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SUND > SEC Filings for SUND > Form 10-K on 16-Jul-2013All Recent SEC Filings

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Form 10-K for SUNDANCE STRATEGIES, INC.


16-Jul-2013

Annual Report


ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

When used in this Annual Report, the words "may," "will," "expect," "anticipate," "continue," "estimate," "project," "intend," and similar expressions are intended to identify forward-looking statements regarding events, conditions, and financial trends that may affect our future plans of operations, business strategy, operating results, and financial position.
Persons reviewing this Annual Report are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties and that actual results may differ materially from those included within the forward-looking statements as a result of various factors. Such factors are discussed further below under "Trends and Uncertainties," and also include general economic factors and conditions that may directly or indirectly impact our financial condition or results of operations.

Plan of Operation

We are engaged in the business of 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 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. These life insurance interests are anticipated to be held to maturity. Our plan of operation for the next 12 months is to continue the acquisition of these life insurance interests whereby we will acquire the interests in life insurance policies at a discount to their face value for investment purposes. We have begun purchasing net insurance benefits in life insurance policies ("NIBs") in our current period. This is not a market sector without competition, and at present, we are a minor competitor. We will need substantial funds to effectively compete in this industry, anticipated to be approximately $10,000,000 to $15,000,000, and no assurance can be given that we will be able to adequately fund our current and intended operations, whether through revenues generated from our current interest in the NIBs we recently acquired or through debt or equity financing. We may be required to expend not less than approximately $20,596,380 over premiums and servicing costs over the next five years. See the caption "Business" of this Item and the heading "NIBs Contracts at Fiscal Year March 31, 2013" of Part I, Item 1.

We currently estimate proceeds of approximately $45,665,018 on the net insurance benefits owned as of March 31, 2013. This amount is based on the estimated proceeds from polices of $129,038,933 plus the estimated increase on


return of premium policies over the life expectancy of those individuals of $5,182,949 less the senior debt outstanding of $19,145,957, expected premium payments of $42,212,966 over the life expectancies, and estimated expenses and interest of $27,197,941 over the term of the senior debt.

We used a "Deterministic" method to project the cash flows and returns as presented. The model required many assumptions, including, but not limited to the following: (i) 15 year projections; (ii) a distinct number of lives; (iii) a distinct number of policies; (iv) life expectancy tables and projections; (v) premiums; (vi) senior lending fees; (vii) MPIC fees; and (viii) insurance, servicing and custodial fees. While this method of modeling cash flows is helpful in informing us of our general expectation of potential returns that might be produced from our NIBs portfolio, it is by no means any guarantee of such results. The actual performance of these NIBs interests (as well as our future expectations as to what such performance might be) may differ substantially from our expectations, especially if any of the assumptions change or differ from Sundance's initial assumptions. Our portfolio of NIBs at March 31, 2013, contained only 22 policies, though insurance rating agencies have stated that at least 1,000 lives are required to achieve any actuarial stability. Many risk factors beyond these assumptions may result in our expectations being incorrect, as outlined under Part I, Item 1A Risk Factors, commencing on page 17 above; therefore, no assurance can be given that these estimated results will occur.

Results of Operations

Revenue and Cost Recognition

We recognize revenue at the time a settlement closes and collection is reasonably assured.

Operating and General & Administrative Expenses

Operating Expenses

We had no material operations during the period from inception to March 31, 2013, and we have no material operations as of the date of this Annual Report. General and administrative expenses were $53,902 during the period from inception to March 31, 2013. We had professional fees totaling $44,172 during the period from inception to March 31, 2013. Most all of these expenses were legal and accounting fees related to the preparation and filing of reports with the SEC under the Exchange Act.

Other Expenses

Other expenses consist of interest accrued on the note payable of $2,999,000 used to purchase the investment in net insurance benefits. During the period from inception to March 31, 2013, interest expenses have accrued in the amount of $6,577.

Income Taxes

At March 31, 2013, we had no taxable income.

Liquidity and Capital Resources

We have cash assets at March 31, 2013, of $545,417. We have $6,299,000 in investment in net insurance benefits. We have only common stock as our capital resource. We will be reliant upon stockholder loans or private placements of equity to fund any kind of operations. We have secured no sources of loans.
There is no assurance that we will be able to raise any required debt or equity financing.

We raised $33,275 in subscriptions to purchase 33,275,000 shares of our common stock from our founders from our inception and through the end of our current fiscal year ended March 31, 2013; and we also raised an additional $3,872,975 for the sale of 3,762,369 shares of our common stock in a private placement to "accredited investors" under Rule 506 and Regulation D of the SEC prior to March 31, 2013, at $1.0294 per share.


For the period from inception through March 31, 2013, we had net cash used in operating activities of $3,323,323. We used $3,300,000 to purchase the investment in net insurance benefits, including $300,000 for a consulting fee directly associated with this purchase. Net cash provided by financing activities totaled $3,868,740, which represents the funds we received from the private placement through March 31, 2013.

Long-Term Debt

At March 31, 2013, we had no long-term debt. We may borrow money in the future to finance our future operations. Any such borrowing will increase the risk of loss to the investor in the event we are unsuccessful in repaying such loans.

We may issue additional shares to finance our future operations, although we do not currently contemplate doing so. Any such issuance will reduce the control of previous investors and may result in substantial additional dilution to investors purchasing shares from this offering.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements for the two fiscal years ended March 31, 2013, and 2012.

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