for a purchase price of 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 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 with a value of approximately $138.9 million on the closing date.

The proceeds of the WE Investment were used to satisfy in full (i) the White Eagle Revolving Credit Facility , and (ii) DIP Financing extended by CLMG, as Administrative Agent ("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 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 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 Bankruptcy Court with respect to the Chapter 11 Cases.

F-10

In connection with the WE Investment, the 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 reserves sufficient to fund premiums, certain operating expenses of White Eagle and certain minimum payments to Lamington as the holder of the Class B interests. 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 WE 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 utilized to repay 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 distributions 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.

See Note 10, "Investment in Limited Partnership", to the accompanying consolidated financial statements for further information.

Deconsolidation and Subsequent Measurement of the Deconsolidated Entities

Lamington and its subsidiaries' (White Eagle, WEGP and Lamington Bermuda), financial results were excluded from the Company’s consolidated results for the period from November 14, 2018, the Petition Date to August 16, 2019 the day the date the White Eagle Revolving Facility was terminated. ASC 810, Consolidation require that an entity whose financial statements were previously consolidated with those of its parent that files for protection under the U.S. Bankruptcy Code, whether solvent or insolvent, generally must be prospectively deconsolidated from the parent and presented as an equity investment (deconsolidation applies to Lamington and all subsidiaries owned, directly or indirectly, by Lamington, including WEGP, White Eagle and Lamington Bermuda which collectively are referred to herein as the ("Deconsolidated Entities" or the "Debtors"). Therefore, our 2019 results are not comparable with our 2018 results. 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 each reporting period. 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.

F-11

On September 16, 2019, the Bankruptcy Court entered an order and final decree closing the White Eagle Chapter 11 Case, the Lamington and WEGP case were dismissed on November 25, 2019. However pursuant to ASC 810, Consolidation, management took the position that given that all third party claims had been satisfied in the case, consolidation of Lamington and WEGP as of August 17, 2019 was appropriate.

As part of the WE Investment, the Company sold 72.5% of its ownership in White Eagle, which is the most substantial asset of the Company, resulting in a reduction in its ownership from 100% to 27.5%. Given the new percentage ownership, this is considered an equity investment. Based on the A&R LPA, the Company will receive funds from White Eagle through a monthly distribution which is highly driven by maturities of the portfolio. Although the Company is guaranteed certain monthly payments, the Class A Partner must be made whole based on their established IRR of 11% which exposes the Company as to the amount and timing of funds that will be received. Although White Eagle continues to be a VIE under ASC 810, Consolidation, the Company has not met the criteria for consolidation as they do not have a controlling interest in While Eagle, financially or otherwise. Based on the A&R LPA, the Company's management responsibilities are very limited. The Company's remaining ownership of White Eagle does not give the Company any control over decisions of White Eagle and the Company is the minority owner. As a result, the Company is precluded from consolidating White Eagle at November 30, 2019.

8.5% Senior Secured Notes Amendment

All terms of the Indenture that were not amended by the Second Supplemental Indenture remain in full force and effect.

F-12

Litigation Settlement

Subsequent Events

See Note 22, "Subsequent Events" of the accompanying consolidated financial statements for further information.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company, all of its wholly-owned subsidiary companies and its special purpose entities, with the exception of the Deconsolidated Entities, White Eagle , an unconsolidated equity investment effective August 17, 2019, which is accounted for using fair value and Imperial Settlements Financing 2010, LLC ("ISF 2010"), an unconsolidated special purpose entity which is accounted for using the measurement alternative, which is measured at cost less impairment. The special purpose entity was to fulfill specific objectives. All significant intercompany balances and transactions except those related to Lamington after November 13, 2018 to August 16, 2019 (see Note 3) have been eliminated in consolidation, including income from services performed by subsidiary companies in connection with the White Eagle Revolving Credit Facility, as detailed herein.

Liquidity

Historically, the Company has incurred substantial losses, which has resulted in an accumulated deficit of approximately $291.5 million as of November 30, 2019.This amount include $14.5 million of net income for the twelve months ended November 30, 2019 for which $37.9 million relates to a gain on change in fair value on the investment in deconsolidated subsidiaries as a result of the resolution of their emergence from bankruptcy. Cash flows used in operating activities were $12.4 million for the twelve months ended November 30, 2019 and $41.2 million for the eleven months ended November 30, 2018. As of November 30, 2019, we had approximately $24.3 million of cash and cash equivalents and certificates of deposit of $511,000.

F-13

Subsequent Events

See Note 22, "Subsequent Events" of the accompanying consolidated financial statements for further information.

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.

Reorganization and Consolidation

Lamington and its subsidiaries' (White Eagle and WEGP) filing of the Chapter 11 Cases was a reconsideration event for Emergent Capital to reevaluate whether consolidation of Lamington and its subsidiaries (White Eagle, WEGP and Lamington Road Bermuda Limited) (collectively, and 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.

On August 16, 2019, the White Eagle Revolving Credit Facility was paid in full and terminated. Additionally, payment was made to all White Eagle vendors and intercompany liabilities were contributed by Emergent. 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 White Eagle Revolving Credit 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. Pursuant to ASC 810, Consolidation, management took the position that given that all third party claims had been satisfied in the case, consolidation of Lamington and WEGP as of August 17, 2019 was appropriate. However, the consummation of the transaction under the Subscription Agreement resulted in the Company being a minority owner in White Eagle, the entity was not reconsolidated but rather treated as an equity investment.

On September 16, 2019, the Bankruptcy Court entered an order and a final decree closing the White Eagle Chapter 11 Case, the Lamington and WEGP case were dismissed on November 25, 2019.

F-14

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. On August 17, 2019 Lamington was reconsolidated and its transactions were eliminated in consolidation. See Note 4 "Condensed and Consolidated Financial Statements For Entities in Bankruptcy" for all transactions between Emergent Capital and Lamington.

Discontinued Operations

On October 25, 2013, the Company sold substantially all of the assets comprising its structured settlement business. As a result, the Company has discontinued segment reporting and classified its operating results of the structured settlement business, net of income taxes, as discontinued operations. The accompanying consolidated statements of operations for the twelve months ended November 30, 2019, the eleven months ended November 30, 2018 and the year ended December 31, 2017 and the related notes to the consolidated financial statements reflect the classification of its structured settlement business operating results, net of tax, as discontinued operations. See Note 8, "Discontinued Operations," of the accompanying consolidated financial statements for further information. Unless otherwise noted, the following notes refer to the Company’s continuing operations.

Ownership of Life Insurance Policies

In the ordinary course of our legacy premium finance business, a large portion of our borrowers defaulted by not paying off their loans and relinquished ownership of their life insurance policies to us in exchange for our release of the obligation to pay amounts due. We also buy life insurance policies in the secondary and tertiary markets. We account for life insurance policies that we own as life settlements (life insurance policies) in accordance with ASC 325-30, Investments in Insurance Contracts, which requires us to either elect the investment method or the fair value method. The election is made on an instrument-by-instrument basis and is irrevocable. We have elected to account for these life insurance policies as investments using the fair value method.

We initially record life settlements at the transaction price. For policies acquired upon relinquishment by our borrowers, we determined the transaction price based on fair value of the acquired policies at the date of relinquishment. The difference between the net carrying value of the loan and the transaction price is recorded as a gain (loss) on loan payoffs and settlement. For policies acquired for cash, the transaction price is the amount paid.

Valuation of Insurance Policies

Our valuation of insurance policies is a critical component of our estimate of the fair value of our life settlements (life insurance policies). We currently use a probabilistic method of valuing life insurance policies, which we believe to be the preferred valuation method in the industry. The most significant assumptions are the Company’s estimate of the life expectancy of the insured and the discount rate. See Note 15 "Fair Value Measurements" of the accompanying consolidated financial statements.

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, and debt under the Revolving Credit Facilities 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, "Fair Value Measurements" of the accompanying consolidated financial statements.

F-15

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 the 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 9, "Life Settlements (Life Insurance Policies)" and Note 15, "Fair Value Measurements" of the accompanying consolidated financial statements.

We have elected to account for the debt under the White Eagle Revolving Credit Facility, which includes the interests 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 estimated fair values.

Income Recognition from Continuing Operations

Our primary sources of income from continuing operations are in the form of changes in fair value and gains on life settlements, net. Our income recognition policies for these sources of income are as follows:

•

Changes in Fair Value of Life Settlements—When the Company acquires 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 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 benefit and fair value 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. The Company recognizes income from monthly distribution from the partnership as prescribed by the Subscription Agreement.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and all highly liquid instruments with an original maturity of three months or less, when purchased. The Company maintains the majority of its cash in several operating accounts with two commercial banks. Balances on deposit are insured by the Federal Deposit Insurance Corporation ("FDIC"). However, from time to time, the Company’s balances may exceed the FDIC insurable amount at its banks.

F-16

Certificate of Deposit

The Company maintains a portion of its operating funds in a certificate of deposit. At November 30, 2019 and November 30, 2018, the carrying amount of the certificate of deposit was $511,000 and $500,000, respectively, which approximates fair value. The certificate of deposit matures on September 22, 2020 and bears interest at a rate of 2.0%.

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 statements 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.

Treasury Stock

The Company accounts for its treasury stock using the treasury stock method as set forth in ASC 505-30, Treasury Stock. Under the treasury stock method, the total amount paid to acquire the stock is recorded and no gain or loss is recognized at the time of purchase. Gains and losses are recognized at the time the treasury stock is reinstated or retired and are recorded in additional paid in capital or retained earnings. At November 30, 2019 and November 30, 2018, the Company owned 608,000 shares of treasury stock.

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 awarded 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.

Earnings Per Share

The Company computes net income per share in accordance with ASC 260, Earnings Per Share. Under the provisions of ASC 260, basic net income per share is computed by dividing the net income available to common shareholders by the weighted average common shares outstanding during the period. Diluted net income per share adjusts basic net income per share for the effects of stock options, warrants, convertible notes and restricted stock awards only in periods, or for such awards in which the effect is dilutive. ASC 260 also requires the Company to present basic and diluted earnings per share information separately for each class of equity instruments that participate in any income distribution with primary equity instruments.

F-17

Held-for-sale and discontinued operations

We report 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. We report 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 we 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, we sold substantially all of our structured settlements business. The remaining balance of $2.4 million was written off as a result of ongoing restructuring plans in the fourth quarter of fiscal 2019 as the Company decided not to continue to pursue this line of investment. As a result, we have classified our structured settlement operating results as discontinued operations.

Foreign Currency

We own certain foreign subsidiary companies formed under the laws of Ireland, Bahamas and Bermuda. These foreign subsidiary companies utilize the U.S. dollar as their functional currency. The functional currency of foreign subsidiary companies' financial statements is the U.S. dollars and therefore, there are no translation gains and losses. Any gains and losses resulting from foreign currency transactions (transactions denominated in a currency other than the subsidiary companies functional currency) are included in income. These gains and losses are immaterial to our financial statements.

Use of Estimates

The preparation of these consolidated financial statements, in conformity with accounting principles generally accepted in the United States of America ("GAAP"), requires management to make 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 periods. Actual results could differ from these estimates and such differences could be material. Significant estimates made by management include income taxes, the valuation of life settlements, the valuation of the debt owing under the White Eagle Revolving Credit Facility, the valuation of deconsolidated subsidiaries, the valuation on investment in limited partnership and the valuation of equity awards.

Reclassifications

Certain reclassifications of the prior period amounts and presentation have been made to conform to the presentation for the current period. These reclassification relate primarily to change in fair value of investment in deconsolidated subsidiaries.

Risks and Uncertainties

In the normal course of business, the Company encounters economic, legal and longevity risk. There are two main components of economic risk that could potentially impact the Company: market risk and concentration of credit risk. Market risk for the Company includes interest rate risk. Market risk also reflects the risk of declines in valuation of the Company’s life settlements, including declines caused by the selection of increased discount rates associated with the Company’s fair value model for life settlements. It is reasonably possible that future changes to estimates involved in valuing life settlements could change and result in material effects to the future financial statements. Concentration of credit risk includes the risk that an insurance carrier who has issued life insurance policies held by the Company in its portfolio, does not remit the amount due under those policies due to the deteriorating financial condition of the carrier or otherwise. Legal risk includes the risk that statutes define or courts interpret insurable interest in a manner adverse to the Company’s ownership rights in its portfolio of life insurance policies and the risk that courts allow insurance carriers to retain premiums paid by the Company in respect of insurance policies that have been successfully rescinded or contested. Longevity risk refers to the risk that the Company does not experience the mortalities of insureds in its portfolio of life insurance policies that are anticipated to occur on an actuarial basis in a timely manner, which would result in the Company expending additional amounts for the payment of premiums.

F-18

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, "Leases" (Topic 842). The new guidance establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. All leases create an asset and a liability for the lessee in accordance with FASB Concepts Statement No. 6, Elements of Financial Statements, and, therefore, recognition of those lease assets and lease liabilities represents an improvement over previous GAAP, which did not require lease assets and lease liabilities to be recognized for most leases. In December 2018, the Board released the amendments related to 1) sales taxes and other similar taxes collected from lessees that affect all lessors electing the accounting policy election; 2) lessor costs affecting all lessor entities that have lease contracts that either require lessees to pay lessor costs directly to a third party or require lessees to reimburse lessors for costs paid by lessors directly to third parties; and 3) recognition of variable payments for contracts with lease and nonlease components affecting all lessor entities with variable payments related to both lease and nonlease components. During the first quarter of 2019, the FASB issued targeted amendments to ASC 842 that affect how (1) financial institution lessors present lessee payments in their statements of cash flows and (2) lessors that are not manufacturers or dealers determine the fair value of the underlying asset. The FASB also clarified that companies transitioning to ASC 842 do not need to provide the interim transition disclosures required by ASC 250 (accounting changes and error corrections). All entities, including early adopters, must apply the amendments in this Update to all new and existing leases. This ASU is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. As a result, ASC 842 will be implemented as of December 1, 2019 since Company’s fiscal year begins on December 1 and ends on November 30. Early adoption is permitted. We do not expect that it will have a material impact.

In February 2018, the FASB issued ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" to address stakeholder concerns about the guidance in current generally accepted accounting principles (GAAP) that requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws or rates with the effect included in income from continuing operations in the reporting period that includes the enactment date. The amendments in this update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. As a result, this update will be implemented as of December 1, 2019 since Company’s fiscal year begins on December 1 and ends on November 30. We do not expect that it will have a material impact.

In July 2018, the FASB issued ASU 2018-11, "Targeted Improvements to Leases" (Topic 842) primarily to provide another transition method in addition to the existing transition method by allowing entities to initially apply the new leases standard at the adoption date (such as January 1, 2019, for calendar year-end public business entities) and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption consistent with preparers’ requests. The amendments in this Update address stakeholders’ concerns about the requirement for lessors to separate components of a contract by providing lessors with a practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease component, similar to the expedient provided for lessees. The amendments in this Update also clarify which Topic (Topic 842 or Topic 606) applies for the combined component. For entities that have not adopted Topic 842 before the issuance of this Update, the effective date and transition requirements for the amendments in this Update related to separating components of a contract are the same as the effective date and transition requirements in Update 2016-02.

In August 2018, the FASB issued ASU 2018-13, "Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement" which modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The following disclosure requirements were removed from Topic 820 among others: 1) The amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy 2) The policy for timing of transfers between levels. The following disclosure requirements were part of the modifications in Topic 820:1) For investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly. The amendments also clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. Lastly, the following disclosure requirements were added to Topic 820: 1) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; 2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. The amendments in this Update are effective for all entities for fiscal years, and

F-19

interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. We are currently evaluating the methods and impact of adopting this new standard on our consolidated financial statements.

In October 2018, the FASB issued ASU No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities ("ASU 2018-17"). ASU 2018-17 provides that indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. ASU 2018-17 is effective for public companies for annual and interim periods beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the methods and impact of adopting this new standard on our consolidated financial statements.

In May 2019, the FASB issued ASU No. 2019- 05 which amends ASU 2016-13 to allow companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option on financial instruments that (1) were previously recorded at amortized cost and (2) are within the scope of ASC 326-203 if the instruments are eligible for the fair value option under ASC 825-10.4 The fair value option election does not apply to held-to-maturity debt securities. Entities are required to make this election on an instrument-by-instrument basis. ASU 2019-05’s amendments should be applied "on a modified-retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained earnings balance in the statement of financial position as of the date that an entity adopted the amendments in ASU 2016-13." Certain disclosures are required. For entities that have adopted ASU 2016-13, the amendments in ASU 2019-05 are effective for fiscal years beginning after December 15, 2019, including interim periods therein. An entity may early adopt the ASU in any interim period after its issuance if the entity has adopted ASU 2016-13. For all other entities, the effective date will be the same as the effective date in ASU 2016-13.We are currently evaluating the methods and impact of adopting this new standard on our consolidated financial statements.

In May 2019, the FASB issued ASU No 2019-04 which clarifies certain aspects of accounting for credit losses, hedging activities, and financial instruments. The ASU’s amendments apply to all entities within the scope of the affected guidance. Accrued interest - Amortized cost basis is defined in ASU 2016-13 as "the amount at which a financing receivable or investment is originated or acquired, adjusted for applicable accrued interest, accretion or amortization of premium, discount, and net deferred fees or costs, collection of cash, writeoffs, foreign exchange, and fair value hedge accounting adjustments" (emphasis added). To address stakeholders’ concerns that the inclusion of accrued interest in the definition of amortized cost basis could make application of the credit loss guidance operationally burdensome, ASU 2019-04 provides certain alternatives for the measurement of the allowance for credit losses (ALL) on accrued interest receivable (AIR). These measurement alternatives include (1) measuring an ALL on AIR separately, (2) electing to provide separate disclosure of the AIR component of amortized cost as a practical expedient, and (3) making accounting policy elections to simplify certain aspects of the presentation and measurement of such AIR. For entities that have adopted ASU 2016-13, the amendments in ASU 2019-04 related to ASU 2016-13 are effective for fiscal years beginning after December 15, 2019, and interim periods therein. ASU 2019-04’s amendments should be applied "on a modified-retrospective basis by means of a cumulative-effect adjustment to the opening retained earnings balance in the statement of financial position as of the date an entity adopted the amendments in ASU 2016-13." Certain disclosures are also required. For all other entities, the effective date will be the same as the effective date in ASU 2016-13.We are currently evaluating the methods and impact of adopting this new standard on our consolidated financial statements.

Adopted Accounting Pronouncements

On August 17, 2018, the SEC issued a final rule that amends certain of its disclosure requirements that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, or changes in the information environment. The financial reporting implications of the final rule’s amendments are generally expected to reduce or eliminate some of an SEC registrant’s disclosure requirements. In limited circumstances, however, the amendments may expand those requirements, including those related to interim disclosures about changes in stockholders’ equity and noncontrolling interests (hereinafter referred to as changes in stockholders’ equity). The changes in stockholders’ equity extends to interim periods the annual disclosure requirement in SEC Regulation S-X, Rule 3-04,5,6 of presenting (1) changes in stockholders’ equity and (2) the amount of dividends per share for each class of shares. An analysis of changes in stockholders’ equity will now be required for the current and comparative year-to-date interim periods with subtotals for each interim period. Note that both rules refer to Rule 3-04 for presentation requirements, which, among other items, include a reconciliation that describes all significant reconciling items in each caption of stockholders’ equity and noncontrolling interests (if applicable). Rule 3-04 permits the disclosure of changes in stockholders’ equity (including dividend-per-share amounts) to be made either in

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a separate financial statement or in the notes to the financial statements. The final rule was effective for all filings submitted on or after November 5, 2018. This standard was adopted during the year ended November 30, 2019.

In July 2019, the FASB issued ASU No 2019-07, Codification Updates to SEC Sections-Amendments to SEC paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization, and Miscellaneous Updates. The FASB has updated the SEC portion of its codification literature to reflect changes the regulator made to simplify disclosures, modernize the reporting and disclosure of information by registered investment companies, and other items. ASU. 2019-07 updates the codification to reflect the amendments of various SEC disclosure requirements that the agency determined were redundant, duplicative, overlapping, outdated or superseded. The SEC amended its disclosure rules in 2018 with the aim of providing investors with useful disclosure information and to simplify compliance without significantly altering the mix of the information being provided. The amendments were part of an initiative by the SEC’s Division of Corporation Finance to review disclosure requirements applicable to issuers to consider ways to improve the requirements for the benefit of investors and issuers. The amendments are effective upon issuance of this update on July 2019.

NOTE 3 - DECONSOLIDATION OF SUBSIDIARIES

On the Petition Date, Lamington and White Eagle General Partner, LLP ("WEGP") filed the November Chapter 11 Cases in the Bankruptcy Court. As of such date, Lamington was the limited partner and owned 99.99%, and WEGP was the general partner and owned 0.01%, of White Eagle. In its capacity as general partner, WEGP managed the affairs of White Eagle. Lamington and WEGP will continue to operate their businesses as "debtors-in-possession" under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. Emergent Capital (exclusive of its subsidiaries) is a separate entity, and has not filed for bankruptcy relief and is continuing to operate in the ordinary course.

The Deconsolidated Entities' financial results are included in the Company’s consolidated results through November 13, 2018, the day prior the Petition Date. However, 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.

At November 13, 2018, the pre-petition date, the Company valued its investment in Lamington to be $278.4 million, of which $127.3 million represents equity, $145.9 million represents promissory notes and interest receivable and $5.2 million represents other liabilities, which is equivalent to the Company's carrying value. This valuation was determined by performing a fair value calculation of the assets and liabilities of Lamington under ASC 820, Fair Value Measurement. 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. The Company calculated the fair value of the White Eagle Revolving Credit Facility 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, the Company’s estimates are not necessarily indicative of the amounts that the Company, 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 different assumptions and/or estimation methodologies could have a material effect on the estimated fair values. All other assets and liabilities were deemed equivalent to their carrying value as at the pre-petition date. See Note 15, "Fair Value Measurements," of the accompanying consolidated financial statements.

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. The calculation was performed consistent with ASC 820 with changes in fair value recorded in current earnings.

As a result of the Chapter 11 Cases, consistent with ASC 321, Investments - Equity Securities, the Company subsequently, measured its investment in Lamington at fair value as of November 30, 2018. Further, the Company engaged a third party to

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perform a quantitative assessment to determine the value of its investment in Lamington. The valuation report showed the fair value of the Company's investment in Lamington to be $128.8 million, which was $150.9 million lower than its pre-petition value. As a result, the Company recognized a reduction in its investment in Lamington at November 30, 2018.

On August 16, 2019, the White Eagle Revolving Credit Facility was paid in full and terminated. In addition, payment was made to all White Eagle vendors and intercompany liabilities were contributed by Emergent. 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.

On September 16, 2019, the Bankruptcy Court entered an order and a final decree closing the White Eagle Chapter 11 Case, the Lamington and WEGP case were dismissed on November 25, 2019. However pursuant to ASC 810, Consolidation, management took the position that given that all third party claims had been satisfied in the case, consolidation of Lamington and WEGP as of August 17, 2019 was appropriate.

The Company further evaluated its investment at August 16, 2019 and recognized a gain of approximately $37.9 million, which amount is reflected in current earnings as change in fair value of investment in deconsolidated subsidiaries. The amount is associated with gains incurred by Lamington for the period up to August 16, 2019 in considering the proceeds received through the transactions for the Subscription Agreement, the actual payoff of the White Eagle Revolving Credit Facility and all other third party claims.

Effective August 17, 2019, the entities are no longer deconsolidated.

The fair value of the investment in Lamington is calculated as follows:



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

The table below summarizes the composition of the Company's investment in the deconsolidated entities at August 16, 2019:



			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

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NOTE 4 - CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS FOR ENTITIES IN BANKRUPTCY

Condensed consolidated financial information for Lamington Road DAC is set forth below, presented at historical cost basis

Lamington Road DAC

(Debtor-in-Possession)

Condensed and Consolidated Statements Balance Sheet



	November 30,		November 30,
	2019		2018
	(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' 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
Retained earnings	—		5,649
Total stockholders' equity	—		66,251

Total liabilities and stockholders' equity	$	—	$	566,722

*Liabilities subject to compromise include pre-petition unsecured claims, which may be settled at amounts different

from those recorded in the condensed consolidated balance sheet.

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Lamington Road DAC

(Debtor-in-Possession)

Condensed and Consolidated Statements of Operations

December 1, 2018 to August 16, 2019 and November 14, 2018 to November 30, 2018



	2019			2018

Change in fair value of life settlements (Notes 9 & 15)	$	(16,841	)	$	(6,034	)
Change in fair value of investment in limited partnership (Note 10 &15)	15,352			—
Realized Gain on Life Settlements, Net	21,336			—
Other Income	709			35
Total income	20,556			(5,999		)

Interest expense	28,331			—
Interest expense - affiliate	—			458
Change in fair value of White Eagle Revolving Credit Facility (Notes 11 & 15)	17,094			53,613
Loss on extinguishment of debt	7,360			—
Reorganization cost	13,954			563
Legal fees	890			139
Professional fees	1,549			79
Administrative service fees - affiliate	2,765			229
Other general and administrative expenses	469			17
Total expenses	72,412			55,098
Income taxes	—			—
(Loss) income	$	(51,856	)	$	(61,097	)

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Lamington Road DAC

(Debtor-in-Possession)

Condensed and Consolidated Statements of Cash Flows

For the Year Ended November 30, 2019 and November 14, 2018 to November 30, 2018



	2019			2018
Net cash flows from operating activities	$	(58,793	)	$	68

Cash flows from investing activities
Premiums paid on life settlements	(69,827		)	(6,557		)
Proceeds from maturity of life settlements	92,505			5,000
Net cash provided by/(used in) investing activities	$	22,678		$	(1,557	)

Cash flows from financing activities
Repayment of borrowings under White Eagle Revolving Credit Facility	(1,804		)	—
Borrowings from White Eagle Revolving Credit Facility	4,221			5,198
Cash distributed to Parent Company	(21		)	—
Net cash provided by financing activities	$	2,396		$	5,198

Net increase in cash and cash equivalents	(33,719		)	3,709
Cash and cash equivalents, at beginning of the period	33,719			30,010
Cash and cash equivalents, at end of the period	$	—		$	33,719

Supplemental disclosures of cash flow information:
Cash paid for interest during the period	$	28,331		$	—
Supplemental disclosures of non-cash financing activities:
Repayment of White Eagle Revolving Credit Facility by third party from proceeds of sale of life settlement	$	366,821		$	—
White Eagle early extinguishment fees paid by third party from proceeds of Class D Shares	$	7,360		$	—

Related Party Transactions

Certain related party transactions had been eliminated in consolidation. Due to the deconsolidation of Lamington, transactions after November 13, 2018 are no longer eliminated. With the discharge of the Chapter 11 Cases, effective August 17, 2019 related party transactions are now eliminated in consolidation. The below is a description of related party transactions for the period.

Administrative Services Fees

In 2014, White Eagle entered into an Administrative Service Agreement with Imperial Finance and Trading ("IFT"). Under the agreement, IFT will perform certain non-discretionary, administrative or ministerial services to assist with certain reporting, compliance and document retention duties and obligations arising under or in connection with the Amended and Restated Loan and Securities Agreement. IFT shall recover all cost incurred in performing these services, with billings quarterly or annually. Bills will be based on actual cost or an appropriate allocation methodology. White Eagle incurred post-petition administrative service expenses of approximately $2.8 million during the twelve months ended November 30, 2019 and 229,000 from November 14, 2018 to November 30, 2018. Amounts due from White Eagle resulting from the administrative services during the twelve months ended November 30, 2019 were contributed on August 16, 2019 consistent with the Master Termination Agreement. During the period from January 1, 2018 to November 13, 2018, White Eagle incurred pre-petition administrative service expense of approximately $5.2 million, these amounts were eliminated on consolidation.

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Promissory Notes Receivables

Effective May 16, 2014, Lamington entered into a 10 year, $59.3 million unsecured Promissory Note ("the 8.5% Promissory Note") with its parent company, Markley Asset Portfolio, LLC ("Markley"). The amount was used by Lamington as the partial purchase price of Markley’s interest in White Eagle. The annual interest rate on the Promissory Note is 8.5% and is due to be paid at the end of each calendar year; provided that any interest accrued at the end of a calendar year which is not paid within seven business days thereafter shall be capitalized and increased to the outstanding principal balance. As of August 16, 2019, the outstanding principal balance was $86.5 million, which includes $27.7 million in capitalized interest. Total interest expense related to the Promissory Note was $0 and $6.3 million for the period December 1, 2018 to August 16, 2019 and the eleven months ended November 30, 2018, respectively. The entire remaining principal balance of the Promissory Note shall be due and payable, together with all accrued but unpaid interest, on May 16, 2024. No principal payments are due prior to the maturity date.

Subsequent to August 16, 2019, the Promissory Note interest expense was approximately $1.9 million at November 30, 2019, these amounts were eliminated on consolidation.

Effective July 28, 2017, Lamington, issued an unsecured Promissory Note to Markley, in a principal amount of $57.0 million. The amount represents distributions of earnings from Lamington's share of profits of White Eagle, to satisfy Profit Participation Notes issued by Markley to Lamington (the "Special Dividend Note"). The Special Dividend Note matures on July 28, 2027 and bears interest at an annual rate of 5.0% provided that any interest accrued at the end of a calendar year which is not paid within seven business days thereafter shall be capitalized and increased to the outstanding principal balance. As of August 16, 2019, the outstanding principal balance was $59.9 million, which includes $2.9 million in capitalized interest. Total interest expense related to the Special Dividend Note was $0.0 million and $2.7 million for the period December 1, 2018 to August 16, 2019 and the eleven months ended November 30, 2018, respectively. The entire remaining principal balance of the Special Dividend Note shall be due and payable, together with all accrued but unpaid interest, on July 28, 2027. No principal payments are due prior to the maturity date.

Subsequent to August 16, 2019, approximately $30.0 million was repaid towards the outstanding principal for the Special Dividend Note, with interest expense of approximately $713,000 through November 30, 2019, these amounts were eliminated on consolidation. The balance at November 30, 2019 was $29.9 million.

At August 16, 2019, the notes were fair valued in accordance with ASC 820, with a fair value of approximately $146.3 million, resulting in a change in fair value of approximately $89.7 million for the period up to August 16, 2019, which is included in change in fair value of investment in deconsolidated subsidiaries. The notes are now being eliminated in consolidation effective August 17, 2019.

NOTE 5 - CONSOLIDATION OF VARIABLE INTEREST ENTITIES

The Company evaluates its interests in variable interest entities ("VIEs") on an ongoing basis and consolidates those VIEs in which it has a controlling financial interest and is thus deemed to be the primary beneficiary. A controlling financial interest has both of the following characteristics: (i) the power to direct the activities of the VIE that most significantly impact its economic performance; and (ii) the obligation to absorb losses of the VIE that could potentially be significant to it or the right to receive benefits from the VIE that could be potentially significant to the VIE.

The following table presents the consolidated assets and consolidated liabilities of VIEs for which the Company has concluded that it is the primary beneficiary and which are consolidated in the Company’s financial statements as of November 30, 2019 and November 30, 2018, as well as non-consolidated VIEs for which the Company has determined it is not the primary beneficiary (in thousands):



	Not Primary Beneficiary				Not Primary Beneficiary
	Non-consolidated VIE				Non-consolidated VIE- White Eagle
	Assets		Liabilities		Total Assets		Maximum Exposure To Loss
November 30, 2019	$	—	$	—	$	137,849	$	137,849
November 30, 2018	$	2,384	$	2,384	$	—	$	—

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Imperial Settlements Financing 2010, LLC ("ISF 2010"), which was formed as an affiliate of the Company to serve as a special purpose financing entity to allow the Company to sell structured settlements and assignable annuities, it is a non-consolidated special purpose financing entity, as well as a non-consolidated VIE for which the Company has determined it is not the primary beneficiary. During twelve months ended November 30, 2019, the investment was fully written off and the Company incurred change in fair value loss on its investment in affiliates of approximately $2.4 million, the amount is included in loss from discounted operations. This investment was held by our structured settlement subsidiary whose activities were discontinued in 2013 with the sale of the structured settlement assets and the amount was written off as part of the restructuring transactions of the Company.

See Note 8, "Discontinued Operations," of the accompanying consolidated financial statements for further information.

Approximately $2.4 million is included in investment in affiliates in the accompanying balance sheet as of November 30, 2018.

Approximately $137.8 million is included as investment in limited partnership in the accompanying balance sheet as of November 30, 2019.

NOTE 6 - EARNINGS PER SHARE

As of November 30, 2019, November 30, 2018 and December 31, 2017, there were 158,365,275, 158,733,928 and 158,495,399 shares of common stock issued, respectively, and 157,757,275, 158,125,928, and 157,887,399 of shares of common stock outstanding, respectively. Outstanding shares as of November 30, 2019, November 30, 2018 and December 31, 2017 have been adjusted to reflect 608,000 treasury shares.

Basic net income per share is computed by dividing the net earnings attributable to common shareholders by the weighted average number of common shares outstanding during the period.

Diluted earnings per share is computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding, increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. Conversion or exercise of the potential common shares is not reflected in diluted earnings per share unless the effect is dilutive. The dilutive effect, if any, of outstanding common share equivalents is reflected in diluted earnings per share by application of the treasury stock method and if-converted method, as applicable.

The following tables reconcile actual basic and diluted earnings per share for the twelve months ended November 30, 2019 and the eleven months ended November 30, 2018 and twelve months ended December 31, 2017 (in thousands except per share data).

F-27



	2019			2018			2017
	(1)			(2)			(3)
Income (loss) per share:
Numerator:
Net (loss) income from continuing operations	$	16,859		$	(169,942	)	$	(3,238	)
Net (loss) income from discontinued operations	(2,363		)	(29		)	(271		)
Numerator for basic and diluted EPS - net income (loss) attributable to common stockholders	$	14,496		$	(169,971	)	$	(3,509	)
Basic income (loss) per common share:
Basic income (loss) from continuing operations	$	0.11		$	(1.09	)	$	(0.04	)
Basic income (loss) from discontinued operations	$	(0.02	)	$	—		$	—
Basic income (loss) per share available to common shareholders	$	0.09		$	(1.09	)	$	(0.04	)
Diluted income (loss) per common share:
Diluted income (loss) from continuing operations	$	0.11		$	(1.09	)	$	(0.04	)
Diluted income (loss) from discontinued operations	(0.02		)	—			—
Diluted income (loss) per share available to common shareholders	$	0.09		$	(1.09	)	$	(0.04	)

Denominator:
Basic	156,994,105			155,949,444			82,323,050
Diluted	157,823,660			155,949,444			82,323,050


(1)	The computation of diluted EPS does not include 85,000 shares of common stock underlying options, 100,000 shares of stock appreciation rights, 42,500,000 shares of common stock underlying warrants, up to 37,918,483 shares of common stock issuable upon conversion of the 5% Convertible Notes (as defined below) as the effect of their inclusion would have been anti-dilutive.

(2)

The computation of diluted EPS does not include 85,000 shares of common stock underlying options, 100,000 shares of stock appreciation rights, 1,400,000 shares of restricted stock, 44,500,000 shares of common stock underlying warrants, up to 37,918,483 shares of common stock issuable upon conversion of the 5% Convertible Notes (as defined below) and up to 181,249 shares of common stock issuable upon the conversion of the 8.5% Convertible Notes (as defined below), as the effect of their inclusion would have been anti-dilutive for the fiscal year ended November 30, 2018.

(3)

The computation of diluted EPS did not include 542,102 options, 48,740,521 warrants, 2,102,522 shares of restricted stock, up to 37,918,483 shares of underlying common stock issuable upon conversion of the Convertible Notes and up to 181,249 shares of underlying common stock issuable upon conversion of the 8.5% Convertible Notes (as defined below) for the year ended December 31, 2017, as the effect of their inclusion would have been anti-dilutive.

NOTE 7 - STOCK-BASED COMPENSATION

On June 27, 2017, the shareholders of the Company voted to amend, and the Company amended, the Amended and Restated 2010 Omnibus Incentive Plan (as amended, the "Omnibus Plan") to increase the number of shares authorized for issuance thereunder by 9,900,000 shares. Awards under the Omnibus Plan may consist of incentive awards, stock options, stock appreciation rights, performance shares, performance units, and shares of common stock, restricted stock, restricted stock units or other stock-based awards as determined by the compensation committee of the Company's board of directors. The Omnibus Plan has an aggregate of 12,600,000 shares of common stock authorized for issuance thereunder, subject to adjustment as provided therein.

Options

As of November 30, 2019, all options to purchase shares of common stock issued by the Company were fully vested. There was no stock-based compensation expense relating to stock options it granted under the Omnibus Plan during the twelve months ended November 30, 2019 and the eleven months year ended November 30, 2018.

F-28

As of November 30, 2019, options to purchase 85,000 shares of common stock were outstanding under the Omnibus Plan at a weighted average exercise price of $6.94 per share. The following table presents the activity of the Company’s outstanding stock options of common stock for the twelve months ended November 30, 2019:



Common Stock Options	Number of Shares	Weighted Average Price per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Options outstanding, December 1, 2018	85,000	$	6.94	1.55	$	—
Options granted	—	—		—
Options exercised	—	—		—
Options forfeited	—	—		—
Options expired	—	—		—
Options outstanding, November 30, 2019	85,000	$	6.94	0.55	$	—
Exercisable at November 30, 2019	85,000	6.94		0.55
Unvested at November 30, 2019	—	$	—	—	$	—

As of November 30, 2019, all outstanding stock options had an exercise price above the fair market value of the common stock on that date. There are no remaining unamortized amounts to be recognized on these options.

Restricted Stock

The Company incurred additional stock-based compensation expense of approximately $375,000, $562,000, and $388,000 relating to restricted stock granted to its board of directors and certain employees during the twelve months ended November 30, 2019, the eleven months ended November 30, 2018 and the year ended December 31, 2017, respectively.

During the year ended December 31, 2016, the Company granted 65,212 shares of restricted stock to its directors under the Omnibus Plan, which are subject to a 1 year vesting period that commenced on the date of grant. The fair value of the restricted stock was valued at approximately $255,000 based on the closing price of the Company’s shares on the date prior to the grant date. The Company incurred stock-based compensation expense related to these 65,212 shares of restricted stock of approximately $0 and $106,000 during the eleven months ended November 30, 2018 and the year ended December 31, 2017, respectively. The 65,212 shares of restricted stock vested during the year ended December 31, 2017.

During the year ended December 31, 2016, the Company granted 200,000 shares of restricted stock units to certain employees under the Omnibus Plan, which are subject to a two year vesting period that commenced on the date of grant. The fair value of the unvested restricted stock was valued at approximately $674,000 based on the closing price of the Company's shares on the day prior to the grant date. Approximately 46,000 and 60,000 shares of restricted stock were vested and forfeited, respectively, during the year ended December 31, 2017 with 74,000 and 20,000 vested and forfeited, respectively, during the eleven months ended November 30, 2018 with 0 pending vesting at November 30, 2018.The Company incurred stock-based compensation expense of approximately $23,000 and $215,000 related to these shares of restricted stock during the eleven months ended November 30, 2018 and the year ended December 31, 2017, respectively.

During the year ended December 31, 2017, the Company granted 51,132 shares of restricted stock to its directors under the Omnibus Plan, which are subject to a 1 year vesting period that commenced on the date of grant. The fair value of the unvested restricted stock was valued at approximately $17,000 based on the closing price of the Company’s shares on the date prior to the grant date. The Company incurred stock-based compensation expense related to these 51,132 shares of restricted stock of approximately $17,000 during year ended December 31, 2017. Approximately 42,610 shares of restricted stock vested during the year ended December 31, 2017 with 8,522 vested during the eleven months ended November 30, 2018.

During the year ended December 31, 2017, the Company granted 2,000,000 shares of restricted stock units to certain employees under the Omnibus Plan, which are subject to a 2 year vesting period that commenced on the date of grant. The fair value of the unvested restricted stock was valued at approximately $745,000 based on the closing price of the Company's shares on the day prior to the grant date. Approximately 1,000,000 and 750,000 shares of restricted stock vested during the twelve months ended November 30, 2019 and eleven months ended November 30, 2018, respectively, with 250,000 unvested at November 30, 2019.The Company incurred stock-based compensation expense of approximately $350,000, $386,000 and

F-29

$51,000 related to these 2,000,000 shares of restricted stock during the twelve months ended November 30, 2019, the eleven months ended November 30, 2018 and the year ended December 31, 2017, respectively.

During the eleven months ended November 30, 2018, the Company granted 150,000 shares of restricted stock units to certain employees under the Omnibus Plan, with 100,000 shares and 50,000 subject to a two and three year vesting period, respectively, that commenced on the date of grant. The fair value of the unvested restricted stock was valued at approximately $58,000 based on the closing price of the Company's shares on the day prior to the grant date. Approximately 66,667 shares of restricted stock vested during the twelve months ended November 30, 2019, with 83,333 unvested at November 30, 2019.The Company incurred stock-based compensation expense of approximately $25,000 and $17,000 related to these 150,000 shares of restricted stock during the twelve months ended November 30, 2019 and the eleven months ended November 30, 2018, respectively.

During the twelve months ended November 30, 2018, the Company established an ad hoc Capital Structure Committee, (the "Committee") consisting of members of the board of directors, to undertake a review of the Company's capital structure. As compensation to the sole non-employee member of the Committee, the Company granted 400,000 restricted stock units under the Omnibus Plan, which will vest on the later of (i) September 30, 2018 and (ii) termination of the director's service on the Committee. The fair value of the restricted stock was valued at approximately $128,000 based on the closing price of the Company’s shares on the date prior to the grant date. The Company incurred stock-based compensation expense related to these 400,000 restricted stock units of approximately $128,000 during the eleven months ended November 30, 2018. The 400,000 restricted stock units vested during the eleven months November 30, 2018.

The following table presents the activity of the Company’s unvested restricted stock for the twelve months ended November 30, 2019:



Common Unvested Shares	Number of Shares
Outstanding December1, 2018	1,400,000
Granted	—
Vested	(1,066,667	)
Forfeited	—
Outstanding November 30, 2019	333,333

The aggregate intrinsic value of the awards of 83,333 and 250,000 is $18,000 and $53,000, respectively, and the remaining weighted average life of these awards is 0.62 years and 0.06 years as of November 30, 2019. As of November 30, 2019, a total of $28,000 in stock based compensation remained unrecognized.

Stock Appreciation Rights (SARs)

During the eleven months November 30, 2018, the Company issued 100,000 SARs to the sole non-employee member of the Committee, which SARs will expire 10 years after the date they were granted. The SARs will vest on the later of (i) September 30, 2018 and (ii) termination of the director's service on the Committee and have a fair value of $8,000 on the grant date. Each SAR entitles the holder to receive, upon exercise, an amount equal to the excess of (a) the fair market value per share of stock on the exercise date, over (b) the exercise price, which is $1.00, being not less than the fair market value per share of stock on the grant date. Upon exercise of the SARs, the stock appreciation amount shall be paid, as determined solely at the discretion of the Company, in (a) whole shares, (b) cash, or (c) a combination of both cash and shares. The Company incurred stock-based compensation expense of $8,000 related to these 100,000 SARs during the eleven months November 30, 2018. The 100,000 SARs units vested during eleven months November 30, 2018 and remain unexercised at November 30, 2019.

NOTE 8 - DISCONTINUED OPERATIONS

On October 25, 2013, the Company sold substantially all of the operating assets comprising its structured settlement business to Majestic Opco LLC pursuant to an Asset Purchase Agreement. No structured settlement receivables were sold and no on-balance sheet liabilities were transferred in connection with the sale. On August 18, 2015, the Company sold its remaining structured settlement receivables asset for $920,000 to the buyer of its operating assets.

F-30

As a result of the sale of its structured settlements business, the Company reclassified its structured settlement business operating results as discontinued operations in the accompanying Consolidated Statements of Operations for all periods presented.

Operating results related to the Company’s discontinued structured settlement business are as follows:



	Twelve Months Ended November 30,			Eleven Months Ended November 30,			Twelve Months Ended December 31,
	2019			2018			2017
	(in thousands)
Change in fair value of investments in affiliates	$	(2,384	)	$	—		$	—
Other income	—			17			33
	(2,384		)	17			33
Total expenses	(21		)	46			304
Income (loss) before income taxes	(2,363		)	(29		)	(271		)
(Benefit) provision for income taxes	—			—			—
Income (loss) from discontinued operations, net of income taxes	$	(2,363	)	$	(29	)	$	(271	)

During twelve months ended November 30, 2019, the discounted operations incurred change in fair value loss on its investment in affiliates of approximately $2.4 million. This investment was held by our structured settlement subsidiary whose primary activities were discontinued in 2013 with the sale of the structured settlement assets and the final investment of $2.4 million was written off in the fourth quarter of 2019 as part of the restructuring transactions of the Company.

NOTE 9 - LIFE SETTLEMENTS (LIFE INSURANCE POLICIES)

The Company accounts for policies it acquires using the fair value method in accordance with ASC 325-30-50 Investments—Other—Investment in Insurance Contracts. Under the fair value method, the Company recognizes the initial investment at the purchase price. For policies that were relinquished in satisfaction of premium finance loans at maturity, the initial investment is the loan carrying value. For policies purchased in the secondary or tertiary markets, the initial investment is the amount of cash outlay at the time of purchase. At each reporting period, the Company re-measures the investment at fair value in its entirety and recognizes changes in the Statements of Operations in the periods in which the changes occur.

At November 30, 2019, Emergent Capital, through its subsidiaries, owns two life insurance policies, also referred to as life settlements, with a fair value of $1.3 million and an aggregate death benefit of approximately $12.0 million. Additionally, through a subsidiary, the Company owns a 27.5% equity investment, having an estimated fair value of approximately $137.8 million 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 through change in fair value and death benefits from these two polices and change in fair value and distributions from its equity investment in White Eagle.

Subsequent Events

F-31

See Note 22, "Subsequent Events," of the accompanying consolidated financial statements for further information.

As of November 30, 2018, the Company through its consolidated and deconsolidated subsidiary companies owned 588 policies, with an aggregate estimated fair value of life settlements of $506.4 million. See Note 3, "Deconsolidation of Subsidiaries" and Note 4, "Condensed and Consolidated Financial Statements for Entities in Bankruptcy," to the accompanying consolidated financial statements for further information.

The following describes the Company’s life settlements as of November 30, 2019 (dollars in thousands):

Policies Pledged Under White Eagle Revolving Credit Facility and Deconsolidated

On August 16, 2019, the Company and its subsidiaries entered into a Subscription Agreement where White Eagle sold 72.5% of its limited partnership interests for a purchase price of approximately $366.2 million and recognized a gain on disposal of approximately $21.3 million. The proceeds were used to satisfy all outstanding indebtedness under the White Eagle Revolving Credit Facility thus terminating the credit facility and releasing the related pledge to the lender of the life settlements owned by White Eagle. The Company now owns a 27.5% equity investment in White Eagle.

As of November 30, 2019, there were no policies pledged under the White Eagle Credit Facility due to its termination.

The weighted average life expectancy calculated based on death benefit of insureds in the policies owned by the White Eagle at November 30, 2018 was 8.9 years.



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

*Based on remaining life expectancy at November 30, 2018, as derived from reports of third party life expectancy providers, and does not indicate the timing of expected death benefits. See "Life Settlements," in Note 15, "Fair Value Measurements," of the accompanying consolidated financial statements.

F-32

During the twelve months ended November 30, 2019 and the eleven months ended November 30, 2018, the Company experienced maturities of 18 and 20 life insurance policies with face amounts totaling $100.4 million and $93.4 million, respectively, resulting in a net gain of approximately $70.3 million and $53.3 million, respectively.

The below is an analysis of policy maturities for the twelve months ended November 30, 2019 and the year ended November 30, 2018.



	Twelve Months Ended November 30,		Eleven Months Ended November 30,
	2019		2018
Face value	$	100,374	$	93,435

Cost*	27,723		31,065
Accumulated Change in Fair Value*	2,351		9,105
Carrying Value	30,074		40,170

Gain on Maturities	$	70,300	$	53,265

Number of Policies	18		20

* Cost includes purchase price and premiums paid into the policy to date of maturity. Accumulated change in fair value is impacted by changes in discount rate, updated life expectancy estimates on the life insurance policy and cost of insurance increase.

Policies Not Pledged

The weighted average life expectancy calculated based on death benefit of insureds in the policies owned by the Company at November 30, 2019 was 11.4 years.



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	1,297		12,000
Total	2	$	1,297	$	12,000

The weighted average life expectancy calculated based on death benefit of insureds in the policies owned by the Company at November 30, 2018 was 12.2 years. The following table describes the Company’s life settlements as of November 30, 2018 (dollars in thousands).

F-33



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	1,172		12,000
Total	2	$	1,172	$	12,000

NOTE 10 - INVESTMENT IN LIMITED PARTNERSHIP

Subscription Agreement

On August 16, 2019 (the "Effective Date"), the Company entered into a subscription agreement (the "Subscription Agreement") with Lamington ("Class B Limited Partner"), White Eagle, WEGP ("Withdrawing General Partner"), and Palomino JV, L.P. ("Palomino" or "Class A Limited Partner"), in connection with the commitment letter signed on June 22, 2019 with Jade Mountain Partners, LLC ("Jade Mountain" ), 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 (the "Manager") 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 and certain funds then held in accounts of White Eagle were used to satisfy in full (i) the White Eagle Revolving Credit Facility and (ii) the DIP Financing, 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.

Amended and Restated Limited Partnership Agreement of White Eagle

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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 utilized to repay 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 WE Investment, Lamington Road Bermuda, LTD resigned as manager of the portfolio and was replaced by an affiliate of Jade Mountain.

On August 16, 2019, White Eagle, Palomino JV GP Limited, ("the General Partner") and the Manager entered into the Management Agreement, setting forth the terms and conditions pursuant to which the General Partner has delegated certain of its management rights and obligations under the A&R LPA to the Manager.

Advance Facility. The facility under which the Class A Limited Partner or its Affiliates from time to time advance to the Class B Limited Partner (or, as a matter of convenience only, provides the proceeds of any such advance directly to the Partnership on behalf of the Class B Limited Partner, provided that, for the avoidance of doubt, any such advance distributed directly to the Partnership shall not be deemed to be an incurrence of an obligation of the Partnership for the repayment thereof) the portion of the premium/expense reserve account owed by the Class B Limited Partner under the Agreement. Essentially, this is the aggregate amount owed by the Class B Limited Partner to the Class A Limited Partner thereunder as a result of such advances.

Class A Minimum Return Cumulative Amount. An amount equal to 11% per annum, compounded quarterly and accruing from the Effective Date, on the sum of (i) 100% of the initial contribution by the Class A Limited Partner on its own behalf to the premium/expense reserve account, accruing from the Effective Date until repaid (as reduced by any repayment thereof) (but for the avoidance of doubt excluding any advances made by the Class A Limited Partner under the Advance Facility), (ii) 100% of the amounts funded into the premium/expense reserve account by the Class A Limited Partner on its own behalf after the Effective Date (as reduced by any repayment thereof), accruing from the date of funding until repaid (but for the avoidance of doubt excluding any advances made by the Class A Limited Partner under the Advance Facility), and (iii) the Purchase Price of $374.2 million (as reduced by any portion thereof repaid by the Class B Interest Monthly Distribution, as defined below, (v) that reflects amortization of principal, all sale proceeds received by the Class A Limited Partner and any reductions thereof as contemplated by the permitted disposition of policies, (plus (x) the amount necessary to reduce the principal balance to the targeted principal balance hereto for such Distribution Date, plus (y) later contributions by the Class A Limited Partner (excluding any advances made by the Class A Limited Partner under the Advance Facility but, for the avoidance of doubt, including amounts funded into the premium/expense reserve account by the Class A Limited Partner on its own behalf), plus (z) the Class D Return.

Class A True Up Payment. As of the applicable Distribution Date, (i) the excess (if positive) of (x) 72.5% of the total return distributions over (y) the sum of cumulative amounts actually received by the Class A Limited Partner prior to such Distribution Date on account of clauses (w), (x) and (y) of the Class A Minimum Return Cumulative Amount, any Class A true up payments and amounts paid to the Class A Limited Partner pursuant plus (ii) the amount necessary such that the Class A Limited Partner shall have received 72.5% of total return distributions after giving effect to the amounts to be paid to the Class A Limited Partner on such Distribution Date.

Class B True Up Payment. As of the applicable Distribution Date, (i) the excess (if positive) of (x) 27.5% of the Total Return Distributions over (y) the sum of cumulative amounts actually received by the Class B Limited Partners prior to such Distribution Date on account of the Minimum Class B Interest Monthly Distributions, the Class B True Up Payments and amounts paid to the Class B Limited Partners pursuant to Section 3.2(b)(v) (plus the cumulative amounts that were paid to the Class A Limited Partner in repayment of the Advance Facility, to the Class D Limited Partner on account of the Class D Return, or to the Purchaser Indemnified Parties to satisfy (in whole or in part) the indemnity obligations of Parent, Lamington Road or the Class B Limited Partner) plus (ii) the amount necessary such that the Class B Limited Partners shall have received 27.5% of Total Return Distributions after giving effect to the amounts to be paid to the Class B Limited Partner on account of the Minimum Class B Interest Monthly Distributions and amounts paid to the Class B Limited Partners on such Distribution Date in the priority of payments after payment of any Class A True Up Payments and Class B True Up Payments (plus the cumulative amounts that would have been distributed to the Class B Limited Partners but that were paid to the Class A Limited

F-35

Partner in repayment of the Advance Facility, to the Class D Limited Partner on account of the Class D Return, or to the Purchaser Indemnified Parties to satisfy (in whole or in part) the indemnity obligations of Parent, Lamington Road or the Class B Limited Partner).

At November 30, 2019 there was no Class B true up payment outstanding.

Class D Return. The aggregate repayment amount of approximately $8.0 million ( as described above) owed by the Class B Limited Partner to the Class D Limited Partner, payable in accordance with the terms herein, which shall equal the greater of (x) 125% of the Class D Payment Amount (which is $10.0 million), and (y) the Class D Payment Amount plus the total amount of unpaid interest accruing on the Class D Payment Amount at a rate equal to 11% per annum compounded quarterly from the Effective Date through the date on which the Class D payment amount and all accrued and unpaid interest is repaid in full.

At November 30, 2019, accrued and unpaid interest on the Class D Return was approximately $259,000 with outstanding principal of $8.0 million. The amount is to be repaid through the waterfall distribution as stated above. There was no payment made during the twelve months ended November 30, 2019.

Distribution Date. The 5th Business Day of each month.

Minimum Class B Interest Monthly Distribution. The monthly amount equal to (i) for each month commencing prior to the third anniversary of the Effective Date, the greater of $667,000 and 1/12th of 1.50% of the Net Asset Value as determined by the most recent valuation report obtained on or prior to such Distribution Date and (ii) for each month commencing on or after the third anniversary of the Effective Date and prior to the tenth anniversary of the Effective Date, the greater of $333,000 and 1/12th of 0.75% of the net asset value as determined by the most recent valuation report obtained on or prior to such Distribution Date.

During the twelve months ended November 30, 2019, approximately $1.7 million was received by the Company for the minimum Class B interest monthly distribution. This amount is included in change in fair value of investment in limited partnership, net of distributions on the consolidated statements of operations.

Expense. On August 16, 2019, the Class A Limited Partner contributed $21.8 million to the premium/expense reserve account in satisfaction of its obligations to fund the premium/expense reserve account as of the Effective Date, and (ii) advanced under the Advance Facility $8.3 million by deposit into the premium/expense reserve account on behalf of the Class B Limited Partner, in satisfaction of the Class B Limited Partner’s obligations to fund the premium/reserve fund as of the Effective Date. This $8.3 million is to be repaid through the waterfall distribution from amounts to be distributed to the Company. Total initial premium/expense reserve was approximately $30.0 million on August 16, 2019. The Class A Limited Partner also contributed $1.8 million towards expenses on August 16, 2019.

At November 30, 2019, approximately $267,000 in accrued and unpaid interest was outstanding on the $8.3 million advanced on behalf of the Class B Limited Partner, the amount is to be repaid through the waterfall distribution as stated above. There was no payment during the twelve months ended November 30, 2019.

If at any time prior to a Distribution Date, the amount in the premium/expense reserve account is less than an amount sufficient to cover the next month of premiums and expenses, as set forth in the budget or as otherwise determined by the General Partner based upon advice of the Manager, the Class A Limited Partner will (i) contribute its percentage interest of 72.5%, and (ii) make advances under the Advance Facility of the Class B Limited Partner’s percentage interest of 27.5% , the aggregate amount of additional capital needed to increase the balance of the premium/expense reserve account to an amount sufficient to cover the next three months of premiums and expenses, as set forth in the budget.

All advances made by the Class A Limited Partner under the Advance Facility, whether prior to, on or after the Effective Date, shall accrue interest at the rate of 11% per annum, compounded quarterly, until repaid, and all such amounts (including any accrued but unpaid interest) shall be secured by the Class B Partnership Units pursuant to the Pledge Agreement. After the Effective Date, the General Partner will use commercially reasonable efforts to obtain financing proposals for premiums and expenses on terms more favorable to the Class B Limited Partner than the Advance Facility, if and to the extent available, and in the event such financing is obtained, the Class A Limited Partner shall no longer have any obligation to fund advances under the Advance Facility.

Funds in the premium/expense reserve account shall be used or otherwise distributed in the following order of priority:

F-36



Premium/Expense Reserve Account	August 16, 2019 to November 30, 2019
	Amount		Use of Proceeds
First	$	30,173	Premiums, Expenses and Manager Fees
Second	1,667		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
	$	31,840

During the twelve months ended November 30, 2019, approximately $31.8 million was distributed from the premium/expense reserve account, of this amount, approximately $28.3 million was utilized to pay premiums, approximately $1.9 million in facility related expenses and approximately $1.7 million was utilized for distribution to the Company to satisfy the requirements of the Class B monthly distribution.

During the twelve months ended November 30, 2019, the premium/expense reserve account received approximately $36.0 million in distributions inclusive of $30.0 million funded on the Transaction Date and $6.0 million from the collection account through maturity proceeds collected. The account balance was approximately $4.2 million at November 30, 2019. Approximately $13.0 million was in the collection account pending distributions to the premium/expense account at November 30, 2019. The below is a reconciliation of the premium/expense reserve account for the twelve months ended November 30, 2019.



	August 16, 2019 to November 30, 2019
Distributions received
Class A and Class B holders	$	30,000
Collections account	6,035
Total distribution received	$	36,035

Less Payments:
Premiums and expenses	$	30,173
Class B monthly distribution	1,667
Total payments	$	31,840

Balance at November 30, 2019	$	4,195

Approximately $667,000 was due for distribution to the Company for the month of November 30, 2019, the amount was received subsequent to the year end.

Distribution. The General Partner has established a separate bank account on behalf of, and in the name of, the Partnership to hold, and shall direct all death benefits and other cash received by the Partnership (other than capital contributions, proceeds of the Advance Facility, and death benefits from matured policies which shall be distributed in accordance with Section 2.02(b) of the Subscription Agreement) into such account (the "Collections Account").

On each Distribution Date, funds on deposit in the Collections Account shall be distributed by the Paying Agent ("Wilmington Trust, N.A") pursuant to the Waterfall Notice in the following order of priority:

F-37



Collection Account	August 16, 2019 to November 30, 2019
Priority	Amount		Use of Proceeds
First	$	6,035	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
	$	6,035

*To pay the Class A Limited Partner the amount necessary such that the Class A Limited Partner shall have received the Class A Minimum Return Cumulative Amount (applied first which is11%), second to the amounts necessary to reduce the principal balance from $406.0 million on the Effective Date to April 2039 when it is expected to be paid in full (the A&R LPA stipulate the expected monthly reduction in target principal commencing in April 2021), third to later contributions by the Class A Limited Partner, excluding Advance Facility but includes funded into premium/expense account on its own behalf and fourth the Class D Return, in each case of the definition of Class A Minimum Return Cumulative Amount as of the last day of the month immediately prior to such Distribution Date.

The below is a reconciliation of funds received in and distributed from the collection account for the twelve months ended November 30, 2019.



	August 16, 2019 to November 30, 2019

Maturity proceeds received - face	$	19,000
Proceeds received - other	42
Total receipts	$	19,042

Less: Distribution to premium/expense account	6,035
Balance at November 30, 2019	$	13,007

During the twelve months ended November 30, 2019, the portfolio experienced maturities of 7 policies with face of approximately $32.7 million, approximately $19.0 million was collected at November 30, 2019.

The below is a reconciliation of receivable for maturity of life settlement held by the limited partnership for the twelve months ended November 30, 2019.



	August 16, 2019 to November 30, 2019

Maturities	$	32,726
Proceeds received	19,000
Receivable at November 30, 2019	$	13,726

F-38

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 November 30, 2019 resulting in a value of approximately $137.8 million.

At November 30, 2019, there were 561 policies in the White Eagle portfolio with death benefits of approximately $2.6 billion and weighted average life expectancy calculated based on death benefit of the insureds in the policies was 7.1 years.



Remaining Life Expectancy (In Years)*	Number of Life Settlement Contracts	Face Value
0-1	8	$	30,795
1-2	25	94,018
2-3	35	139,464
3-4	59	272,895
4-5	50	257,050
Thereafter	384	1,846,886
Total	561	$	2,641,108

*Based on remaining life expectancy at November 30, 2019, as derived from reports of third party life expectancy providers, and does not indicate the timing of expected death benefits. See "Life Settlements," in Note 15, "Fair Value Measurements," of the accompanying consolidated financial statements.

Estimated premiums to be paid for each of the five succeeding fiscal years and thereafter to keep the life insurance policies in force as of November 30, 2019, are as follows (in thousands):



Year	Expected Premiums
2020	101,737
2021	106,765
2022	102,721
2023	97,127
2024	91,852
Thereafter	614,608
	$	1,114,810

The amount of $1.1 billion noted above represents the estimated total future premium payments required to keep the life insurance policies in force during the life expectancies of all the underlying insured lives and does not give effect to projected receipt of death benefits. The estimated total future premium payments could increase or decrease significantly to the extent that insurance carriers increase the cost of insurance on their issued policies or that actual mortalities of insureds differs from the estimated life expectancies.

See Note 15, "Fair Value Measurement", to the accompanying consolidated financial statements for further information.

NOTE 11 - WHITE EAGLE REVOLVING CREDIT FACILITY

F-39

Effective April 29, 2013, White Eagle entered into a 15-year revolving credit agreement with LNV Corporation, as initial lender, Imperial Finance & Trading, LLC, as servicer and portfolio manager and CLMG Corp., as administrative agent. Proceeds from the initial advance under the facility were used, in part, to retire a bridge facility and to fund a payment to the lender protection insurance provider to release subrogation rights in certain of the policies pledged as collateral for the White Eagle Revolving Credit Facility. On May 16, 2014, White Eagle Asset Portfolio, LLC converted from a Delaware limited liability company to White Eagle Asset Portfolio, LP, a Delaware limited partnership (the “Conversion”) and all of its ownership interests were transferred to an indirect, wholly-owned Irish subsidiary of the Company. In connection with the Conversion, the White Eagle Revolving Credit Facility was amended and restated among White Eagle, as borrower, Imperial Finance and Trading, LLC, as the initial servicer, the initial portfolio manager and guarantor, Lamington Road Bermuda Ltd., as portfolio manager, LNV Corporation, as initial lender, the other financial institutions party thereto as lenders, and CLMG Corp., as administrative agent for the lenders. The White Eagle Revolving Credit Facility was amended on November 9, 2015. As amended, the White Eagle Revolving Credit Facility may provide earlier participation in the portfolio cash flows if certain loan to value ("LTV") ratios are achieved. Additionally, the maximum facility limit was reduced from $300.0 million to $250.0 million, and the interest rate under the facility was increased by 50 basis points.

On December 29, 2016, White Eagle entered into a Second Amendment to the Amended and Restated Loan and Security Agreement ("White Eagle Second Amendment") and on January 31, 2017, as required by the terms of the White Eagle Amendment, White Eagle executed the Second Amended and Restated Loan and Security Agreement, dated January 31, 2017, which consolidated into a single document the amendments evidenced by the White Eagle Amendment and all previous amendments.

As amended, the White Eagle Revolving Credit Facility adjusted the loan-value ("LTV") ratios which directed cash flow participation and became subjected to achieving certain financial metrics, as more fully described below under "Amortization & Distributions." Pursuant to the White Eagle Second Amendment, 190 life settlement policies purchased from wholly owned subsidiaries of the Company were pledged as additional collateral under the facility for an additional policy advance of approximately $71.1 million. The maximum facility limit was increased to $370.0 million and the term of the facility was extended to December 31, 2031. Additional loan terms and amendment changes are more fully described in the sections that follow.

On October 4, 2017, White Eagle entered into an amendment to the Second Amended and Restated Loan and Security Agreement. The amendment changed the provisions over how participation of the proceeds from the maturity of the policies pledged as collateral under the White Eagle Revolving Credit Facility are distributed pursuant to a waterfall. The amendment included an exclusion from the cash interest coverage ratio of at least 2.0:1 for the period of July 1, 2017 through July 28, 2017. As a result of the amendment, the Company was able to participate in the waterfall distribution scheduled during October 2017.

General & Security. The White Eagle Revolving Credit Facility provides for an asset-based revolving credit facility backed by White Eagle’s portfolio of life insurance policies with an aggregate lender commitment of up to $370.0 million, subject to borrowing base availability.

Borrowing Base. Borrowing availability under the White Eagle Revolving Credit Facility is subject to a borrowing base, which at any time is equal to the lesser of (A) the sum of all of the following amounts that have been funded or are to be funded through the next distribution date: (i) the initial advance and all additional advances to acquire additional pledged policies that are not for ongoing maintenance advances, plus (ii) 100% of the sum of the ongoing maintenance costs, plus (iii) 100% of fees and expense deposits and other fees and expenses funded and to be funded as approved by the required lenders, less (iv) any required payments of principal and interest previously distributed and to be distributed through the next distribution date; (B) 75% of the valuation of the policies pledged as collateral as determined by the lenders; (C) 50% of the aggregate face amount of the policies pledged as collateral (excluding certain specified life insurance policies); and (D) the then applicable facility limit.

Amortization & Distributions. Proceeds from the maturity of the policies pledged as collateral under the White Eagle Revolving Credit Facility are distributed pursuant to a waterfall. After distributions for premium payments, fees to service providers and payments of interest, a percentage of the collections from policy proceeds are to be paid to the Company, which will vary depending on the then LTV ratio as illustrated below where the valuation is determined by the lenders:

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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%

Provided that (i) if (a) the Company failed to maintain a cash interest coverage ratio of at least 2.0:1 at any time during the immediately preceding calendar quarter or (b) the Company fails to take steps to improve its solvency in a manner acceptable to the required lenders (as determined in their sole and absolute discretion), then the cash flow sweep percentage to the lenders shall equal one-hundred percent (100%) and (ii) if such distribution date occurs on or after December 29, 2025, then the cash flow sweep percentage shall equal one-hundred percent (100%).

The cash interest coverage ratio is the ratio of (i) consolidated cash and cash equivalents maintained by the Company to (ii) the aggregate interest amounts that will be due and payable in cash on (x) the $47.6 million 8.5% Senior Secured Notes due July 15, 2021 (and any notes issued by the Company or any of its Affiliates in connection with refinancing, replacing, substituting or any similar action with respect to any such notes), the $75.8 million 5.0% Convertible Notes due February 15, 2023 (and any notes issued by the Company or any of its Affiliates in connection with refinancing, replacing, substituting or any similar action with respect to any such notes), and the $1.2 million 8.50% Convertible Notes due February 15, 2019 which was fully repaid during the year ended November 30, 2019 (and any notes issued by the Company or any of its Affiliates in connection with refinancing, replacing, substituting or any similar action with respect to any such notes) and (y) any additional indebtedness issued by the Company after December 29, 2016, in each case, during the twelve month period following such date of determination. See Note 12, 8.50% Senior Unsecured Convertible Notes, Note 13, 5.0% Senior Unsecured Convertible Notes and Note 14, 8.5% Senior Secured Notes to the accompanying consolidated financial statements for further information.

With respect to approximately 25% of the face amount of policies pledged as collateral under the White Eagle Revolving Credit Facility, White Eagle has agreed that if policy proceeds that are otherwise due are not paid by an insurance carrier, the foregoing distributions will be altered such that the lenders will receive any "catch-up" payments with respect to amounts that they would have received in the waterfall prior to distributions being made to White Eagle. During the continuance of events of default or unmatured events of default, the amounts from collections of policy proceeds that might otherwise be paid to White Eagle will instead be held in a designated account controlled by the lenders and may be applied to fund operating and third party expenses, interest and principal, "catch-up" payments or percentage payments that would go to the lenders as described above.

The below is a reconciliation of proceeds collected by the White Eagle Revolving Credit Facility and distributed from the collection account in accordance with the budget approved by the Bankruptcy court and the White Eagle Revolving Credit Facility termination agreement (in thousands):

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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**	$	—

*Includes refund of premiums and interest earned on maturity proceeds

** Collection account was closed on August 16, 2019 in connection with the termination of the White Eagle Revolving Credit Facility.

For the year ended November 30, 2018, $76.6 million, of proceeds received from the maturity of policies pledged under the White Eagle Revolving Credit Facility, were distributed through the waterfall in the following stages of priority (in thousands):



		Twelve Months Ended November 30, 2019		Eleven Months Ended November 30, 2018
Clause	Amount					Use of Proceeds
First:		$	—	$	334	Custodian and Securities Intermediary
Second:		—		—		White Eagle - Ongoing Maintenance Cost Reimbursable
Third:		—		—		Administrative Agent - Protective Advances
Fourth:		—		79		Administrative Agent - Administrative Agent Fee and Legal Expense Reimbursement
Fifth:		—		22,757		Administrative Agent - Accrued and Unpaid Interest
Sixth:		—		52,683		Administrative Agent - Required Amortization
Seventh:		—		—		Administrative Agent - Amortization Shortfall
Eighth:		—		340		Administrative Agent - Participation Interest
Ninth:		—		—		Reserved
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		$	—	$	76,609

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Use of Proceeds. Generally, ongoing advances may be made for paying premiums on the life insurance policies pledged as collateral and to pay the fees of service providers. Effective with the White Eagle Amendment on November 9, 2015, ongoing advances may no longer be used to pay interest, which will now be paid by White Eagle if there is not otherwise sufficient amounts available from policy proceeds to be distributed to pay interest expense pursuant to the waterfall described above in "Amortization and Distributions." Subsequent advances and the use of proceeds from those advances are at the discretion of the lenders. During the twelve months ended November 30, 2019 and the eleven months ended November 30, 2018, advances for premium payments and fees to service providers amounted to (in thousands):



	November 30,		November 30,
	2019		2018
Amount drawn for premium payments	$	4,221	$	84,922
Amount drawn in fees to service providers	—		2,478
Total amount drawn	$	4,221	$	87,400

Interest. Borrowings under the White Eagle Revolving Credit Facility bear interest at a rate equal to LIBOR or, if LIBOR is unavailable, the base rate, in each case plus an applicable margin of 4.50%, which was increased from 4.00% pursuant to the November 9, 2015 amendment, and subject to a rate floor component equal to the greater of LIBOR (or the applicable rate) and 1.5%. The base rate under the White Eagle Revolving Credit Facility equals the sum of (i) the weighted average of the interest rates on overnight federal funds transactions or, if unavailable, the average of three federal funds quotations received by the Agent plus 0.75% and (ii) 0.5%. Based on the loan agreement, the LIBOR portion of the interest rate will re-adjust annually, once the floor has exceeded 1.5%. The applicable rate will be dependent on the rate at the last business day of the preceding calendar year. On December 31, 2018, the LIBOR floor increased from 2.11% to 3.01%. The effective rate at August 15, 2019 and August 31, 2018 was 9.51% and 6.61%, respectively. In the event that an Event of Default has occurred and is continuing, the interest rate will be equal to the sum of (i) the greater of (a) (1) LIBOR or, if LIBOR is unavailable, (2) the Base Rate and (b) one and a half percent (1.5%) plus (ii) six and a half percent (6.5%).

Interest paid during the period is recorded in the Company’s consolidated financial statements. Accrued interest is reflected as a component of the estimated fair value of the White Eagle Revolving Credit Facility debt. The below table shows the composition of interest for the twelve months ended November 30, 2019 and the year ended November 30, 2018 (in thousands):



	November 30,		November 30,
	2019		2018
Interest paid through waterfall	$	—	$	22,757
Participation interest paid by waterfall	—		340
Interest paid from collection account	28,331		—
Total interest expense	$	28,331	$	23,097

Maturity. Effective with the White Eagle Second Amendment, the term of the White Eagle Revolving Credit Facility expires December 31, 2031, which is also the scheduled commitment termination date (though the lenders’ commitments to fund borrowings may terminate earlier in an event of default). The lenders’ interests in and rights to a portion of the proceeds of the policies does not terminate with the repayment of the principal borrowed and interest accrued thereon, the termination of the White Eagle Revolving Credit Facility or expiration of the lenders’ commitments.

Covenants/Events of Defaults. The White Eagle Revolving Credit Facility contains covenants and events of default that are customary for asset-based credit agreements of this type, but also include cross defaults under the servicing, account control, contribution and pledge agreements entered into in connection with the White Eagle Revolving Credit Facility (including in relation to breaches by third parties thereunder), certain changes in law, changes in control of or insolvency or bankruptcy of the Company and relevant subsidiary companies and performance of certain obligations by certain relevant subsidiary companies, White Eagle and third parties. Effective with the White Eagle Second Amendment, and as described above in "Amortization and Distributions", the White Eagle Revolving Credit Facility contains a financial covenant requiring

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White Eagle to maintain a cash interest coverage ratio of at least 1.75:1 commencing after June 30, 2019. Failure to maintain this ratio for 60 consecutive days after June 30, 2019 constitutes an event of default. There is no cash interest coverage ratio requirement that would result in an event of default prior to this date; however, any failure to maintain a cash interest coverage ratio of at least 2.0:1 does impact the cash flow sweep percentage for proceeds distributed through the waterfall.

Remedies. The White Eagle Revolving Credit Facility and ancillary transaction documents afford the lenders a high degree of discretion in their selection and implementation of remedies, including strict foreclosure, in relation to any event of default, including a high degree of discretion in determining whether to foreclose upon and liquidate all or any pledged policies, the interests in White Eagle, and the manner of any such liquidation. White Eagle has limited ability to cure events of default through the sale of policies or the procurement of replacement financing.

The Company elected to account for the debt under the White Eagle Revolving Credit Facility in accordance with ASC 820, Fair Value Measurements and Disclosures, which includes the 45% interest in policy proceeds to the lender, using the fair value method. The fair value of the debt is the amount the Company would have to pay to transfer the debt to a market participant in an orderly transaction. The Company 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, the Company’s estimates are not necessarily indicative of the amounts that the Company, 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 different assumptions and/or estimation methodologies could have a material effect on the estimated fair values.

Voluntary Petitions for Relief Under Chapter 11

On the Petition Date, Lamington and WEGP filed the November Chapter 11 Cases in the Bankruptcy Court. Lamington was the limited partner and owned 99.99%, and WEGP was the general partner and owned 0.01%, of White Eagle. In its capacity as general partner, WEGP managed the affairs of White Eagle. The Lamington and WEGP filings are referred to as the "November Chapter 11 Cases."

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 of 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. The effective period under the Standstill Agreement was extended several times, finally to December 13, 2018. On September 16, 2019, the Bankruptcy Court entered an order and final decree closing the White Eagle Chapter 11 Case. The Lamington and WEGP Chapter 11 Cases were dismissed on November 25, 2019.

On December 13, 2018, White Eagle filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court. The Chapter 11 case is being administered under case number 18-12808 (the "White Eagle Chapter 11 Case" and, together with the November Chapter 11 Cases, the "Chapter 11 Cases").

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 relating to 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 White Eagle Chapter 11 Case by holders of all of the outstanding principal amount of the 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 Company’s Amended and Restated Senior Secured Indenture or the New Convertible Note Indenture.

The commencement of the White Eagle Chapter 11 Case, together with the related 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

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Eagle to secure its obligations under the White Eagle Revolving Credit Facility. Any efforts by LNV to enforce repayment by White Eagle and/or 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. On September 16, 2019, the Bankruptcy Court entered an order and final decree closing the White Eagle Chapter 11 Case.

On September 16, 2019, the Bankruptcy Court entered an order and final decree closing the White Eagle Chapter 11 Case. The Lamington and WEGP Chapter 11 Cases were dismissed on November 25, 2019.

Deconsolidation and Subsequent Measurement of the Deconsolidated Entities

Lamington and its subsidiaries' (White Eagle, WEGP and Lamington Bermuda) financial results were excluded from the Company’s consolidated results for the period from November 14, 2018, the Petition Date, to August 16, 2019, the day the date the White Eagle Revolving Credit Facility was terminated. ASC 810, Consolidation require that an entity whose financial statements were previously consolidated with those of its parent that files for protection under the U.S. Bankruptcy Code, whether solvent or insolvent, generally must be prospectively deconsolidated from the parent and presented as an equity investment (deconsolidation applies to Lamington and all subsidiaries owned, directly or indirectly, by Lamington, including WEGP, White Eagle and Lamington Bermuda which collectively are referred to herein as the ("Deconsolidated Entities" or the "Debtors"). Therefore, our 2019 results are not comparable with our 2018 results. 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 each reporting period. 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. See Note 2, "Summary of Significant Accounting Policies - Reorganization and Consolidation" to the accompanying consolidated financial statements.

Beal Litigation

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 previously filed 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 White Eagle Revolving 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.

In connection with the White Eagle Chapter 11 Case, on January 15, 2019, the Court authorized the Debtors to use the proceeds of pre-petition cash collateral for a period of twenty (20) weeks (the "Cash Collateral'), which allowance was extended in May 2019 for another nine (9) weeks. The Cash Collateral may be used solely for the purposes permitted under the budget approved by the Court, including (i) to provide working capital needs of the Debtors and general corporate purposes of the Debtors, (ii) to make the payments or fund amounts otherwise permitted in the final order that authorized such uses and such budget, (iii) to fund amounts necessary to pay certain fees; and (iv) to fund amounts necessary to pay certain professional fees in accordance with such Budget.

Global Settlement Agreement in Principle in Bankruptcies

On May 7, 2019, the Proposed Settlement, 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 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

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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.

Pursuant to the Proposed Settlement, among other things:

•


•	If White Eagle satisfies such obligations after September 17, 2019 and by December 30, 2019, the amount due on the outstanding principal would increase to 104%;

•


•	If the portfolio is sold in whole or in part, LNV shall only have the right to step in to bid for such sale if, and to the extent, the total amounts generated through the sale thereof do not fully satisfy the payoff amount.


•	If the sale of any portion of the Collateral has not closed or the proceeds of such sale(s) have not been received by CLMG by December 30, 2019, (i) if the Payoff Amount has not then been paid in cash in full, such Collateral shall be transferred on or before Noon Eastern on December 31, 2019 to CLMG (or its designee) in full satisfaction of the remaining unpaid portion of the amounts due to LNV.

Plan of Reorganization

On June 5, 2019, the Bankruptcy Court approved the Settlement Agreement memorializing the Proposed Settlement and the DIP Financing. The Plan of Reorganization for the Chapter 11 Cases, which implements the Settlement Agreement and the DIP Financing, was confirmed by the Bankruptcy Court on June 19, 2019.

On July 18, 2019, the Company entered into the Commitment Letter with Lamington, White Eagle and Jade Mountain in connection with the Plan of Reorganization. The Commitment Letter provided for a transaction in which Jade Mountain and/or certain of its affiliates and/or certain investors would acquire 72.5% of the equity interests of White Eagle in exchange for $384.3 million as may be adjusted in accordance with the final documentation. The Commitment Letter and its terms and the transactions contemplated thereby were approved by the Bankruptcy Court on July 22, 2019.

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 for a purchase price of 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 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 with a value of approximately $138.9 million on the closing date.

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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.

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 which is included in the income statement as loss on extinguishment of debt and lender-allowed claims of $5.8 million.

NOTE 12- 8.50% SENIOR UNSECURED CONVERTIBLE NOTES

In February 2014, the Company issued $70.7 million in an aggregate principal amount of 8.50% senior unsecured convertible notes due 2019 (the "Convertible Notes" or "8.5% Convertible Notes"). The Convertible Notes were issued pursuant to an indenture dated February 21, 2014, between the Company and U.S. Bank National Association, as trustee (the "Convertible Note Indenture").

The Convertible Notes are general senior unsecured obligations and rank equally in right of payment with all of the Company's other existing and future senior unsecured indebtedness. The Convertible Notes are effectively subordinate to all of the Company's secured indebtedness to the extent of the value of the assets collateralizing such indebtedness. The Convertible Notes are not guaranteed by the Company's subsidiaries.

The maturity date of the Convertible Notes is February 15, 2019. The Convertible Notes accrue interest at the rate of 8.50% per annum on the principal amount of the Convertible Notes, payable semi-annually in arrears on August 15 and February 15 of each year.

The Convertible Notes are convertible into shares of common stock at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date. Initially, the Convertible Notes were convertible into shares of common stock at a conversion rate of 147.9290 shares of common stock per $1,000 principal amount of Convertible Notes (equivalent to a conversion price of $6.76 per share of common stock). In the second quarter of 2015, the conversion rate was adjusted to 151.7912 shares of common stock per $1,000 principal amount of Convertible Notes (equivalent to a conversion price of $6.59 per share of common stock) in connection with an anti-dilution adjustment triggered by a rights offering that resulted in the issuance of 6,688,433 shares of the Company’s common stock.

On and after February 15, 2017 and prior to the maturity date, the Company may redeem for cash all, but not less than all, of the Convertible Notes if the last reported sale price of the Company’s common stock equals or exceeds 130% of the applicable conversion price for at least 20 trading days during the 30 consecutive trading day period ending on the trading day immediately prior to the date the Company delivers notice of the redemption. The redemption price will be equal to 100% of the principal amount of the Convertible Notes, plus any accrued and unpaid interest to, but excluding, the redemption date. In addition, a make-whole fundamental change occurs prior to the maturity date, and a holder elects to convert its Convertible Notes in connection therewith, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares of common stock for holders who convert their notes prior to the redemption date.

The Company determined that an embedded conversion option existed in the Convertible Notes that was required to be separately accounted for as a derivative under ASC 815 which required the Company to bifurcate the embedded conversion option, record it as a liability at fair value and record a debt discount by an equal amount. Upon receipt of shareholder approval to issue shares of common stock upon conversion of the Convertible Notes in an amount that exceeded applicable New York Stock Exchange limits for issuances without shareholder approval, the Company reclassified the embedded conversion derivative liability to equity. The Convertible Notes are recorded at accreted value and will continue to be accreted up to the par value of the Convertible Notes at maturity.

On February 14, 2017, the Company solicited consents (the "Consent Solicitation") to issue additional 8.50% Convertible Notes (the "Additional Convertible Notes") in lieu of a cash payment of interest on February 15, 2017 (the "2017 Interest Payment Date") to holders of the Convertible Notes.

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On March 14, 2017, the Company issued Additional Convertible Notes for an aggregate principal amount of $3.5 million following the Company’s receipt of the requisite consents of the holders of approximately 98% of the aggregate principal amount of Convertible Notes (the "Consenting Holders"), pursuant to the Consent Solicitation, whereby each Consenting Holder agreed to accept Additional Convertible Notes in lieu of a cash payment of interest on the Convertible Notes due on the 2017 Interest Payment Date. All Additional Convertible Notes issued by the Company to Consenting Holders were issued under the Convertible Note Indenture and such Additional Convertible Notes have identical terms to the existing Convertible Notes. Interest on the Additional Convertible Notes will accrue from February 15, 2017.

On March 15, 2017 and May 12, 2017, the Company entered into a series of separate Master Transaction Agreements (the "Master Transaction Agreements") by and among the Company, PJC Investments, LLC, a Texas limited liability company ("PJC") and each such Consenting Convertible Note Holder that is a party to such Master Transaction Agreement regarding a series of integrated transactions with the intent to effect a recapitalization of the Company (the "Transaction") which included, among other transactions, a Convertible Note Exchange Offer and a New Convertible Note Indenture providing for the issuance of New Convertible Notes to be delivered in connection with the Transaction (each as defined in the Master Transaction Agreements).

As part of the Transaction, on April 18, 2017, the Company launched an exchange offer (the "Convertible Note Exchange Offer") to the existing holders of its outstanding Convertible Notes for 5.0% Senior Unsecured Convertible Notes due 2023 (the "New Convertible Notes" or "5% Convertible Notes"). At least 98% of the holders of the Convertible Notes were required to tender in the Convertible Note Exchange Offer as a condition to closing the Transaction.

On July 26, 2017, the Company’s offer to exchange its outstanding $74.2 million aggregate principal amount of Convertible Notes for its New Convertible Notes expired. Holders of at least 98% of the Convertible Notes tendered in the Convertible Note Exchange Offer. 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, which transactions included the consummation of the Convertible Note Exchange Offer. The amount exchanged included approximately $73.0 million of principal outstanding prior to the exchange and approximately $2.8 million of interest paid in kind at the exchange date. The outstanding principal amount of the Convertible Notes after the exchange was approximately $1.2 million.

In connection with the Transaction Closing, the Company entered into a supplemental indenture (the "Supplemental Convertible Note Indenture") to the Convertible Note Indenture governing the Convertible Notes. The purpose of the Supplemental Convertible Note Indenture was to eliminate substantially all of the restrictive covenants, eliminate certain events of default, eliminate the covenant restricting mergers and consolidations and modify certain provisions relating to defeasance contained in the Convertible Note Indenture and the Convertible Notes (collectively, the "Proposed Amendments") promptly after the receipt of the requisite consents for the Proposed Amendments.

The Company performed an assessment of the modification of the Convertible Notes under ASC 470, Debt, and determined the transaction is a troubled debt restructuring. The Company did not recognize any gain as a result of the restructuring, therefore, approximately $7.7 million was reclassified to the New Convertible Notes, including $6.7 million and $1.0 million related to debt discount and origination cost, respectively.

On February 20, 2019, the Company received written notice from U.S. Bank, National Association, the trustee under New Convertible Note Indenture, that the Company was in default (the "Event of Default") under the New Convertible Note Indenture for failure to pay the principal amount and accrued interest due upon maturity on February 15, 2019 of Convertible Notes due 2019 (the "Convertible Notes").

The Event of Default, which caused an automatic acceleration of the outstanding principal and accrued interest, had no practical effect on the Company, as such amounts were already due and payable. The Event of Default did not result in a cross-default under other debt agreements or arrangements of the Company.

On August 28, 2019, the Company paid off the outstanding principal and accrued interest on its Convertible Notes, consisting of $1.2 million in principal, $110,000 in accrued and unpaid interest and $38,000 in administrative fees and expenses. The Convertible Notes matured on February 15, 2019. Upon the payoff, the Convertible Notes were extinguished.

The Company recorded $93,000 of interest expense on the Convertible Notes, including $73,000, $18,000 and $3,000 from interest, amortizing debt discounts and originations costs, respectively, during the twelve months ended November 30, 2019.

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For the eleven months ended November 30, 2018, the Company recorded $169,000 of interest expense on the Convertible Notes, including $93,000, $66,000 and $10,000 from interest, amortizing debt discounts and origination costs, respectively.

NOTE 13— 5.0% SENIOR UNSECURED CONVERTIBLE NOTES

On July 26, 2017, the Company’s Convertible Note Exchange Offer expired. Holders of at least 98% of the Convertible Notes tendered in the Convertible Note Exchange Offer.

In connection with the Transaction Closing, the Company caused to be issued the New Convertible Notes in an aggregate amount of approximately $75.8 million pursuant to an Indenture (the "New Convertible Note Indenture") between the Company and U.S. Bank, National Association, as indenture trustee. The terms of the New Convertible Notes are governed by the New Convertible Note Indenture, which provide, among other things, that the New Convertible Notes are unsecured senior obligations of the Company and will mature on February 15, 2023. The New Convertible Notes bear interest at a rate of 5% per annum from the issue date, payable semi-annually on August 15 and February 15 of each year, beginning on August 15, 2017.

The Company may redeem, in whole but not in part, the New Convertible Notes at a redemption price of 100% of the principal amount of the New Convertible Notes to be redeemed, plus accrued and unpaid interest and additional interest, if any, if and only if the last reported sale price of the Common Stock equals or exceeds 120% of the conversion price for at least 15 trading days in any period of 30 consecutive trading days. The Company may, at its election, pay or deliver as the case may be, to all Holders of the New Convertible Notes, either (a) solely cash, (b) solely shares of Common Stock, or (c) a combination of cash and shares of Common Stock.

The provisions of the New Convertible Note Indenture include a make-whole provision to compensate the Company’s debt holders for the lost option time value and forgone interest payments upon the Company experiencing a Fundamental Change (as defined in the New Convertible Note Indenture). These Fundamental Changes revolve around change in beneficial ownership, the consummation of specified transactions which result in the conversion of common stock into other assets or the sale, transfer or lease of all or substantially all of the Company’s assets, a majority change in the composition of the Company’s Board of Directors, the Company’s stockholders approval of any plan for liquidation of dissolution of the Company, and the Common Stock ceasing to be listed or quoted on a Trading Market . The number of incremental additional shares to be issued as a result of a Fundamental Change is based on a table which calculates the adjustment based on the inputs of time and share value.

The New Convertible Note Indenture, among other things includes provisions such as the Company’s failure to timely file any document or report that is required to be filed with the SEC, as well as a registration statement covering the re-sale by holders of the New Convertible Notes not being declared effective by the SEC; the Company’s failure to cure such a default within 14 days after the occurrence will result in the Company being required to pay additional interest in cash.

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Additional interest on the New Convertible Notes will accrue with respect to the first 90-day period (or portion thereof) following the restricted transfer triggering date, which is 120 days after the last date on which any securities are originally issued under the New Convertible Note Indenture or a registration statement regarding the resale by the holders of the securities or holders of any shares of common stock issuable upon conversion. For each day that a restricted transfer default is continuing at a rate equal to 0.25% per annum of the principal amount of New Convertible Notes, which rate will increase by an additional 0.25% per annum of the principal amount of the New Convertible Notes for each subsequent 90- day period (or portion thereof) while a restricted transfer default is continuing until all restricted transfer defaults have been cured, up to a maximum of 0.5% of the principal amount of the securities. Following the cure of all restricted transfer defaults, the accrual of additional interest arising from restricted transfer defaults will cease.

The New Convertible Note Indenture states that the sole remedy for an event of default relating to the failure by the Company to comply with the provisions of the New Convertible Note Indenture requiring timely reporting by the Company and for any failure to comply with Section 314(a)(1) of the Trust Indenture Act shall, for the first 365 days after the occurrence of such an Event of Default, consist exclusively of the right to receive special interest on the New Convertible Notes at an annual rate equal to 0.5% of the principal amount of the New Convertible Notes.

Voluntary Petitions for Relief Under Chapter 11

On November 14, 2018, the November Chapter 11 Cases were filed, and on December 13, 2018, the White Eagle

Chapter 11 Case was filed. 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 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.

As of November 30, 2019, the outstanding principal of the New Convertible Notes is $75.8 million with a carrying value $71.0 million, net of unamortized debt discounts and origination costs of $4.2 million and $621,000, respectively. These are being amortized over the remaining life of the New Convertible Notes using the effective interest method.

During the twelve months ended November 30, 2019, the Company recorded $5.1 million of interest expense on the New Convertible Notes, including $3.8 million, $1.1 million and $165,000 from interest, amortization of debt discount and origination costs, respectively.

During the eleven months ended November 30, 2018, the Company recorded $4.6 million of interest expense on the New Convertible Notes, including $3.5 million, $947,000 and $140,000 from interest, amortization of debt discount and origination costs, respectively.

Subsequent Event

On December 11, 2019 the Company redeemed $8.0 million principal amount of the 5.0% Convertible Notes in exchange for cash consideration of $4.8 million inclusive of unpaid interest of approximately $123,000. The Company incurred a net gain on extinguishment of approximately $2.8 million after expense for derivative and origination cost write off of approximately $442,000 and $66,000, respectively. Upon such redemption, the Convertible Notes were surrendered and canceled.

NOTE 14 - 8.5% SENIOR SECURED NOTES

In connection with the Transaction Closing, the Company and the Senior Secured Note Trustee entered into an Amended and Restated Senior Secured Note Indenture (the "Amended and Restated Senior Secured Indenture") to amend and restate the Senior Secured Indenture between the Company and the Senior Secured Note Trustee following the Company’s receipt of requisite consents of the holders of the 15% Senior Secured Notes. Pursuant to the terms of the Amended and Restated Senior Secured Indenture, the Company caused the cancellation of all outstanding 15% Senior Secured Notes and the issuance of 8.5% Senior Secured Notes due 2021 (the "8.5% Senior Secured Notes") in an aggregate amount of $30.0 million. The Amended and Restated Senior Secured Indenture provides, among other things, that the 8.5% Senior Secured Notes will be secured senior obligations of the Company and will mature on July 15, 2021. The 8.5% Senior Secured Notes will bear interest at a rate of 8.5% per annum, payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning on September 15, 2017. Certain holders of the Company's securities that are party to Board Designation Agreements (as discussed

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below), purchased approximately $24.5 million of the 8.5% Senior Secured Notes that were issued in exchange for 15% Senior Secured Notes during the year ended December 31, 2017.

The Amended and Restated Senior Secured Indenture provides that the 8.5% Senior Secured Notes may be optionally redeemed in full by the Company at any time and must be redeemed in full upon additional issuances of debt by the Company in each case, at a price equal to 100% of the principal amount redeemed plus (i) accrued and unpaid interest on the 8.5% Senior Secured Notes redeemed up to the date of redemption, and (ii) the Applicable Premium, if any, as defined in the Amended and Restated Senior Secured Indenture. Upon a change of control, the Company will be required to make an offer to holders of the 8.5% Senior Secured Notes to repurchase the 8.5% Senior Secured Notes at a price equal to 107.5% of their principal amount, plus accrued and unpaid interest up to the date of redemption.

The Amended and Restated Senior Secured Indenture contains negative covenants restricting additional debt incurred by the Company, creation of liens on the collateral securing the 8.5% Senior Secured Notes, and restrictions on dividends and stock repurchases, among other things. The 8.5% Senior Secured Notes are secured by settlement proceeds, if any, received from certain litigation involving the Company, certain notes issued to the Company, and pledges of 65% of the equity interests in Blue Heron Designated Activity Company, OLIPP IV, LLC and Red Reef Alternative Investments, LLC.

On January 10, 2018, the Company commenced the process of appointing a liquidator to liquidate Blue Heron. The completion of liquidation formalities of Blue Heron under Irish law is expected to take several months, and liquidation was still pending at November 30, 2018. Blue Heron is an inactive subsidiary of the Company. In connection with liquidation of Blue Heron, the Company and Wilmington Trust, National Association, as trustee under the Amended and Restated Senior Secured Indenture (the "Trustee"), entered into (i) the First Supplemental Indenture (the "First Supplemental Indenture"), dated as of January 10, 2018, to implement certain amendments to the Indenture and (ii) the Amendment to Pledge and Security Agreement ("Pledge and Security Amendment"), dated as of January 10, 2018, to implement certain amendments to the Pledge and Security Agreement Pledge and Security Agreement, dated as of March 11, 2016, between the Company and Trustee. The First Supplemental Indenture and the Pledge and Security Amendment amend the Indenture and Pledge and Security Agreement, respectively, to: (i) remove from the assets pledged to the secured parties under the Amended and Restated Senior Secured Indenture, 65% of the equity and certain other assets of Blue Heron; and (ii) reflect the pledge by the Company, in favor of the secured parties under the Indenture, of the promissory note dated as of December 29, 2016 in the principal sum of $69.6 million issued by OLIPP IV, LLC to Blue Heron and subsequently assigned to the Company.

On August 11, 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 (i) 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 and (ii) $5.0 million principal amount of the Company’s 8.5% Senior Secured Notes (the "Brennan Notes," and together with the Brennan Shares, the "Brennan Securities"). The Securities Purchase Agreement contained customary representations, warranties, and covenants.

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of Notes who consented to accept PIK interest. Each holder of outstanding Notes made an election with respect to some or all of the outstanding principal amount of such holder’s Notes as to whether or not to accept PIK interest whenever the Company elects to pay interest in PIK in lieu of cash. Any new holder of Notes, other than a transferee who is an affiliate of a transferring holder that did not elect to accept PIK interest, will be deemed to have elected to accept PIK interest. A holder receiving PIK interest shall also automatically receive, for each applicable Interest Period, an amount equal to 3.0% per annum of additional interest on the principal amount of such holder’s Notes for which the holder elected to accept PIK interest. Holders receiving PIK is approximately $26.8 million with approximately $8.2 million electing to be paid by cash.

All terms of the Indenture that were not amended by the Second Supplemental Indenture remain in full force and effect.

On February 11, 2019, the Company entered into a Subscription Agreement (the "Subscription Agreement") with Brennan Opportunities Fund I LP (the "Investor"), which is affiliated with Patrick T. Brennan, a member of the Company’s Board of Directors. Pursuant to the Subscription Agreement, the Investor purchased from the Company $967,000 principal amount of the Company’s 8.5% Senior Secured Notes (the "Senior Notes") for a purchase price of $725,000. The transaction was consummated on February 14, 2019.

The Company issued an additional $4.0 million in additional 8.5% Senior Secured Notes in lieu of a cash payment of interest to the relevant holders of the notes during the year ended November 30, 2019.

Voluntary Petitions for Relief Under Chapter 11

On November 14, 2018, the November Chapter 11 Cases were filed, and on December 13, 2018, the White Eagle

At November 30, 2019, the outstanding principal of the 8.5% Senior Secured Notes is $47.6 million with a carrying value of $45.7 million, net of discount and unamortized debt issuance cost $1.6 million and $362,000, respectively.

During the twelve months ended November 30, 2019, the Company recorded approximately $6.0 million of interest expense on the 8.5% Senior Secured Notes, which includes $4.9 million of interest, $468,000 of amortizing debt issuance costs $594,000 of amortizing of debt discount respectively.

During the eleven months ended November 30, 2018, the Company recorded approximately $3.0 million of interest expense on the 8.5% Senior Secured Notes, which includes $2.8 million of interest and $244,000 of amortizing debt issuance costs.

NOTE 15 - FAIR VALUE MEASUREMENTS

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The Company carries life settlements, investment in limited partnership and investment in deconsolidated subsidiaries at fair value as shown in the consolidated balance sheets. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or 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. Fair value measurements are classified based on the following fair value hierarchy:

Level 1—Valuation is based on unadjusted quoted prices in active markets for identical assets and liabilities that are accessible at the reporting date. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

Level 2—Valuation is determined from pricing inputs that are other than quoted prices in active markets that are either directly or indirectly observable as of the reporting date. Observable inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and interest rates and yield curves that are observable at commonly quoted intervals.

Level 3—Valuation is based on inputs that are both significant to the fair value measurement and unobservable. Level 3 inputs include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value generally require significant management judgment or estimation.

Assets and liabilities measured at fair value on a recurring basis

The balances of the Company’s assets measured at fair value on a recurring basis as of November 30, 2019, are as follows (in thousands):



	Level 1		Level 2		Level 3		Total Fair Value
Assets:
Investment in limited partnership	$	—	$	—	$	137,849	$	137,849
Investment in life settlements	—		—		1,297		1,297
	$	—	$	—	$	139,146	$	139,146

The balances of the Company’s assets measured at fair value on a recurring basis as of November 30, 2018, are as follows (in thousands):



	Level 1		Level 2		Level 3		Total Fair Value
Assets:
Investment in life settlements - Deconsolidated	$	—	$	—	$	505,235	$	505,235
Investment in life settlements - Consolidated	—		—		1,172		1,172
	$	—	$	—	$	506,407	$	506,407

Investment in deconsolidated subsidiaries	$	—	$	—	$	128,795	$	128,795

The balances of the Company’s liabilities measured at fair value on a recurring basis as of November 30, 2018, are as follows (in thousands):



	Level 1		Level 2		Level 3		Total Fair Value
Liabilities:
White Eagle Revolving Credit Facility - Deconsolidated	$	—	$	—	$	346,670	$	346,670
	$	—	$	—	$	346,670	$	346,670

The below is a quantitative analysis of the Company's level 3 assets fair value measurements at November 30, 2019:

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($ in thousands)

Quantitative Information about Level 3 Fair Value Measurements

Fair Value at 11/30/19

Aggregate death benefit 11/30/2019

Valuation Technique

Unobservable Input

Range (Weighted Average)

Investment in life settlements

1,297

12,000

Discounted cash flow

Discount rate

13.25% - 15.25%

Life expectancy evaluation

11.4 years

Investment in limited partnership

137,849

736,449

Discounted cash flow

Discount rate

15.25%

Life expectancy evaluation, distributions, return on investment

Following is a description of the methodologies used to estimate the fair values of assets measured at fair value on a recurring basis and within the fair value hierarchy inclusive of life settlements and investment in limited partnership which holds a portfolio of life settlements.

Life settlements-The Company has elected to account for the life settlement policies it acquires using the fair value method. The Company uses a present value technique to estimate the fair value of its life settlements, which is a Level 3 fair value measurement as the significant inputs are unobservable and require significant management judgment or estimation. 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.

The Company provides medical records for each insured to life expectancy report providers ("LE providers"). Each LE provider reviews and analyzes the medical records and identifies all medical conditions it feels are relevant to the life expectancy determination of the insured. Debits and credits are assigned by each LE provider to the individual’s health based on identified medical conditions which are derived from the experience of mortality attributed to relevant conditions in the portfolio of lives that the LE provider monitors. The health of the insured is summarized by the LE provider into a life assessment of the individual’s life expectancy expressed both in terms of months and in mortality factor. The mortality factor represents the degree to which the given life can be considered more or less impaired than a life having similar characteristics (e.g. gender, age, smoking, etc.). For example, a standard insured (the average life for the given mortality table) would carry a mortality rating of 100%. A similar but impaired life bearing a mortality rating of 200% would be considered to have twice the chance of dying earlier than the standard life relative to the LE provider’s population. Since each provider’s mortality factor is based on its own mortality table, the Company calculates its own factors to apply to the table selected by the Company.

The Company calculates mortality factors so that when applied to the mortality table selected by the Company, the resulting LE equals the LE provided by each LE provider. The resulting mortality factors are then blended to determine a factor for each insured.

A mortality curve is then generated based on the calculated mortality factors and the rates from the Company selected mortality table to generate the best estimated probabilistic cash flow stream. The net present value of the cash flows is then calculated to determine the policy value.

If the insured dies earlier than expected, the return will be higher than if the insured dies when expected or later than expected. The calculation allows for the possibility that if the insured dies earlier than expected, the premiums needed to keep the policy in force will not have to be paid. Conversely, the calculation also considers the possibility that if the insured lives longer than expected, more premium payments will be necessary.

The Company uses the 2015 Valuation Basic tables, smoker distinct ("2015 VBT"), mortality tables developed by the U.S. Society of Actuaries (the "SOA"). The mortality tables are created based on the expected rates of death among different groups categorized by factors such as age and gender. The 2015 VBT is based on a large dataset of insured lives, face amount of policies and more current information and its dataset includes 266 million policies. The experience data in the 2015 VBT dataset includes 2.55 million claims on policies from 51 insurance carriers. Life experiences implied by the 2015 VBT are generally longer for male and female nonsmokers between the ages of 65 and 80, while smokers and insureds of both genders over the age of 85 have significantly lower life expectancies. The table shows lower mortality rates in the earlier select periods at most ages, so

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while the Company continues to fit the life expectancies from the LE providers to the 2015 VBT, the change in the mortality curve changes the timing of the Company’s expected cash flow streams.

Historically, the Company has procured the majority of its life expectancy reports from two life expectancy report providers (AVS Underwriting LLC and 21st Services, LLC) for valuation purposes and used an average or "blending," of the results of the two life expectancy reports to establish a composite mortality factor.

On October 18, 2018, 21st Services announced revisions to its underwriting methodology, these revisions have generally been understood to lengthen the average reported life expectancy furnished by this life expectancy provider by 9%. On October 29, 2018 AVS Underwriting LLC also announced revisions to its underwriting methodology without an estimated impact, which resulted in an average lengthening of the life expectancies by approximately 13%.

To account for the impact of the revisions by 21st Services and based off of market responses to the methodology change, the Company decided to lengthen the life expectancies furnished by 21st Services by 9% during the eleven months ended November 30, 2018. The resulting impact is approximately $124.0 million reduction in the fair value of its life settlements.

Further, the Company has decided to no longer utilize the results of life expectancy reports furnished by AVS for valuation purposes. The Company's decision was based on a series of events leading up to the announcement on October 29, 2018, which includes AVS inability to furnish timely reports to allow the Company to blend the results to facilitate timely quarterly reporting. Market participants have expressed concerns regarding their inability to connect the new AVS model to past model. During the eleven months ended November 30, 2018, the Company discontinued its blending approach. The resulting impact is approximately $23.1 million reduction in the fair value of its life settlements.

Moving forward, the Company will procure its life expectancy report from 21st Services on a periodic basis and expects to continue to lengthen life expectancies furnished by 21st Services that have not been re-underwritten using their updated methodology.

Future changes in the life expectancies could have a material adverse effect on the fair value of the Company’s life settlements, which could have a material adverse effect on its business, financial condition and results of operations.

Life expectancy sensitivity analysis

If all of the insured lives in the Company’s life settlement portfolio lived six months shorter or longer than the life expectancies provided by these third parties, the change in estimated fair value would be as follows (dollars in thousands):



Life Expectancy Months Adjustment	Value		Change in Value
+6	$	1,090	$	(207	)
-	$	1,297	$	—
-6	$	1,514	$	217

Discount rate

The Company re-evaluates its discount rates at the end of every reporting period in order to reflect the estimated discount rates that could reasonably be used in a market transaction involving the Company’s portfolio of life settlements. In doing so, consideration is given to the various factors influencing the rates, including risk tolerance and market activity. The Company relies on management insight, engages third party consultants to corroborate its assessment, engages in discussions with other market participants and extrapolates the discount rate underlying actual sales of policies. In considering these factors, at November 30, 2019, the Company determined that the weighted average discount rate calculated based on death benefit was 14.92%, compared to 13.43% at November 30, 2018.

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Credit exposure of insurance company

The Company considers the financial standing of the issuer of each life insurance policy. Typically, we seek to hold policies issued by insurance companies that are rated investment grade by the top three credit rating agencies. At November 30, 2019, the Company had no life insurance policies issued by one carriers that were rated non-investment grade as of that date.

The following table provides information about the life insurance issuer concentrations that exceed 10% of total death benefit and 10% of total fair value of the Company’s life settlements as of November 30, 2019:



Carrier - Consolidated	Percentage of Total Fair Value		Percentage of Total Death Benefit		Moody’s Rating	S&P Rating
Sun Life Assurance Company of Canada	100.0	%	100.0	%	Aa3	AA

Market interest rate sensitivity analysis

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 extent to which the fair value could vary in the near term has been quantified by evaluating the effect of changes in the weighted average discount rate on the death benefit used to estimate the fair value. If the weighted average discount rate was increased or decreased by 1/2 of 1% and the other assumptions used to estimate fair value remained the same, the change in estimated fair value as of November 30, 2019 would be as follows (dollars in thousands):



Weighted Average Rate Calculated Based on Death Benefit - Consolidated	Rate Adjustment		Value		Change in Value
14.42%	-0.50	%	$	1,352	$	55
14.92%	—		$	1,297	$	—
15.42%	0.50	%	$	1,245	$	(52	)

Future changes in the discount rates we use to value life insurance policies could have a material effect on the Company's yield on life settlement transactions, which could have a material adverse effect on our business, financial condition and results of our operations.

At the end of each reporting period we re-value the life insurance policies using our valuation model in order to update our estimate of fair value for investments in policies held on our balance sheet. This includes reviewing our assumptions for discount rates and life expectancies as well as incorporating current information for premium payments and the passage of time.

White Eagle Revolving Credit Facility -White Eagle holds life insurance policies previously pledged by White Eagle to serve as collateral for its obligations under the White Eagle Revolving Credit Facility. On August 16, 2019, the Company entered into a subscription agreement (the "Subscription Agreement") pursuant to which White Eagle sold 72.5% of its limited partnership in the form of newly issued limited partnership interests (the "WE Investment"). The proceeds of the WE Investment were used to satisfy in full (i) White Eagle’s 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.

Investment in deconsolidated subsidiaries - As previously discussed in Note 4, upon the deconsolidation of Lamington, an investment was recorded for $278.4 million which represented the fair value of the Company's investment in Lamington at November 13, 2018. The amount was equivalent to the carrying value of Lamington's net assets. The fair value measurements were calculated using unobservable inputs, primarily discounted cash flow analysis and classified as Level 3, requiring significant management judgment due to the absence of quoted market prices or observable inputs for assets of similar nature. The investment was further valued at November 30, 2018 by a third party also using unobservable inputs, which utilizes a discounted cash flow analysis considering the anticipated date the Company would emerge from bankruptcy, the settlement amount of debt, and future expenses, resulted in a fair value of approximately $128.8 million.

Effective August 16, 2019, Lamington and WEGP were reconsolidated under the provisions of ASC 810, Consolidation. It was determined that the investment in White Eagle, which was no longer wholly owned, would be treated as an equity

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investment. The Company further evaluated its investment at August 16, 2019 and recognized a gain of approximately $37.9 million, which amount is reflected in current earnings as change in fair value of investment in deconsolidated subsidiaries. The amount is associated with gains incurred by Lamington for the period up to August 16, 2019 in considering the proceeds received through the transactions for the Subscription Agreement, the actual payoff of the White Eagle Revolving Credit Facility and all other third party claims.

Investment in limited partnership - In connection with the WE Investment, the 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" evidenced by the Class D limited partnership interests, to maintain reserves sufficient to fund premiums, certain operating expenses of White Eagle and certain minimum payments to Lamington as the holder of the Class B interests. The A&R LPA provides generally that holders 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 utilized to repay 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.

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. The Company will utilize a fair value approach to account for its 27.5% investment in White Eagle Asset Portfolio, and the calculation will be performed consistent with ASC 820, Fair Value Measurement with changes in fair value recorded in current earnings.

On August 16, 2019, Lamington's capital contribution to the limited partnership was an estimated fair value of approximately $138.9 million. The Company performed a valuation at November 30, 2019 resulting in a value of approximately $137.8 million using an estimated discount rate of approximately 15.25%.

See Note 10, "Investment in Limited Partnership", to the accompanying consolidated financial statements for further information.

Discount rate of investment in limited partnership

The discount rate incorporates current information about market interest rates, the credit exposure to the insurance company that issued the life insurance policy, the Company's estimates of the return an investor would require and the current rate of return of the major partner.

The Company re-evaluates its discount rates at the end of every reporting period in order to reflect the estimated discount rates that could reasonably be used in a market transaction involving the Company’s 27.5% investment in White Eagle Asset Portfolio. In doing so, consideration is given to the various factors influencing the rates, including risk tolerance and market activity. The Company relies on management insight, engages third party consultants to corroborate its assessment and engages in discussions with other market participants. In considering these factors, at November 30, 2019, the Company determined that the estimated discount rate was 15.25%.

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Market interest rate sensitivity analysis of the investment in limited partnership

The extent to which the fair value of the investment in limited partnership could vary in the near term has been quantified by evaluating the effect of changes in the weighted average discount. If the weighted average discount rate were increased or decreased by 1/2 of 1% and the other assumptions used to estimate fair value remained the same, the change in estimated fair value of investment in limited partnership as of November 30, 2019 would be as follows (dollars in thousands):



Weighted Average Rate	Rate Adjustment		Value		Change in Value
14.75%	-0.50	%	$	141,694	$	3,845
15.25%	—		$	137,849	$	—
15.75%	0.50	%	$	134,157	$	(3,692	)

Changes in Fair Value

The following tables provides a roll-forward in the changes in fair value for the periods ended November 30, 2019, for all assets for which the Company determines fair value using a material level of unobservable (Level 3) inputs, which consists solely of life settlements (in thousands):



Life Settlements - Consolidated:
Balance, December 1, 2018	$	1,172
Purchase of policies	—
Change in fair value	(38		)
Matured/lapsed/sold polices	—
Premiums paid	163
Balance, November 30, 2019	$	1,297
Changes in fair value included in earnings for the period relating to assets held at November 30, 2019	$	(38	)



Life Settlements - Deconsolidated:
Balance, December 1, 2018	$	505,235
Purchase of policies	—
Change in fair value	(16,841		)
Receivable for maturity of life settlement write off	17,800
Policies sold	(344,845		)
Policies matured	(100,373		)
Premiums paid	69,827
Balance, Transfer to investment in limited partnership	(130,803		)
Balance, August 16, 2019	$	—
Changes in fair value included in earnings for the period relating to deconsolidated assets held at November 30, 2019	$	—

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The following table provides a roll-forward in the changes in fair value for the nine months ended November 30, 2019, for investment in limited partnership for which the Company determines fair value using a material level of unobservable (Level 3) inputs, which consists solely of life settlements (in thousands):



Investment in Limited Partnership
Balance, December 1, 2018	$	—
Transfer from investment in life settlement	130,803
Change in fair value - August 16, 2019	15,352
Advance for Class D Shares	(8,000		)
Balance, August 16, 2019	$	138,155

Distributions	(1,667		)
Change in fair value - August 17, 2019 to November 30, 2019	1,361
Balance, November 30, 2019	$	137,849
Changes in fair value included in earnings for the period relating to assets held at November 30, 2019	$	(306	)

The following tables provides a roll-forward in the changes in fair value for the periods ended November 30, 2019, for the White Eagle Revolving Credit Facility for which the Company determines fair value using a material level of unobservable (Level 3) inputs (in thousands):



White Eagle Revolving Credit Facility - Deconsolidated :
Balance, December 1, 2018	$	346,670
Draws under the White Eagle Revolving Credit Facility	4,221
Payments on White Eagle Revolving Credit Facility	(367,985		)
Unrealized change in fair value	17,094
Balance, August 16, 2019	$	—
Changes in fair value included in earnings for the period relating to liabilities at November 30, 2019	$	—

The following table provides a roll-forward in the changes in fair value for the period ended November 30, 2019, for the investment in deconsolidated subsidiaries for which the Company determines fair value using a material level of unobservable (Level 3) inputs (in thousands):



Investment in Deconsolidated Subsidiaries
Investment in Lamington at December 1, 2018	$	128,795
Change in fair value	37,941
Transferred to consolidation	(166,736		)
Investment in Lamington at August 16, 2019	$	—

The following table provides a roll-forward in the changes in fair value for the year ended November 30, 2018, for all assets for which the Company determines fair value using a material level of unobservable (Level 3) inputs, which consists solely of life settlements (in thousands):

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Life Settlements - Consolidated:
Balance, January 1, 2018	$	567,492
Purchase of policies	—
Change in fair value	(46,879		)
Matured/lapsed/sold polices	(93,435		)
Premiums paid	78,706
Deconsolidation of life settlement, November 13, 2018	(504,712		)
Balance, November 30, 2018	$	1,172
Changes in fair value included in earnings for the period relating to assets held at November 30, 2018	$	315



Life Settlements - Deconsolidated:
Balance, November 13, 2018	$	504,712
Purchase of policies	—
Change in fair value	(6,034		)
Matured/lapsed/sold polices	—
Premiums paid	6,557
Balance, November 30, 2018	$	505,235
Changes in fair value included in earnings for the period relating to deconsolidated assets held at November 30, 2018	$	(6,034	)

The following table provides a roll-forward in the changes in fair value for the year ended November 30, 2018, for the White Eagle Revolving Credit Facility for which the Company determines fair value using a material level of unobservable (Level 3) inputs (in thousands):



White Eagle Revolving Credit Facility
Balance, January 1, 2018	$	329,240
Draws under the White Eagle Revolving Credit Facility	82,202
Payments on White Eagle Revolving Credit Facility	(52,683		)
Unrealized change in fair value	(70,900		)
Deconsolidation of White Eagle Revolving Credit Facility, November 13, 2018	(287,859		)
Balance, November 13, 2018	$	—
Changes in fair value included in earnings for the period relating to liabilities at November 30, 2018	$	(70,900	)



White Eagle Revolving Credit Facility - Deconsolidated:
Balance, November 13, 2018	$	287,859
Draws under the White Eagle Revolving Credit Facility	5,198
Payments on White Eagle Revolving Credit Facility	—
Unrealized change in fair value	53,613
Balance, November 30, 2018	346,670
Changes in fair value included in earnings for the period relating to deconsolidated liabilities at November 30, 2018	$	53,613

The following table provides a roll-forward in the changes in fair value for the period ended November 30, 2018, for the investment in deconsolidated subsidiaries for which the Company determines fair value using a material level of unobservable (Level 3) inputs (in thousands):

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Investment in Deconsolidated Subsidiaries
Investment in Lamington at November 13, 2018	$	278,440
Increase in basis investment - November 14, 2018 to November 30, 2018	1,249
Change in fair value	(150,894		)
Investment in Lamington at November 30, 2018	$	128,795

There were no transfers of financial assets or liabilities between levels of the fair value hierarchy during the twelve months ended November 30, 2019 and the eleven months ended November 30, 2018.

Other Fair Value Considerations - Carrying value of certificate of deposits, prepaid expenses and other assets, receivable for maturity of life settlements, Promissory Notes receivable, Promissory Notes interest receivable, investment in affiliates, 8.5% Senior Secured Notes, 5.0% Senior Unsecured Convertible Notes, accounts payable and accrued expenses approximate fair value due to their short-term maturities and/or low credit risk.

NOTE 16 - 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 8 "Discontinued Operations" to the accompanying consolidated financial statements.

NOTE 17 - 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 $268,000, with a provision for a 3% increase on each anniversary of the rent commencement date. Rent expense was approximately $290,000, $396,000 and $407,000 for the twelve months ended November 30, 2019, the eleven months ended November 30, 2018 and 2017, respectively.

During the eleven months ended 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.

The future minimum payments under operating leases for each of the one succeeding years subsequent to November 30, 2019 are as follows (in thousands):



November 30,
2020	$	217

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

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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.

Severance Agreements

On November 12, 2019, the Company entered into a retention agreement with each of Mr. Simony, (the "Simony Retention Agreement"), and Mr. Werblowsky, (the "Werblowsky Retention Agreement" and, together with the Simony Retention Agreement, the "Retention Agreements"). Each Retention Agreement provides for a cash retention payment (each, a "Retention Payment") and certain extended benefits to each of Mr. Simony and Mr. Werblowsky (the "Benefits") in recognition of his significant contributions to consummating the Company’s August 2019 transaction with Jade Mountain Partners, LLC, which allowed the Company and its then subsidiary White Eagle Asset Portfolio, L.P to refinance an onerous credit facility and improve the Company’s overall financial position (the "White Eagle Transaction), and in consideration of Mr. Simony’s and Mr. Werblowsky’s continued support and assistance with the current restructuring under consideration by the Company (the Restructuring").

The Retention Agreements provide that in exchange for the Retention Payment and Benefits, each of Mr. Simony and Mr. Werblowsky will remain employed by Imperial pursuant to his current employment agreement, each dated March 13, 2018 (the "Employment Agreements"), and that each Retention Payment is in lieu of any severance otherwise payable to Mr. Simony or Mr. Werblowsky under his Employment Agreement. In addition, each of Mr. Simony and Mr. Werblowsky will not be eligible to receive any portion of his Retention Payment if he is terminated for Cause (as defined in the Employment Agreements) or resigns without Good Reason (as defined in the Employment Agreements). The Retention Payments consist of $1.0 million for Mr. Simony and $500,000 for Mr. Werblowsky. The Benefits consist of, for each of Mr. Simony and Mr. Werblowsky, 12 months of (x) COBRA health insurance coverage reimbursement from the company and (x) other benefits to which he would be entitled upon an involuntary termination without Cause under his Employment Agreement. The Retention Payments are

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payable as to two-thirds upon entering into the Retention Agreements and one-third within three (3) business days of the consummation of the Restructuring, so long as the White Eagle Transaction remains in full force and effect and White Eagle and its limited partnership agreement remain operative and in good standing.

Subsequent Event

On December 10, 2019, the Company, entered into a retention agreement with Miriam Martinez, the Company’s Senior Vice President, Chief Financial Officer and Secretary (the "Martinez Retention Agreement").The Martinez Retention Agreement provides for a cash retention payment (the "Martinez Retention Payment") and certain extended benefits to Ms. Martinez (the "Martinez Benefits") in recognition of the significant contributions to consummating the Company’s August 2019 transaction with Jade Mountain, which allowed the Company and White Eagle to refinance the White Eagle Revolving Credit Facility and improve the Company’s overall financial position (the "White Eagle Transaction"), and in consideration of Ms. Martinez’s continued support and assistance with the Restructuring.

The Martinez Retention Agreement provides that in exchange for the Martinez Retention Payment and Martinez Benefits, Ms. Martinez will remain employed by Imperial pursuant to the 2018 Martinez Agreement, and that the Martinez Retention Payment is in lieu of any severance otherwise payable to Ms. Martinez under the 2018 Martinez Agreement. In addition, Ms. Martinez will not be eligible to receive any portion of the Martinez Retention Payment if she is terminated for Cause (as defined in the 2018 Martinez Agreement) or resigns without Good Reason (as defined in the 2018 Martinez Agreement). The Martinez Retention Payment consists of $700,000. The Martinez Benefits consist of 18 months of (x) COBRA health insurance coverage reimbursement from the Company and (x) other benefits to which she would be entitled upon an involuntary termination without Cause under the 2018 Martinez Agreement. The Martinez Retention Payment is payable as to two-thirds upon entering into the Martinez Retention Agreement and one-third within three (3) business days of the consummation of the Restructuring, so long as the White Eagle Transaction remains in full force and effect and White Eagle and its limited partnership agreement remain operative and in good standing. In the event that the Company files for bankruptcy prior to the payment of any portion of the Martinez Retention Payment or Martinez Benefits, the Company will file with the bankruptcy court a motion to approve a Key Employee Retention Plan to preserve each of Ms. Martinez’s rights under the Martinez Retention Agreement to the full Martinez Retention Payment and Martinez Benefits provided that she must comply with all of the provisions of the Martinez Retention Agreement.

Compensation Agreement - Chief Executive Officer

On January 27, 2020, the Company, granted a bonus to Patrick J. Curry, the Company’s Chief Executive Officer (the "Bonus"), in recognition of his past and ongoing work for the Company. The Bonus consists of: (i) $400,000 in cash, payable promptly after the grant, and 1,000,000 shares of restricted common stock of Emergent, vesting in thirds upon the first three anniversaries of the grant date, (ii) up to $300,000 in cash, as determined by the Compensation Committee (the "Compensation Committee") of Emergent’s Board of Directors (the "Board"), payable upon the consummation of the Company’s contemplated restructuring, and (iii) up to $300,000 in cash, as determined by the Compensation Committee, if the Company effects the Restructuring at least $600,000 under the budget for such Restructuring that is approved by the Board within 45 days of the date hereof, measured as of 30 days after the date of the Restructuring.

Resignation - Chief Investment Officer

See Note 22, "Subsequent Events," of the accompanying consolidated financial statements for further information.

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.

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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 at November 30, 2019. The $2.0 million settlement related to the Allstate lawsuit was recorded as other income on the statement of operations for consolidated financial statements at November 30, 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.

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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.

Subsequent Event

On December 4, 2019 the Company and certain of its subsidiaries entered into a Settlement Agreement and Mutual Release (the "Settlement Agreement") with Sun Life Assurance Company of Canada ("Sun Life") and Wilmington Trust, N.A. as securities intermediary ("Wilmington Trust"). The Settlement Agreement relates to Sun Life Assurance Company of Canada v. Imperial Holdings, Inc., et al., Case No. 13-cv-80385 BRANNON (consolidated with Case No. 13-cv-80730) (S.D. Florida) (the "Legal Action"), which has been ongoing since 2013.

Pursuant to the Settlement Agreement, (i) 31 life insurance policies with face totaling $163.5 million issued by Sun Life were canceled in exchange for a lump sum payment of $36.1 million. The settlement included two policies held by the Company outside of White Eagle with an aggregate face value of $12.0 million, 28 policies held by White Eagle with an aggregate face value of $141.5 million and one policy with a face of $10.0 million in receivable for maturity for White Eagle. Of this amount, approximately $12.7 million was received by the Company, $13.4 million was paid to White Eagle and $10.0 million was paid to Wilmington Trust for the maturity receivable, (ii) the Legal Action dismissed with prejudice, (iii) Sun Life agreed not to challenge the validity of or to seek to deny coverage (other than for non-payment of premiums) for certain life insurance policies issued by it and held by White Eagle that were specifically excluded from the settlement or have already matured, and (iv) Sun Life released all claims against the Company and Wilmington Trust, and the Company and Wilmington Trust released all claims against Sun Life.

See Note 22, "Subsequent Events," of the accompanying consolidated financial statements for further information.

Voluntary Petitions for Relief Under Chapter 11

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.

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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 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.

On September 16, 2019, the Bankruptcy Court entered an order and final decree closing the White Eagle Chapter 11 Case. The Lamington and WEGP Chapter 11 Cases were dismissed on November 25, 2019.

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.

In order to effectuate the settlement, a portion the proceeds under the Settlement Agreement was used to repurchase the policies from White Eagle. Any remaining proceeds were allocated in accordance with the requirements of the Amended and Restated Limited Partnership Agreement of White Eagle.

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

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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.

NOTE 18 - STOCKHOLDERS’ EQUITY

Shares of Common Stock under Omnibus Plan

The Company has reserved an aggregate of 12,600,000 shares of common stock under its Omnibus Plan, pursuant to which, as of November 30, 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 a director and were fully and outstanding, 633,215 shares of restricted stock had been granted to directors and were fully vested, 2,270,000 shares of restricted stock units had been granted to certain employees, with a total of 333,333 shares subject to vesting. Approximately 1,936,667 shares have been issued since granted. There were 9,511,785 securities remaining for future issuance under the Omnibus Plan as of November 30, 2019.

Share Note Repurchase Program

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 November 30, 2019, the repurchase program has terminated.

Warrants

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. The warrants expired during the twelve months ended November 30, 2019.

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 number of Warrant Shares is 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

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Agreement Shares") of the Company’s common stock, $0.01 par value, at a price of $0.2 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 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 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.

NOTE 19 - EMPLOYEE BENEFIT PLAN

The Company has adopted a 401(k) plan that covers employees that have reached 18 years of age and completed three months of service. The plan provides for voluntary employee contributions through salary deductions, as well as discretionary employer contributions. For the twelve months ended November 30, 2019, the eleven months ended November 30, 2018 and the year ended December 31, 2017, there were no employer contributions made.

NOTE 20 - SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED)

The following tables set forth our unaudited consolidated financial data regarding continuing operations for each quarter of fiscal 2019 and 2018 (in thousands). This information, in the opinion of management, includes all adjustments necessary, consisting only of normal and recurring adjustments, to state fairly the information set forth therein. Certain amounts previously reported have been reclassified to conform to the current presentation. These reclassifications had no net impact on the results of operations (in thousands).



	Fiscal 2019
	1st Quarter				2nd Quarter					3rd Quarter		4th Quarter
Total income	$	(33,953	)	(2)	$	(18,792	)	(2	)	$	86,858	7,412
(Loss)/income from continuing operations before taxes	(37,459		)		(22,650		)			80,196		538
Net (loss)/income from continuing operations	(37,459		)		(25,868		)			80,201		(15		)
(Loss)/income per share from continuing operations:
Basic	$	(0.24	)		$	(0.16	)			$	0.51	$	—		(1)
Diluted	$	(0.24	)		$	(0.16	)			$	0.41	$	(0.02	)	(1)

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	Fiscal 2018
	1st Quarter			2nd Quarter			3rd Quarter		4th Quarter
Total income	$	5,591		$	5,563		$	29,714	$	(86,395	)
(Loss)/income from continuing operations before income taxes	(3,994		)	(6,483		)	11,751		(171,170		)
Net (loss)/income from continuing operations	(3,994		)	(9,603		)	14,288		(170,631		)
(Loss)/income per share from continuing operations:
Basic and diluted	$	(0.03	)	$	(0.04	)	$	0.09	$	(1.09	)

(1)

The sum of the basic and diluted earnings per share amounts for each quarter in fiscal year 2019 and 2018 do not equal the amount presented in the statements of operations for the twelve months ended November 30, 2019 and the eleven months ended November 30, 2018 due to the Company having losses for the twelve months ended November 30, 2019 and the eleven months ended November 30, 2018 and therefore all common stock equivalents were antidilutive for the quarters in which in the Company had losses.


(2)	Certain reclassifications of the prior period amounts and presentation have been made to conform to the presentation for the current period. These reclassification relate primarily to change in fair value of investment in deconsolidated subsidiaries which was reclassified from expense to income.

NOTE 21 - INCOME TAXES

The provision (benefit) for income taxes from continuing operations consisted of (in thousands):



	November 30, 2019			November 30, 2018			December 31, 2017
Continuing operations	$	3,766		$	45		$	—
Discontinued operations	—			—			—
Provision (benefit) for income taxes	$	3,766		$	45		$	—
Current
Federal	$	3,190		$	621		$	—
State	—			—			—
	$	3,190		$	621		$	—
Deferred
Federal	(34		)	2,427			14,109
State	(278		)	(60		)	2,931
	(312		)	2,367			17,040
Valuation allowance increase (decrease)	888			(2,943		)	(17,040		)
	$	576		$	(576	)	$	—

Provision (benefit) for income taxes from continuing operations	$	3,766		$	45		$	—

U.S. and foreign components of income (loss) from continuing operations before income taxes were as follows (in thousands):



	November 30, 2019			November 30, 2018			December 31, 2017
U.S.	$	72,481		$	(153,896	)	$	(19,016	)
Foreign	(51,856		)	(16,001		)	15,778
	$	20,625		$	(169,897	)	$	(3,238	)

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The Company’s actual provision (benefit) for income taxes from continuing operations differ from the federal expected income tax provision as follows (in thousands):



	2019					2018					2017
	Amount			Rate		Amount			Rate		Amount			Rate
Tax provision (benefit) at statutory rate	$	4,331		21.00	%	$	(35,678	)	21.00	%	$	(1,134	)	35.00	%
Increase (decrease) in taxes resulting from:	—			—		—			—		—			—
State tax (net of federal benefit)	(137		)	(0.66	)	(151		)	0.09		(679		)	20.98
Attribute reduction from ownership change	—			—		—			—		35,871			(1,107	)
Impact of rate changes	(141		)	(0.68	)	—			—		—			—
Other permanent items	5,802			28.13		(2		)	—		2			(0.07	)
Tax Cuts and Job Act Enactment	—			—		—			—		(17,199		)	530.99
Prior year true-ups	764			3.70		(533		)	0.31		50			(2	)
Effects of deconsolidation	(18,857		)	(91.43	)	31,591			(18.59	)	—			—
Foreign rate differential	11,116			53.90		3,360			(1.98	)	—			—
Alternative Minimum Tax	—			—		621			(0.37	)	—			—
Other	—			—		85			(0.05	)	129			(3.99	)
Valuation allowance (decrease) increase	888			4.30		752			(0.44	)	(17,040		)	526.08
Provision (benefit) for income taxes	$	3,766		18.26	%	$	45		(0.03	)%	$	—		—	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and tax liabilities were (in thousands):



	November 30, 2019			November 30, 2018
Deferred tax assets:
Federal and state net operating loss carryforward	$	1,371		$	2,459
Investment impairment	585			—
Federal AMT Credit carryforward	—			576
Deferred gain and losses	2,339			2,450
Other	3,125			1,153
Total gross deferred tax assets	7,420			6,638
Less valuation allowance	(4,053		)	(2,586		)
Total deferred tax assets	3,367			4,052
Deferred tax liabilities:
Unrealized gains on life and structured settlements	64			76
Gain on structured settlements deferred for tax purposes	2,636			2,539
Convertible debt discount	667			861
Total deferred tax liabilities	3,367			3,476
Total net deferred tax asset (liability)	$	—		$	576

The Company is subject to U.S. federal, state and foreign income taxes in the jurisdictions in which it operates. The Company’s provision for income taxes from continuing operations results in an effective rate of 18.26% for the period ended November 30, 2019. The Company recorded a total tax expense of approximately $3.8 million. The Company’s effective tax rate is principally impacted by expected income inclusions under the GILTI tax regime, limitations imposed on the use of historical net operating losses, and interest expense limitations under IRC Sec. 264(a)(4) that apply when determining tested income for the GILTI inclusion. The GILTI inclusion is driven in large part by the Company’s allocable share of taxable income from the WE Investment. The Company coordinates with the manager of the WE Investment to obtain reasonable estimates of the Company’s share of taxable results.

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The Company evaluates its deferred tax assets to determine if valuation allowances are required. 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. Based on the Company’s evaluation, a deferred tax valuation allowance was established against its net deferred tax assets as of November 30, 2019.

As of November 30, 2019, the Company has federal and state net operating loss carryovers ("NOLs") of approximately $82.8 million and $96.0 million, respectively. Of these amounts, the Company estimates that approximately $3.7 million and $16.9 million, respectively, may be available for utilization prior to their scheduled expiration periods, as a substantial portion of the NOLs are subject to limitations under Section 382 of the Internal Revenue Code. These NOLs are scheduled to begin expiring in 2031, with the portion of state NOLs generated for the current year having an indefinite life.

Impact of Tax Reform

For tax years beginning after December 31, 2017 under certain circumstances, Section 245A enacted by the TCJA 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 tax on certain foreign income under new Section 951A. Specifically, for tax years beginning after December 31, 2017, income earned in excess of a deemed return on tangible assets held by a 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 Company changed the tax year of its U.S. parent 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 the short period ended November 30, 2017. As a result of the change in tax year, the Company is subject to GILTI for its first tax year beginning on December 1, 2018. Based on the Company’s life settlement assets held within Ireland, the net income generated from these activities are subject to the GILTI regime.

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 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.

Palomino Transaction

On August 16, 2019, the WE Investment was consummated whereby White Eagle, an indirectly-owned entity of the Company, sold to 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 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. For U.S. income tax purposes, this transaction was treated as a contribution by White Eagle of its assets and liabilities to a newly-formed partnership in exchange for the 27.5% interest in White Eagle’s capital and profits. The Company recognized no gain or loss as a result of the transaction.

Uncertain Tax Positions

The Company recognizes interest and penalties accrued related to unrecognized tax benefits in tax expense. A reconciliation of the total amounts of unrecognized benefits at the beginning and end of the period was as follows (in thousands):

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	November 30, 2019		November 30, 2018		December 31, 2017
Balance as of beginning of period	$	—	$	—	$	6,295
Additions based on tax positions taken in the current year	—		—		—
Reductions of tax positions for prior years	—		—		(6,295		)
Balance as of end of period	$	—	$	—	$	—

Prior to the year ended December 31, 2017, the Company reflected an unrecognized benefit of $6.3 million as a reduction of the deferred tax asset related to the federal and state NOLs. The Section 382 limitation that resulted in the year ended December 31, 2017 impacted the future utilization of a significant portion of the Company’s NOLs. As a result, the NOLs that gave rise to the unrecognized tax benefit will be entirely forfeited. The Company wrote off the deferred tax asset and eliminated the liability for unrecognized tax benefits in that year. The Company does not have any unrecognized tax benefits to record for the current year.

Tax years prior to 2016 are no longer subject to IRS examination. Various state jurisdiction tax years remain open to examination.

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NOTE 22 - SUBSEQUENT EVENTS

Sunlife Settlement Agreement

Of the $12.7 million received by the Company, approximately $2.0 million was allocated to the two policies that were owned by the Company outside of White Eagle, which resulted in a gain on disposal of approximately $743,000, with approximately $10.6 million allocated to legal fees.

Retention Agreement

The Martinez Retention Agreement provides that in exchange for the Martinez Retention Payment and Martinez Benefits, Ms. Martinez will remain employed by Imperial pursuant to the 2018 Martinez Agreement, and that the Martinez Retention Payment is in lieu of any severance otherwise payable to Ms. Martinez under the 2018 Martinez Agreement. In addition, Ms. Martinez will not be eligible to receive any portion of the Martinez Retention Payment if she is terminated for Cause (as defined in the 2018 Martinez Agreement) or resigns without Good Reason (as defined in the 2018 Martinez Agreement). The Martinez Retention Payment consists of $700,000. The Martinez Benefits consist of 18 months of (x) COBRA health insurance coverage reimbursement from the Company and (x) other benefits to which she would be entitled upon an involuntary termination without Cause under the 2018 Martinez Agreement. The Martinez Retention Payment is payable as to two-thirds upon entering into the Martinez Retention Agreement and one-third within three (3) business days of the consummation of the Restructuring, so long as the White Eagle Transaction remains in full force and effect and White Eagle and its limited partnership agreement remain operative and in good standing. In the event that the Company files for bankruptcy prior to the payment of any portion of the Martinez Retention Payment or Martinez Benefits, the Company will file with the bankruptcy court a motion to approve a Key Employee Retention Plan to preserve each of Ms. Martinez’s rights under the Martinez Retention Agreement to the full Martinez Retention Payment and Martinez Benefits provided that she must comply with all of the provisions of the Martinez Retention Agreement.

Repurchase of 5% Convertible Notes

F-73

Compensation Agreement - Chief Executive Officer

On January 27, 2020, the Company, granted a bonus to Patrick J. Curry, the Company’s Chief Executive Officer (the "Bonus"), in recognition of his past and ongoing work for the Company. The Bonus consists of: (i) $400,000 in cash, payable promptly after the grant, and 1,000,000 shares of restricted common stock of Emergent, vesting in thirds upon the first three anniversaries of the grant date, (ii) up to $300,000 in cash, as determined by the Compensation Committee (the "Compensation Committee") of Emergent’s Board of Directors (the "Board"), payable upon the consummation of the Company’s contemplated restructuring (the "Restructuring"), and (iii) up to $300,000 in cash, as determined by the Compensation Committee, if the Company effects the Restructuring at least $600,000 under the budget for such Restructuring that is approved by the Board within 45 days of the date hereof, measured as of 30 days after the date of the Restructuring.

Resignation - Chief Investment Officer

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Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company