SUND Sundance Strategies Inc (QB)

Item 1. Financial Statements (Unaudited)

SUNDANCE STRATEGIES, INC. AND SUBSIDIARY

Condensed Consolidated Balance Sheets

(Unaudited)

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.

(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 December 31, 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.

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 nine months ended December 31, 2021 and 2020, because to do so would be anti-dilutive. Potentially dilutive securities outstanding as of December 31, 2021 and 2020 are comprised of warrants convertible into 4,958,754 and 3,488,754 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.

(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, 2021, the Company had $53,393 of cash assets, compared to $21,179 as of March 31, 2021. As of December 31, 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 nine months ended December 31, 2021, the Company’s average monthly operating expenses were approximately $50,000, which includes salaries of our employees, 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 $10,200 were incurred during the three months ended December 31, 2021. As management continues to explore additional financing alternatives, beginning January 1, 2022 the Company is expected to spend up to an additional $400,000 on these efforts. Outstanding Accounts Payable as of December 31, 2021 totaled $557,222. 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 February 2023. 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:

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, 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 partially recognized during the three months ended June 30, 2021, and the remainder was recognized during the three months ending September 30, 2021.

On October 29, 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. On November 5, 2021, the Company received a subscription agreement from an investor, for 40,000 common shares at a purchase price of $5 per share, including 200,000 warrants exercisable at $5 per share, vested immediately upon issuance, with a five year expiration. Proceeds to the Company totaled $200,000.

Warrants to Purchase Common Stock

The following table summarizes the changes in warrants outstanding of the Company during the nine months ended December 31, 2021:

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 vested immediately upon issuance, have an exercise price of $0.05 and expire 5 years from the date of issuance.

During the nine months ended December 31, 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, vested immediately upon issuance, 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, vested immediately upon issuance, have an exercise price of $2.00, and expire in 5 years.

On November 5, 2021, the Company issued 40,000 common shares of its common stock to an investor at a purchase price of $5 per share, including 200,000 warrants exercisable at $5 per share, vested immediately upon issuance, with a five year expiration. Proceeds to the Company totaled $200,000.

The following table summarizes the warrants issued and outstanding as of December 31, 2021:

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 December 31, 2021, was 3.28 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.

(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 January 6, 2022. Subsequent to December 31, 2021, the unsecured promissory note with Satco International, Ltd. was amended to extend the due date from January 6, 2022 to April 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. (see note 7). 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 December 31, 2021, accrued interest on the note totaled $17,688.

(6) NOTES PAYABLE, RELATED PARTY

As of December 31, 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 $700,960 and $513,665 is recorded on the balance sheet as an Accrued Expense obligation at December 31, 2021 and March 31, 2021, respectively.

Related Party Promissory Notes

As of both December 31, 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 were due on November 30, 2021, and subsequent to December 31, 2021 was extended to October 31, 2022, or at the immediate time when alternative financing or other proceeds are received. During the nine months ended December 31, 2021, the Company neither borrowed any additional funds under this agreement nor made any principal repayments. As of December 31, 2021, accrued interest on the notes totaled $202,326. 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 December 31, 2021, accrued interest on the note totaled $1,033.

Related Party Note Payable and Line of Credit Agreements

As of December 31, 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 was due November 30, 2022. Subsequent to December 31, 2021, the agreement was amended to extend the due date from November 30, 2022 to November 30, 2023, or at the immediate time when alternative financing or other proceeds are received. As of December 31, 2021, the agreement allowed for borrowings of up to $4,600,000. During the nine months ended December 31, 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 December 31, 2021, accrued interest on this note totaled $202,461. 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 nine months ended December 31, 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 December 31, 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.

As of December 31, 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 were due November 30, 2022. Subsequent to December 31, 2021, the agreement was amended to extend the due date from November 30, 2022 to November 30, 2023, 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 nine months ended December 31, 2021, the Company borrowed an additional $100,000 under the agreement and did not make any principal repayments. As of December 31, 2021, accrued interest on this agreement totaled $294,445. 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 nine months ended December 31, 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 December 31, 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 December 31, 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 December 31, 2021 and March 31, 2021.

(8) SUBSEQUENT EVENTS

Subsequent to December 31, 2021, the following events transpired:

The Company borrowed an additional $100,000 under the note payable and lines of credit agreement with Radiant Life, LLC and, in conjunction, issued 200,000 warrants.

On January 1, 2022, the Company entered into a marketing and consulting agreement with Tradability, LLC (“Consultant”) that requires the Company to make an initial $100,000 payment and up to an additional $400,000 in the future (which will be financed by the Consultant via a promissory note). The $400,000 obligation is contingent upon the Consultant and the Company successfully reaching certain milestones. Further, the agreement requires the Company to issue between 1,000,000 and 10,000,000 stock options (which are exercisable into the Company’s common stock at prices between $1.00 to $2.50 per share) contingent upon the Consultant and the Company successfully reaching certain milestones. The milestones primarily relate to the Consultant finalizing the tokenization of 500 million non-fungible tokens (“NFTs”) and the successful placement of NFTs with proceeds of between $100 million and $500 million. The proceeds will be used to purchase Life Settlements for which the Company will be an advisor.

On February 2, 2021 the unsecured promissory note with Satco International, Ltd. (see Note 5) was amended to extend the due date from January 6, 2022 to April 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.

On February 7, 2022, the related party note payable and line of credit agreement with Radiant Life, LLC, an entity partially owned by the Chairman of the Board of Directors (see Note 5) was amended to extend the due date from November 30, 2022 to November 30, 2023, 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 agreement, the Company also agreed to provide Radiant Life, LLC with warrants for 649,754 shares of common stock vested immediately upon issuance, with an exercise price of $0.05 per share and a 5-year exercise window from the date of the extension agreement.

On February 7, 2022, the related party note payable and line of credit agreement with the Chairman of the Board of Directors and a stockholder (see Note 5) was amended to extend the due date from November 30, 2022 to November 30, 2023, 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 agreement, the Company also agreed to provide the Chairman of the Board of Directors and a stockholder, with warrants for 653,150 shares of common stock, vested immediately upon issuance, with an exercise price of $0.05 per share and a 5-year exercise window from the date of the extension agreement.

On February 8, 2022, the Company agreed to amend the 8% convertible debenture agreement with Satco International, Ltd. (see Note 7) to extend the due date and conversion rights from November 30, 2022 to November 30, 2023.

On February 10, 2022, the unsecured promissory notes from Mr. Glenn S. Dickman, a stockholder and member of the Board of Directors (see Note 5) were amended to extend the due date from November 30, 2022 to October 31, 2022, 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, the Company also agreed to provide Mr. Dickman with warrants for 488,583 shares of common stock, vested immediately upon issuance, with an exercise price of $0.05 per share and a 5-year exercise window from the date of the extension agreement.