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SUND > SEC Filings for SUND > Form 10-Q on 12-Aug-2013All Recent SEC Filings

Show all filings for SUNDANCE STRATEGIES, INC.

Form 10-Q for SUNDANCE STRATEGIES, INC.


12-Aug-2013

Quarterly Report


Item 2. Management's Discussions and Analysis of Financial Condition and Results of Operations.

Forward-looking Statements

In this Quarterly Report on Form 10-Q, references to "Sundance," the "Company," "we," "us," "our" and words of similar import refer to Sundance Strategies, Inc., a Nevada corporation and its subsidiary, ANEW LIFE, INC., a Utah corporation ("ANEW LIFE"), unless the context requires otherwise.

This Quarterly Report contains forward-looking statements within the meaning of
Section 27A of the Securities Act, and Section 21E of the Exchange Act. In some cases, you can identify forward-looking statements by the following words:
"anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "ongoing," "plan," "potential," "predict," "project," "should," "will," "would," or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this report. These factors include, among others:

our ability to raise capital;

our ability to identify suitable acquisition targets;

our ability to successfully execute acquisitions on favorable terms;

declines in general economic conditions in the markets where we may compete;

unknown environmental liabilities associated with any companies we may acquire; and

significant competition in the markets where we may operate.

You should read any other cautionary statements made in this Quarterly Report as being applicable to all related forward-looking statements wherever they appear in this Quarterly Report. We cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate, and therefore, prospective investors are encouraged not to place undue reliance on forward-looking statements. You should read this Quarterly Report completely, and it should be considered in light of all other information contained in the reports or registration statement that we file with the Securities and Exchange Commission, including all risk factors outlined therein. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.

Plan of Operations

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 began purchasing the net insurance benefits in life insurance policies ("NIBs") during our fiscal year ended March 31, 2013. 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 in fiscal 2013 or through debt or equity financing. We may be required to expend not less than approximately $20,572,390 over premiums and servicing costs over the next five years.

We currently estimate proceeds of approximately $45,665,028 on the NIBs owned as of June 30, 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 $20,727,306, expected premium payments of $41,229,556 over the life expectancies, and estimated expenses and interest of $26,599,992 over the term of the senior debt. We anticipate that over the next 15 years that, during years 1-5, policies representing 11.9% of total death benefits will mature; during years 6-11, policies representing 70.4% of total death benefits will mature; and during the remaining years 12-15, policies representing 17.7% of the total death benefits will mature. These percentages


all assume that the policies mature according to the life expectancy of the underlying insured as of the date they were originally underwritten, without any adjustments for change in health or mortality improvement factors.

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. This portfolio of contains 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 of our Annual Report; therefore, no assurance can be given that these estimated results will occur.

We advanced payments to purchase future additional life settlement products during the quarter ended June 30, 2013, and if these life settlement products become "Qualified NIBs" as defined in the acquisition documents and as discussed in Part II, Item 5, below, we will also utilize the "Deterministic" method to estimate what our proceeds from these "Qualified NIBs" may be, all subject to the same assumptions, qualifications and risks referenced above. These life settlement products are not included in the estimates above because we have not been delivered the "Qualified NIBs" from which such calculations would be made.

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 three months ended June 30, 2013, and we have no material operations as of the date of this Quarterly Report. General and administrative expenses were $915,075 during the three months ended June 30, 2013. We had professional fees totaling $118,790 during the three months ended June 30, 2013. Most all of these expenses were legal and accounting fees related to the preparation and filing of reports with the Securities and Exchange Commission (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 our NIBs. During the three months ended June 30, 2013, interest expenses have accrued in the amount of $30,073.

Income Taxes

At June 30, 2013, we had no taxable income.

Liquidity and Capital Resources

We have cash assets at June 30, 2013, of $1,258,527. We have $6,299,000 in investment in NIBs and have advanced $5,797,700 for 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 or debt to fund any future 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.

On April 8, 2013, our Board of Directors approved a private offering of up to 3,000,000 common shares of our common stock, also comprised of "restricted securities" under SEC Rule 144 to "accredited investors" only at $5.00 per share. The purpose of the offering is to acquire additional NIBs or other life settlement products. During the quarter ended June 30, 2013, we had received $7,320,000 for 1,464,000 common shares at $5.00 per share; paid $400,000 of the $560,000 due in


introduction fees; and agreed to issue two year warrants to acquire 70,000 shares of our common stock at an exercise price of $5.00 per share.

For three months ended June 30, 2013, we had net cash used in operating activities of $6,238,665. We used $5,797,700 as an advancement to purchase the investment in NIBs under the Del Mar ATA. Net cash provided by financing activities totaled $6,951,775, which represents the funds we received from the private placement through June 30, 2013.

Long-Term Debt

At June 30, 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.

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