NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2022
(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, 2022, which was filed with the SEC on
June 29, 2022. The results from operations for the three and six-month periods ended September 30, 2022, are not necessarily
indicative of the results that may be expected for the fiscal year ended March 31, 2023. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of
operations, stockholders’ equity, and cash flows at June 30, 2022 and for all periods presented herein have been
made.
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.
During
the latter part of the year ended March 31, 2021, we began working closely with bond placement agents and aggregators to establish various
aspects of a proprietary, investment grade bond offering. In this arrangement, we participate 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, we use 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. We provide 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 our advisory role, we are 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, 2022
On
January 1, 2022, we entered into a marketing and consulting agreement with Tradability, LLC (“Consultant”) that requires
us 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 us successfully reaching certain milestones. Further,
the agreement requires us to issue between 1,000,000 and 10,000,000 stock options (which are exercisable into our common stock at prices
between $1.00 to $2.50 per share) contingent upon the Consultant and us 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 we will
be an advisor. As of September 30, 2022 none of the milestones related to the potential issuance of equity have been met.
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, 2022 and 2021, because to do so would be anti-dilutive.
Potentially dilutive securities outstanding as of September 30, 2022 and 2021 are comprised of warrants convertible into 7,250,241 and
4,758,754 shares of common stock, respectively.
New
Accounting Pronouncements
Adopted
During the Six Months Ended September 30, 2022
In
May 2021, the FASB issued ASU 2021-04 Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity Classified
Written Call Options. This ASU clarifies an issuer’s accounting for certain modifications or exchanges of freestanding equity-classified
written call options (for example, warrants) that remain equity classified after modification or exchange. Specifically, it provides
a principles-based framework to determine whether an issuer should recognize the modification or exchange as an adjustment to equity
or an expense. The amendment is effective for fiscal years beginning after December 15, 2021, and interim periods therein. The Company
adopted the new guidance as of April 1, 2022, and used the framework to record modification to the exercise price of equity classified
warrants during the six months ended September 30, 2022.
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, 2022
(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, 2022, the Company had $498 of
cash assets, compared to $267,966 as of March 31, 2022. As of September 30, 2022, the Company had access to draw an additional $4,604,192
on the notes payable, related party (see Note 6) and $3,000,000 on the Convertible Debenture Agreement (See Note 7). For the six months
ended September 30, 2022, the Company’s average monthly operating expenses were approximately $62,500, 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 $13,500 were incurred during the three months ended September 30, 2022. As management continues to explore additional
financing alternatives, beginning October 1, 2022 the Company is expected to spend up to an additional $400,000 on these efforts. Outstanding
Accounts Payable as of September 30, 2022 totaled $665,270. 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 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:
| ● |
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, 2022
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, 2022 and 2021.
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. 6,000,000 of the 8,000,000 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.
Warrants
to Purchase Common Stock
The
Company’s related party lenders consist of: 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 equal to the fair value of the Company’s
common stock on the date of grant, and expire 5 years from the date of issuance.
On
June 20, 2022, the Company amended the agreements with the related party lenders to adjust the exercise price of the warrants issued
in conjunction with extensions of due dates and new monies lent on the outstanding notes payable, related parties from January 5, 2022
to February 5, 2022. The original agreements stated that the exercise price of the warrants issued was $0.05. The amended agreements
adjust the exercise price from $0.05 to $1.05, which is the estimated fair market value of the common stock on the grant dates of the
warrants. The original agreements inadvertently stated an exercise price of $0.05, when the Company had intended to grant warrants with
an exercise price of $1.05. This modification was evaluated and it was determined that the increase in exercise price resulted in a decrease
in the fair value of the warrants issued from January 5, 2022 to February 5, 2022, and therefore no additional warrant expense was required.
SUNDANCE STRATEGIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2022
The
following table summarizes the warrants issued and outstanding as of September 30, 2022:
SCHEDULE
OF WARRANTS ISSUED AND OUTSTANDING
| Exercise Price ($) | | |
Warrants Outstanding | | |
Warrants Exercisable | | |
Weighted Average Remaining Contractual Life (Years) | | |
Proceeds to Company if Exercised | |
| | | |
| | |
| | |
| | |
| |
| | 0.05 | | |
| 3,708,754 | | |
| 3,708,754 | | |
| 2.70 | | |
$ | 185,439 | |
| | 1.00 | | |
| 1,000,000 | | |
| 1,000,000 | | |
| 1.52 | | |
| 1,000,000 | |
| | 1.05 | | |
| 2,534,487 | | |
| 2,534,487 | | |
| 4.51 | | |
| 2,661,211 | |
| | 2.00 | | |
| 50,000 | | |
| 50,000 | | |
| 3.85 | | |
| 100,000 | |
| | 5.00 | | |
| 500,000 | | |
| 500,000 | | |
| 4.32 | | |
| 2,500,000 | |
| | | | |
| 7,793,241 | | |
| 7,793,241 | | |
| | | |
$ | 6,446,650 | |
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 September 6, 2022. 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. On October 19, 2022,
the unsecured promissory note with Satco International, Ltd. was amended to extend the due date from September 6, 2022 to January 6,
2023, 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). As of September 30, 2022 accrued interest on the note totaled
$35,638.
(6)
NOTES PAYABLE, RELATED PARTY
As
of both September 30, 2022, and March 31, 2022, the Company had borrowed $3,001,808, excluding accrued interest, from related parties.
The interest associated with the Notes Payable, Related Party of $905,371 and $767,358 is recorded on the balance sheet as an Accrued
Expense obligation at September 30, 2022 and March 31, 2021, respectively.
Related
Party Promissory Notes
As
of both September 30, 2022 and March 31, 2022, the Company owed $826,000 under the unsecured promissory notes from Mr. Dickman. The promissory
notes bear interest at a rate of 8% annually. The notes are due July 31, 2023, or at the immediate time when alternative financing
or other proceeds are received. During the six months ended September 30, 2022, the Company neither borrowed any additional funds under
this agreement nor made any principal repayments. As of September 30, 2022, accrued interest on the notes totaled $265,727. In the event
the Company completes a successful equity raise all principal and interest on the notes are due in full at that time. As
discussed in Note 4, 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. No new warrants were issued during the six months ended September
30, 2022. The total number of warrants issued to the related party lender was 1,690,583 as of September 30,
2022 (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 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 that is outlined below in this Note 6. The $50,000 promissory
note bears interest at a rate of 8% annually and was due on July 29, 2022. On August 3, 2022, the promissory note was amended to extend
the due date from July 29, 2022 to July 29, 2023, or at the immediate time when alternative financing or other proceeds are received.
As of September 30, 2022, accrued interest on the note totaled $4,917.
SUNDANCE STRATEGIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2022
Related
Party Note Payable and Line of Credit Agreements
As
of both September 30, 2022 and March 31, 2022, the Company owed $1,066,300, 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, 2023 or at the immediate time when alternative financing or other proceeds are received. As of September
30, 2022, the agreement allowed for borrowings of up to $4,600,000. During the six months ended September 30, 2022, the Company
neither borrowed any additional funds under this agreement nor made 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, 2022, accrued interest on this note totaled $262,276. As discussed in Note 4, 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. No new warrants were issued during the six months ended September 30, 2022. The total number of warrants issued to the related
party lender was 2,380,150 as of September 30, 2022 (see Note 4 for further details on these
warrants).
As
of September 30, 2022 and March 31, 2021, the Company owed $1,059,508 in principle under the note payable and lines of credit agreement
with Radiant Life, LLC. The agreement allows for borrowings of up to $2,130,000. The principal and interest on the note are due 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 six months ended September 30,
2022 the Company neither borrowed nor repaid any principal under this agreement. As of September 30, 2022, accrued interest on this agreement
totaled $372,450. As discussed in Note 4, 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. No new warrants were issued during the six
months ended September 30, 2022. The total number of warrants issued to the related party lender was 1,679,508 as of September
30, 2022 (see Note 4 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, 2022. On August 9, 2022, the note was amended to extend the due date from July 5, 2022
to November 30, 2023, 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, 2022 and March 31, 2022, 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, 2022 and March 31, 2022.
(8)
SUBSEQUENT EVENTS
Subsequent
to September 30, 2022, the following events transpired:
On
October 19, 2022, the unsecured promissory note with Satco International, Ltd. was amended to extend the due date from September 6, 2022
to January 6, 2023, 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.
Between
October 4, 2022 and November 8, 2022, the Company borrowed an additional $72,000 under the note payable and lines of credit agreement
with the Chairman of the Board of Directors and a stockholder.
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 144,000
shares of common stock vested immediately upon issuance, with an exercise price of $1.05 per share and a 5-year exercise window from
the date of the extension agreement. The warrants issued have no registration rights.
On November 11, 2022, the unsecured promissory notes from Mr. Dickman were amended to extend the due date from
October 31, 2022 to July 31, 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 Mr.
Dickman with warrants for 399,749 shares of common stock vested immediately upon issuance, with an exercise price of $1.05 per
share and a 5-year exercise window from the date of the extension agreement. The warrants issued
have no registration rights.
