SUND Sundance Strategies Inc (QB)

(1) BASIS OF PRESENTATION, ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(2) LIQUIDITY REQUIREMENTS

Since the Company’s inception on January 31, 2013, its operations have been primarily financed through sales of equity, debt financing from related parties and the issuance of notes payable and convertible debentures. As of December 31, 2023, the Company had $556,240 of cash assets, compared to $553 as of March 31, 2023. As of December 31, 2023, the Company had access to draw an additional $4,265,942 on the notes payable, related party (see Note 6) and $3,000,000 on the Convertible Debenture Agreement (See Note 7). For the nine months ended December 31, 2023, the Company’s average monthly operating expenses were approximately $49,000, which includes salaries of the Company’s employee, consulting agreements and contract labor, general and administrative expenses and legal and accounting expenses. In addition to the monthly operating expenses, the Company continues to pursue other debt and equity financing opportunities, and as a result, financing expenses of $105,000 and $40,500 were incurred during the nine months ended December 31, 2023, and 2022, respectively. As management continues to explore additional financing alternatives, beginning January 1, 2024, the Company is expected to spend up to an additional $300,000 on these efforts. Outstanding Accounts Payable as of December 31, 2023, totaled $463,066. Management has concluded that its existing capital resources and availability under its existing debt agreements with related parties will be sufficient to fund its operating working capital requirements for at least the next 12 months from the issuance of these financial statements, or through February 2025. Related parties have given assurance that their continued support, by way of either extensions of due dates, or increases in lines-of-credit, can be relied on. As mentioned above, the Company also continues to evaluate other debt and equity financing opportunities.

The accompanying financial statements have been prepared on a going concern basis under which the Company is expected to be able to realize its assets and satisfy its liabilities in the normal course of business.

(3) FAIR VALUE MEASUREMENTS

As defined by ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”), fair value is the price 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. ASC 820 also requires the consideration of differing levels of inputs in the determination of fair values.

Those levels of input are summarized as follows:

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

The Company did not have any transfers of assets and liabilities between Levels 1, 2 and 3 of the fair value measurement hierarchy during the nine months ended December 31, 2023, and 2022.

The Company issues warrants from time to time (see Note 4), which fair value is calculated using Level 3 inputs.

Other Financial Instruments

The Company’s recorded values of cash and cash equivalents, prepaid expenses and other assets, accounts payable and accrued liabilities approximate their fair values based on their short-term nature. The recorded values of the notes payable and convertible debenture approximate the fair values as the interest rate approximates market interest rates.

(4) STOCKHOLDERS’ EQUITY

Common Stock

Effective December 6, 2018, three existing stockholders have contributed to the Company a portion of their common shares held at a repurchase price to the Company of $0.05 per share. The Company has cancelled the acquired shares, which decreased the outstanding common shares on the books of the Company. The total number of common shares canceled/retired was 8,000,000, of which 6,000,000 shares were owned by a related party to the Company. The total liability related to the repurchase of these shares is $400,000, with repayment to the related party stockholders contingent on a major financing event. $300,000 of the $400,000 liability is to a related party.

On August 15, 2023, the Company issued a private placement memorandum offering to raise up to $1,500,000 through the issuance of restricted shares of the Company’s common stock (par value $0.001) to qualified investors. On September 20, 2023, the Company received subscription agreements from an investor, for 200,000 shares of common stock in conjunction with a purchase of 400,000 warrants to purchase shares of common stock. The proceeds from this transaction were $400,000. On October 4, 2023, the Company received subscription agreements from three separate investors, for 650,000 shares of common stock in conjunction with a purchase of 1,300,000 warrants to purchase shares of common stock. The proceeds from this transaction were $650,000.

Warrants to Purchase Common Stock

The Company’s related party lenders consist of: Kraig Higginson, the Chairman of the Board of Directors and a stockholder, Radiant Life, LLC, and Mr. Dickman, a board member and stockholder. These holders of the related party unsecured promissory notes hold agreements that provide each related party with common stock warrants upon the lender’s extension of a maturity due date or upon the loaning of additional monies. The number of warrants issued for an extension is based on the following formula: 10,000 warrants per month the due date is extended plus 1 warrant for every $2 of the principal balance outstanding (not including interest) at the time of the extension (rounded to the nearest whole warrant). Upon the loaning of additional monies, the lender will also require 2 warrants for each dollar loaned. All warrants issued under these terms vested immediately upon issuance, have an exercise price approximately equivalent to the fair value of the Company’s common stock on the date of grant, and expire 5 years from the date of issuance.

During the nine months ended December 31, 2023, the Company issued 281,900 warrants to the Chairman of the Board of Directors in conjunction with monies borrowed during the period per the terms outlined above. The exercise price of these warrants was $1.05. The value of the warrants on the date of grant, as calculated by the Black-Scholes-Merton valuation model was $258,354. The inputs used in this calculation included a fair value of the underlying common stock of $1.049 per share, a risk-free between 3.36% and 4.19%, volatility between 86.04% and 89.11% and a dividend rate of 0%.

During the nine months ended December 31, 2023, the Company issued 80,000 warrants to Radiant Life, LLC in conjunction with monies borrowed during the period per the terms outlined above. The exercise price of these warrants was $1.05. The value of the warrants on the date of grant, as calculated by the Black-Scholes-Merton valuation model was $58,402. The inputs used in this calculation included a fair value of the underlying common stock of $1.049 per share, a risk-free between 4.04% and 4.29%, volatility between 85.03% and 86.44% and a dividend rate of 0%.

On June 5, 2023, the Company issued 543,000 warrants to Mr. Dickman in conjunction with an extension of the maturity dates during the period per the terms outlined above. The exercise price of these warrants was $1.05. The value of the warrants on the date of grant, as calculated by the Black-Scholes-Merton valuation model was $523,451. The inputs used in this calculation included a fair value of the underlying common stock of $1.049 per share, a risk-free rate of 3.82%, volatility of 89.07% and a dividend rate of 0%.

Between September 20, 2023 and October 4, 2023, the Company issued 1,700,000 warrants to equity investors, which vested immediately, in conjunction with a purchase of 850,000 shares of the Company’s common stock. The exercise price of these warrants was $0.35.

The shares of common stock issuable upon exercise of the warrants are not registered with the Securities and Exchange Commission and the holders of the warrants do not have registration rights with respect to the warrants or the underlying shares of common stock.

(5) NOTES PAYABLE

On April 6, 2021, the Company borrowed $300,000 under an unsecured promissory note with Satco International, Ltd. This promissory note bears interest at a rate of 8% annually and was due April 6, 2023. In conjunction with this note, the Company issued warrants for 1,000,000 shares of common stock, exercisable at $1.00 per share and expiring in 3 years from the date of the promissory note. Since that date, the unsecured promissory note with Satco International, Ltd. has been amended through a series of amendments to extend the due date from April 6, 2023 to August 31, 2024, or at the immediate time when alternative financing or other proceeds are received. These extensions have no bearing on the warrants that were issued in conjunction with the original promissory note. This note is separate from the 8% convertible debenture agreement that the Company has in place with Satco International, Ltd. (see note 7). As of December 31, 2023, accrued interest on the note totaled $65,688.

(6) NOTES PAYABLE, RELATED PARTY

As of December 31, 2023, and March 31, 2023, the Company had borrowed $3,340,058 and $3,194,108 respectively, excluding accrued interest, from related parties. Short-term accrued interest associated with the Notes Payable, Related Parties and Promissory Notes, Related Parties, of $10,702 and $364,908 is recorded on the balance sheet as an Accrued Expense obligation at December 31, 2023, and March 31, 2023, respectively. Long-term accrued interest associated with the Notes Payable, Related Parties, and Promissory Notes, Related Parties, of $1,277,613 and $857,684 is recorded on the balance sheet as an Accrued Expense obligation at December 31, 2023, and March 31, 2023, respectively.

Related Party Promissory Notes

As of both December 31, 2023, and March 31, 2023, the Company owed $826,000 under the unsecured promissory notes from Mr. Dickman. The promissory notes bear interest at a rate of 8% annually. On June 5, 2023, the notes were amended to have a due date of August 31, 2024, or at the immediate time when alternative financing or other proceeds are received. As per the provision outlined in Note 4, and in conjunction with the extension of the due date of the promissory notes on June 5, 2023, the Company agreed to provide Mr. Dickman with warrants for 543,000 shares of common stock (see Note 4). Subsequent to quarter end, as per the provision outlined in Note 4, Mr. Dickman agreed to extend the unsecured promissory note to November 30, 2025. The Company agreed to provide Mr. Dickman with warrants to purchase 563,000 shares of common stock (see Note 8). During the nine months ended December 31, 2023, the Company neither borrowed any additional funds under this agreement nor made any principal repayments. As of December 31, 2023, accrued interest on the notes totaled $380,027. In the event the Company completes a successful equity raise all principal and interest on the notes are due in full at that time. The total number of warrants issued to the related party lender was 2,633,332 as of December 31, 2023 (See Note 4 for further details on these warrants).

On July 29, 2021, the Company entered into an unsecured promissory note agreement with Radiant Life, LLC. This agreement was in conjunction with the Company borrowing $50,000 of Notes Payable, Related Party, and is not part of the existing note payable and lines of credit agreement the Company has with Radiant Life, LLC. The promissory note bears interest at a rate of 8% annually and was amended on June 12, 2023, to be due on July 29, 2024. As of December 31, 2023, accrued interest on the note totaled $10,702.

Related Party Note Payable and Line of Credit Agreements

As of December 31, 2023, and March 31, 2023, the Company owed $1,304,550 and $1,198,600, respectively, exclusive of accrued interest, under the note payable and line of credit agreement with Kraig T. Higginson, Chairman of the Board of Directors and a stockholder. As of December 31, 2023, the agreement allowed for borrowings of up to $4,600,000. During the nine months ended December 31, 2023, the Company borrowed $140,950 in principal and made repayments on principal of $35,000 on this agreement. The note payable and line of credit agreement incurs interest at 7.5% per annum. As of December 31, 2023, accrued interest on this note totaled $378,967. As per the provision outlined in Note 4, and in conjunction with the $140,950 borrowed during the nine months ended December 31, 2023, the Company also agreed to provide the Chairman of the Board of Directors and a stockholder, with warrants for 281,900 shares of common stock, vested immediately upon issuance, having an exercise price of $1.05 per share, and a 5-year exercise window from the dates of issuance. Subsequent to quarter end, as per the provision outlined in Note 4, the Chairman of the Board of Directors agreed to extend the note payable and line of credit to November 30, 2025. The Company agreed to provide the Chairman of the Board of Directors with warrants to purchase 772,275 shares of common stock (see Note 8). During the nine months ended December 31, 2023, the company amortized $37,226 of debt discount, leaving a remaining debt discount balance of $53,731 in association with these warrants. The total number of warrants issued to the related party lender was 3,645,950 as of December 31, 2023 (see Note 4 for further details on these warrants).

As of December 31, 2023, and March 31, 2023, the Company owed $1,159,508 and $1,119,508, respectively, in principle under the note payable and lines of credit agreement with Radiant Life, LLC, an entity partially owned by the Chairman of the Board of Directors. The agreement allows for borrowings of up to $2,130,000. The note payable has a due date of the principal and interest on the note of November 30, 2024, or at the immediate time when alternative financing or other proceeds are received. The note payable and line of credit agreement incurs interest at 7.5% per annum and is collateralized by the Company’s NIBS, if any. During nine-months ended December 31, 2023, the Company borrowed $40,000, and made no repayments of principal on this agreement. As of December 31, 2023, accrued interest on this agreement totaled $518,619. As per the provision outlined in Note 4, and in conjunction with the $40,000 borrowed during the nine months ended December 31, 2023, the Company also agreed to provide Radiant Life, LLC, with warrants for 80,000 shares of common stock, vested immediately upon issuance, having an exercise price of $1.05 per share, and a 5-year exercise window from the date’s issuance. Subsequent to quarter end, as per the provision outlined in Note 4, the Radiant Life, LLC agreed to extend the note payable and lines of credit to November 30, 2025. The Company agreed to provide Radiant Life, LLC with warrants to purchase 699,754 shares of common stock (see Note 8). During the nine months ended December 31, 2023, the company amortized $23,618 of debt discount, leaving a remaining debt discount balance of $36,767 in association with existing warrants. The total number of warrants issued to the related party lender was 2,529,262 as of December 31, 2023 (see Note 4 for further details on these warrants).

As of December 31, 2023, the unamortized debt discount on related party notes payable is $90,498.

(7) CONVERTIBLE DEBENTURE AGREEMENT

The Company has entered into an 8% convertible debenture agreement with Satco International, Ltd., that allows for borrowings of up to $3,000,000. The holder originally had the option to convert the outstanding principal and accrued interest to unregistered, restricted common stock of the Company on June 2, 2016. Per the agreement, the number of shares issuable at conversion shall be determined by the quotient obtained by dividing the outstanding principal and accrued and unpaid interest by 90% of the 90-day average closing price of the Company’s common stock from the date the notice of conversion is received; and the price at which the Debenture may be converted will be no lower than $1.00 per share. The original maturity date was June 2, 2016, but was later extended, through a series of extensions, to November 30, 2024. As of December 31, 2023, and March 31, 2023, the Company owed $0 under the agreement, excluding accrued interest. The associated interest of $124,225 is recorded on the balance sheet as an Accrued Expense obligation at December 31, 2023, and March 31, 2023.

(8) SUBSEQUENT EVENTS

Subsequent to quarter end, the Company negotiated with the Chairman of the Board of Directors, Radiant Life, LLC, and Mr. Dickman to extend the due date of the notes payable, lines of credit, and an unsecured promissory note to November 30, 2025. In conjunction with these note extensions, the Company issued 772,275, 699,754, and 563,000 warrants to the Chairman of the Board of Directors, Radiant Life, LLC, and Mr. Dickman, respectively (see Note 4). The exercise price of these warrants was $0.41.