The accompanying notes are an integral part of these
condensed consolidated financial statements.
The accompanying notes are an integral part of these
condensed consolidated financial statements.
The accompanying notes are an integral part of these
condensed consolidated financial statements.
The accompanying notes are an integral part of these
Condensed Consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2021
(1) BASIS OF PRESENTATION, ORGANIZATION AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States
(“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim
financial reporting and reflect the financial position, results of operations and cash flows of the Company. Certain information and note
disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to
such rules and regulations. As such, these unaudited condensed consolidated financial statements should be read in conjunction with the
audited financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended
March 31, 2021, which was filed with the SEC on June 29, 2021. The results from operations for the three-month period ended September
30, 2021, are not necessarily indicative of the results that may be expected for the fiscal year ended March 31, 2022.
The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent
amounts in the Company’s financial statements and the accompanying notes. Actual results could materially differ from those estimates.
Organization and Nature of
Operations
Sundance Strategies, Inc. (formerly
known as Java Express, Inc.) was organized under the laws of the State of Nevada on December 14, 2001, and engaged in the retail selling
of beverage products to the general public until these endeavors ceased in 2006; it had no material business operations from 2006, until
its acquisition of ANEW LIFE, INC. (“ANEW LIFE”), a subsidiary of Sundance Strategies, Inc. (“Sundance Strategies”,
“the Company”, “we” or “our”).
Our historical business model
has focused on purchasing or acquiring life insurance policies and residual interests in or financial products tied to life insurance
policies, including notes, drafts, acceptances, open accounts receivable and other obligations representing part of or all of the sales
price of insurance, life settlements and related insurance contracts being traded in the secondary marketplace, often referred to as the
“life settlements market.”
During the latter part of the
fiscal year ended March 31, 2021, the Company began developing an additional business offering, providing professional services to specialty
structured finance groups, bond issuers and life settlement aggregators. The Company has now assembled an experienced team from the life
settlement marketplace, as well as from other areas such as financial services and public financial markets. As a professional services
provider, the Company applies industry best practices to advise on the selection of specific portfolios of life insurance policies that
are tailored to meet the needs of its clients. The Company’s clients may include bond issuers, bond investors, or other structured
finance product issuers. The Company develops strategies and methodologies which include the acquisition of life insurance portfolios,
then uses common structured finance techniques and proprietary analytics to structure bonds for issuances, including principal protected
bonds. The Company’s goal is to deliver long-term value and profitability to shareholders by growing the Company’s professional
services business and asset base, resulting in the ability to pay dividends to its shareholders.
Most recently the Company began
working closely with bond placement agents and aggregators to establish various aspects of a proprietary, investment grade bond offering.
In this arrangement, the Company participates as the sole originator in the role of structuring and advising on the structure of the proprietary
bond instrument. Included in the role of structuring financial assets, the Company uses proprietary analytics to establish the makeup
of the rated instrument, including but not limited to, life settlement assets (life insurance policies) and managed cash, and implements
a process of selective assembly of the underlying assets and cash management that will meet the policy requirements and analytics. The
Company provides current and ongoing resources for all analytics, as well as advisement support for the investment and non-investment
grade ratings for the managed asset pool and the managed cash accounts. In its advisory role, the Company is reimbursed for all expenses
associated with the structuring and preparation of any bond offering, will receive an advisory payment upon the closing of any bond offering,
and then will hold residual rights on the balance of assets once the bond is retired.
SUNDANCE STRATEGIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2021
During the quarter ended June
30, 2021, the Company and US Capital Global Securities LLC, an affiliate of US Capital Global, entered into an arrangement wherein the
Company is the lead advisor and lead originator of tailored life insurance portfolios to be used in a life insurance-linked bond offering
(“bond offering”) of between $250 million to $500 million. US Capital Global Securities LLC is the lead placement agent and
is marketing the bond offering on behalf of the issuer on a best-efforts basis to qualified investors. The Company has worked with Egan
Jones rating agency to obtain a minimum of BBB plus to an A minus rating on the bond offering. This initial rating is based upon a sample
portfolio of life settlement assets similar to those expected to be utilized in the bond offering. Once a percentage of the bond offering
is in escrow, then the actual life settlement portfolios will be purchased and held until the bond offering closes. Once the final group
of assets are assembled, then a final rating will be obtained. The Company has engaged a licensed asset manager, whose projected returns
will be approved by the rating agency. Important for the success of the bond is the treatment of the various cash accounts that will support
the bond. The two primary accounts will be the Investment account and the Cash Reserve account. These accounts will represent approximately
40% of the total cash raised from the bond offering. The Investment and Cash Reserve accounts are projected to produce sufficient annual
returns to support the cost associated to maintain the bonds. A nationally recognized trust manager has been engaged to insure all the
workings of the bond are handled properly and timely. An actuarial company has also been engaged to provide the modeling needed for the
rating agency, asset manager and bond issuer. For services provided, the Company will receive a fee upon the closing on the bond offering
and will also hold a residual monetary right to cash flows from the life settlement assets once the bond is retired.
Significant Accounting Policies
There have been no changes to
the significant accounting policies of the Company from the information provided in Note 2 of the Notes to Consolidated Financial Statements
in the Company’s most recent Form 10-K, except as discussed below.
Basic and Diluted Net Income (Loss) Per Common
Share
Basic net loss per common share
is computed by dividing net loss by the weighted average number of common shares outstanding during the periods presented using the treasury
stock method. Diluted net loss per common share is computed by including common shares that may be issued subject to existing rights with
dilutive potential, when applicable. Potential dilutive common stock equivalents are primarily comprised of potential dilutive shares
resulting from convertible debt agreements and common stock warrants. Potentially dilutive shares resulting from convertible debt agreements
are evaluated using the if-converted method. Potentially dilutive securities are not included in the calculation of diluted net loss per
share for the three and six months ended September 30, 2021 and 2020, because to do so would be anti-dilutive. Potentially dilutive securities
outstanding as of September 30, 2021 and 2020 are comprised of warrants convertible into 4,758,754 and 2,133,000 shares of common stock,
respectively.
New Accounting Pronouncements
Not Yet Adopted
The Company has reviewed all recently
issued, but not yet adopted, accounting standards, in order to determine their effects, if any, on its results of operations, financial
position or cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on
its financial statements.
SUNDANCE STRATEGIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2021
(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 September 30, 2021, the Company had $939
of cash assets, compared to $21,179
as of March 31, 2021. As of September 30, 2021, the Company had access to draw an additional $4,704,192
on the notes payable, related party (see Note 6) and $2,700,000
on the Convertible Debenture Agreement (See Note 7). For the six months ended September 30, 2021, the Company’s average
monthly operating expenses were approximately $70,000,
which includes salaries of our employees, consulting agreements and contract labor, general and administrative expenses and legal and
accounting expenses. The Company anticipates the average monthly expenses of $70,000
to decrease by approximately $6,000
over the next 12 months, resulting in ongoing, average monthly expenses of approximately $64,000.
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 $10,000
were incurred during the three months ended September 30, 2021. As management continues to explore additional financing alternatives,
beginning October 1, 2021 the Company is expected to spend up to an additional $400,000
on these efforts. Outstanding Accounts Payable as of September 30, 2021 totaled $551,216.
Management has concluded that its existing capital resources and availability under its existing convertible debentures and debt agreements
with related parties will be sufficient to fund its operating working capital requirements for at least the next 12 months, or through
November 2022. 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 outbreak of COVID-19 originated
in Wuhan, China, in December 2019 and has since spread to multiple countries, including the United States and several European
countries. On March 11, 2020, the World Health Organization declared the outbreak a pandemic. The COVID-19 pandemic is affecting the
United States and global economies and may affect the Company’s operations and those of third parties on which the Company relies.
While the potential economic impact brought by, and the duration of, the COVID-19 pandemic is difficult to assess or predict, the impact
of the COVID-19 pandemic on the global financial markets may reduce the Company’s ability to access capital, which could negatively
impact the Company’s short-term and long-term liquidity. The ultimate impact of the COVID-19 pandemic is highly uncertain and subject
to change. The Company does not yet know the full extent of potential delays or impacts on its business, financing or other activities
or on healthcare systems or the global economy as a whole. However, these effects could have a material impact on the Company’s
liquidity, capital resources, operations and business and those of the third parties on which we rely.
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:
|
●
|
Level 1: Quoted prices in active markets for identical assets and liabilities.
|
|
|
|
|
●
|
Level 2: Observable inputs other than Level 1 quoted prices, such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
|
|
|
|
|
●
|
Level 3: Unobservable inputs that are supported by little or no market activity. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques as well as instruments for which the determination of fair value requires significant management judgment or estimation.
|
SUNDANCE STRATEGIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2021
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 six months ended September 30,
2021 and 2020.
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
On May 4, 2021, the Company issued
1,200,000 shares of the Company’s common stock to members of the Board of Directors in lieu of director compensation. The stock
awards vested 25% on the date of grant and the remainder of the shares vested equally over the three months following the date granted.
Using a fair value stock price of $0.062 per share, the transaction resulted in a compensation expense of $73,920, of which $55,440 was
recognized during the three months ended June 30, 2021, and the remainder was recognized during the three months ending September 30,
2021.
Warrants to Purchase Common
Stock
The
following table summarizes the changes in warrants outstanding of the Company during the six months ended September 30, 2021:
SCHEDULE OF WARRANT OUTSTANDING
|
|
|
Number of Warrants
|
|
|
Weighted Average Exercise Price
($)
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2021
|
|
|
3,488,754
|
|
|
$
|
0.05
|
|
|
Granted
|
|
|
1,270,000
|
|
|
$
|
0.87
|
|
|
Outstanding at September 30, 2021
|
|
|
4,758,754
|
|
|
$
|
0.27
|
|
During
the fiscal year ended March 31, 2021, the Company’s related party lenders consisting of: the Chairman of the Board of
Directors and a stockholder, Radiant Life, LLC and Mr. Dickman, the holder of the related party unsecured promissory notes, all
amended their agreements to 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 have an exercise price of $0.05 and
expire 5 years from the date of issuance.
During the six months ended
September 30, 2021, the Company issued 200,000 warrants to Radiant Life, LLC and 20,000 warrants to the Chairman of the Board of Directors
and a stockholder in conjunction with monies borrowed during the period (see Note 6) per the terms outlined above.
On
April 6, 2021, the Company borrowed $300,000
under an unsecured
promissory note with Satco International, Ltd. (see Note 5). In conjunction with this note, the Company issued a warrant 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. The
value of the warrants on the date of grant, as calculated by the Black-Scholes-Merton valuation model, was not significant. The inputs
used in this calculation included a fair value of $0.062
per share, a risk-free rate of 0.35%,
volatility of 50.3%
and a dividend rate of 0%.
On
July 29, 2021, the Company borrowed an additional $50,000
from Radiant Life, LLC, a related party. In conjunction with this specific loan event, a one-time agreement specifies that
the associated warrants issued totaled 50,000,
have an exercise price of $2.00,
and expire in 5
years.
The
following table summarizes the warrants issued and outstanding as of September 30, 2021:
SCHEDULE
OF WARRANTS ISSUED AND OUTSTANDING
|
Exercise Price ($)
|
|
|
Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
|
Weighted Average Remaining Contractual
Life (Years)
|
|
|
Proceeds to Company if Exercised
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.05
|
|
|
|
3,708,754
|
|
|
|
3,708,754
|
|
|
|
3.93
|
|
|
|
185,438
|
|
|
|
1.00
|
|
|
|
1,000,000
|
|
|
|
1,000,000
|
|
|
|
2.52
|
|
|
|
1,000,000
|
|
|
|
2.00
|
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
4.84
|
|
|
|
100,000
|
|
|
|
|
|
|
|
4,758,754
|
|
|
|
4,758,754
|
|
|
|
|
|
|
|
1,285,438
|
|
The
estimated fair value of the warrants on the date of grant, as calculated by the Black-Scholes-Merton valuation model, was not significant.
The average remaining outstanding life of the warrants as of March 31, 2021, was 3.47
years. 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.
SUNDANCE STRATEGIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2021
(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 is due October 6, 2021. Subsequent to September 30, 2021, the unsecured promissory
note with Satco International, Ltd. was amended to extend the due date from October 6, 2021 to January 6, 2022, or
at the immediate time when alternative financing or other proceeds are received. This extension has 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. 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. As of September 30, 2021, accrued interest on the note totaled $11,638.
(6) NOTES PAYABLE, RELATED PARTY
As of September 30, 2021, and
March 31, 2021, the Company had borrowed $2,901,808 and $2,741,808 excluding accrued interest, respectively, from related parties. The
interest associated with the Notes Payable, Related Party of $635,765 and $513,665 is recorded on the balance sheet as an Accrued Expense
obligation at September 30, 2021 and March 31, 2021, respectively.
Related Party Promissory Notes
As of both September 30, 2021 and March 31, 2021, the
Company owed $826,000 under the unsecured promissory notes from Mr. Glenn S. Dickman, a stockholder and member of the Board of Directors.
The promissory notes bear interest at a rate of 8% annually. The notes are due on November 30, 2021, or at the immediate time when alternative
financing or other proceeds are received. During the six months ended September 30, 2021, the Company neither borrowed any additional
funds under this agreement nor made any principal repayments. As of September 30, 2021, accrued interest on the notes totaled $181,800.
In the event the Company completes a successful equity raise all principal and interest on the notes are due in full at that time.
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 on the date of the agreement, 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
is due on July 29, 2022. In conjunction with this specific loan event, the agreement awards Radiant Life, LLC with 50,000 common stock
warrants, which have an exercise price of $2.00, and expire in 5 years (see Note 4). As of September 30, 2021, accrued interest on the
note totaled $695.
Related Party Note Payable and Line of Credit Agreements
As
of September 30, 2021 and March 31, 2021, the Company owed $1,066,300 and
$1,056,300,
exclusive of accrued interest, under the note payable and line of credit agreement with the Chairman of the Board of Directors and a
stockholder. The note is due November
30, 2022 or at the immediate time when alternative financing or other proceeds are received. As of September
30, 2021, the agreement allowed for borrowings of up to $4,600,000.
During the six months ended September 30, 2021, the Company borrowed an additional $10,000 under
the agreement and did not make any principal repayments. The note payable and line of credit agreement incurs interest at 7.5%
per annum and are collateralized by the Company’s NIBS, if any. As of September 30,
2021, accrued interest on this note totaled $182,304.
As discussed in Note 5, a provision to the lending agreement provides the related party lender with common stock warrants upon the
lenders extension of a maturity due date or upon the loaning of additional monies. During the six months ended September 30, 2021,
the Company issued 20,000 warrants
for $10,000 borrowed
during the period. The total number of warrants issued to the related party lender was 1,727,000 as
of September 30, 2021 (see Note 5 for further details on these warrants). These
warrants have an exercise price of $0.05 per
share and have a 5-year
exercise window from the respective dates of issuance.
SUNDANCE STRATEGIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2021
As of
September 30, 2021 and March 31, 2021, the Company owed $959,508 and $859,508 in principle, respectively, 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 principal and interest on the note are due November 30, 2022 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 the six months ended September 30, 2021, the Company borrowed an additional $100,000 under
the agreement and did not make any principal repayments. As of September 30, 2021, accrued interest on this agreement totaled $270,966.
As discussed in Note 5, a provision to the lending agreement provides the related party lender with common stock warrants upon the lenders
extension of a maturity due date or upon the loaning of additional monies. Under the existing agreement, 200,000 warrants were issued
for $100,000 borrowed during the six months ended September 30, 2021. These warrants have an exercise price of $0.05 per share and have
a 5-year exercise window from the respective dates of issuance.
The total
number of warrants issued to the related party lender, including the warrants issued in conjunction with the one-time lending event, was
829,754 as of September 30, 2021 (see Note 5 for further details on these warrants).
(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 July
5, 2021. On August 9, 2021, the note was amended to extend the due date from July 5, 2021
to November 30, 2021, or at the immediate time when alternative financing or other proceeds are received. This extension
has no bearing on the warrants that were issued in conjunction with the original promissory note.
As of September 30, 2021 and March
31, 2021, 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 September 30, 2021 and March 31, 2021.
(8) SUBSEQUENT EVENTS
Subsequent to September 30, 2021,
the following events transpired:
On November 5, 2021,
the Company issued a private placement memorandum offering to raise up to $500,000
through the issuance of restricted shares of the Company’s common stock (par value $0.001)
to qualified investors. As of November 15, 2021, the Company has received a subscription agreement from an introduction through
related parties, which is a business association of a stockholder for 40,000
common shares at a purchase price of $5
per share, including 200,000
warrants exercisable at $5
per share over the next five
years. Proceeds to the Company totaled $200,000.
On
November 9, 2021 the unsecured promissory note with Satco International, Ltd. (see Note 5) was amended to extend the due date from October
6, 2021 to January 6, 2022, or at the immediate time when alternative financing or other proceeds are received. This extension has no
bearing on the warrants that were issued in conjunction with the original promissory note.