Item 7. Management’s Discussion and Analysis
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-looking
Statements
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. Reference is also made to the caption “Forward-Looking Statements” at the forepart of this Annual Report, which
information is incorporated herein by reference.
Overview
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
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.”
We
currently do not hold life settlement or life insurance policies but, rather, previously held a contractual right to receive the net
insurance benefits, or “NIBs”, from a portfolio of life insurance policies held by a third party (“the Owners”
or “the Holders”). These NIBs represented an indirect, residual ownership interest in a portfolio of individual life insurance
policies, and they allowed us to receive a portion of the settlement proceeds from such policies, after expenses related to the acquisition,
financing, insuring and servicing of the policies underlying our NIBs have been paid.
NIBs
are generally sold by an entity that holds the underlying life settlement or life insurance policies, either directly or indirectly through
a subsidiary, such an entity being referred to herein as a “Holder.” A Holder, either directly or through a wholly owned
subsidiary, purchases life insurance policies either from the insured or on the secondary market and aggregates them into a portfolio
of policies. At the time of purchase, the Holder also (i) contracts with a service provider to manage the servicing of the policies until
maturity, (ii) consider purchasing mortality re-insurance (“MRI”) coverage under which payments will be made to the Holder
in the event the insurance policies do not mature according to actuarial life expectancies, and (iii) arranges financing to cover the
initial purchase of the insurance policies, the servicing of the life insurance policies until maturity and the payment of the MRI premiums.
The financing obtained by the Holder for a portfolio of life settlement or life insurance policies is secured by the insurance policies
for which the financing was obtained. After a Holder purchases policies, aggregates them into a portfolio and arranges for the servicing,
MRI coverage and financing, the Holder contracts to sell NIBs related to the policies, which gives the holder of the NIBs the right to
receive the proceeds from the settlement of the insurance policies after all of the expenses related to such policies have been paid.
When an insurance policy underlying our NIBs comes to maturity, the insurance proceeds are first used to pay expenses associated with
such policy. Once all of the expenses have been paid, the Holder will retain a small percentage of the proceeds and then will pay the
remaining insurance proceeds to us.
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During
the latter part of the fiscal year ended March 31, 2021, we began developing an additional business offering, providing professional
services to specialty structured finance groups, bond issuers and life settlement aggregators. We have 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, we apply 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. Our clients may include bond issuers, bond investors, or other structured finance product
issuers. We develop 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. Our goal is to deliver
long-term value and profitability to shareholders by growing our 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.
On
January 1, 2022, we entered into a marketing and consulting agreement with Tradability, LLC (“Consultant”) that require d
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 July 1, 2024 none of the milestones related
to the potential issuance of equity have been met. This Company has terminated this agreement with Tradability, and no future payments are expected in association with
this terminated agreement.
Results
of Operations
Fiscal
year ended March 31, 2024 compared to March 31, 2023
General
& Administrative Expenses
General
and administrative expenses totaled $531,406 and $682,283 during the years ended March 31, 2024, and 2023, respectively. A significant
portion of these expenses were professional fees, payroll, and rent expenses. The reduction in general and administrative expenses is because we had reduced
professional fees during 2024.
Other
Income and Expenses
During
the years ended March 31, 2024, and 2023, we recognized $1,047,729, and $1,745,808, respectively, as loss on extinguishment of debt in
conjunction with related party debt. The reduction in loss on extinguishment of debt is because we extinguished less debt at a loss during
2024.
For
the years ended March 31, 2024, and 2023, interest expense totaled $410,856 and $329,890, respectively. The increase in interest expense
was a result of higher loan balances, and $67,890 recognized on amortization of debt discount. For the years ended March 31, 2024, and
2023, expenses incurred pursuing potential financing alternatives totaled $135,000 and $54,000, respectively. The increase in financing
expense is due to expenses incurred in pursuing bonding.
Income
Taxes
During
the years ended March 31, 2024, and 2023, the Company recorded a net loss before income taxes of $1,834,991 and $2,811,981,
respectively. The reduction in net loss is largely due to decrease in losses from extinguishing debt.
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Liquidity
and Capital Resources
Since
our inception our operations have been primarily financed through sales of equity instruments, debt financing, lines of credit and notes
payable from related parties and the issuance of convertible debentures. As of March 31, 2024, we had $329,860 of cash, compared to $553
as of March 31, 2023. As of March 31, 2024, the Company had access to draw an additional $4,265,942 on the notes payable, related party,
and $3,000,000 on the Convertible Debenture Agreement. Our monthly expenses are approximately $44,000, which includes salaries of our
employee, policy servicing expenses, consulting agreements and contract labor, general and administrative expenses and estimated legal
and accounting expenses. Outstanding Accounts Payable as of March 31, 2024, totaled $447,862, and other accrued liabilities totaled $1,790,940
. We believe that our availability under our existing lines of credit with related parties, our existing capital resources, together
with the issuance of additional notes payable and convertible debentures will be sufficient to fund our operating working capital requirements
for the 12 months from the issuance of the financial statements.
2024
Cash Flows Compared to 2023 Cash Flows
For
the year ended March 31, 2024, we recorded net cash used in operating activities of $666,643, compared to $459,713 used in operating
activities during the year ended March 31, 2023.
For
the years ended March 31, 2024, and 2023 no cash was used in or provided by investing activities.
During
the years ended March 31, 2024, and 2023 net cash provided by financing activities was $995,950, and $192,300, respectively. Financing
activities for both years consisted of borrowing on new related party promissory notes and existing notes payable and lines-of-credit
in the amounts of $180,950, and $192,300, respectively. Additionally, during the years ended March 31, 2024, and 2023, the Company received
$850,000 and $0 in proceeds raised by issuance of our common stock through private placement memorandums, respectively.
Debt
At
March 31, 2024, we owed $5,205,617, including accrued interest, for debt obligations. We owed $3,340,058 in principal pursuant to notes
payable and lines-of-credits from related parties and $300,000 in other notes payable. As of March 31, 2024, one note payable had a principal
balance of $1,159,508 and is due on November 30, 2025, and a line-of-credit had a principal balance of $50,000 and is due on July 29,
2024, or when the Company completes a successful equity raise (if earlier than the due date), at which time principal and interest is
due in full. The second note payable and line-of-credit had a principal balance of $1,304,550, and the line of credit is due November
30, 2025. The third series of related-party promissory notes had a total principal balance of $826,000 and has
been extended to be due on November 30, 2025. The convertible debenture agreement, which has no principal balance due as of March
31, 2024, is open through November 30, 2024. As of July 1, 2024, there was $4,265,942 available under the lines-of-credit we currently
have with related parties and $3,000,000 available under the 8% convertible debenture agreement.
We
may borrow money in the future to finance our operations but can make no guarantees that such credit will be made available to us. Any
such borrowing will increase the risk of loss to the debt holder in the event we are unsuccessful in repaying such loans.
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. As the company has no current source of revenues, in order to
meet financial obligations, the Company will need to continue to rely on debt financing from related parties and/or raise additional
capital. 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 June 2025. 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. The Company also continues to evaluate other debt and equity financing opportunities.
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Contractual
Obligations and Contingencies
The
following table sets forth payments due by period for fixed contractual obligations by maturity date as of March 31, 2024:
Maturity Date
Total
Year Ended March 31, 2025
Year Ended March 31, 2026
Thereafter
Debt Obligations (1)
$ 3,640,058
$ 350,000
$ 3,290,058
$ -
Interest Payable
$ 1,565,559
$ 207,821
$ 1,357,738
$ -
Total
$ 5,205,617
$ 557,821
$ 4,647,796
$ -
(1)
Debt
obligations consist of the principal pursuant to the notes payable from related parties and non-related parties (as mentioned above)
Critical
Accounting Policies and Estimates
The
preparation of our financial statements requires that we make estimates and judgments. We base these on historical experience and on
other assumptions that we believe to be reasonable.
Estimates,
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Stock
Based Compensation and Financing Costs , we measure stock-based compensation expense related to employee stock-based awards and stock
based expense associated with certain financing costs based on the estimated fair value of the awards as determined on the date of grant
and is recognized as expense over the remaining requisite service period or vesting period of the warrant. We utilize the Black-Scholes
pricing model to estimate the fair value of stock options issued as compensation and warrants issued as financing costs. The Black-Scholes
model requires the input of highly subjective and complex assumptions, including the estimated fair value of our common stock on the
date of grant, the expected term of the stock option and warrant, and the expected volatility of our common stock over the period equal
to the expected term of the grant or warrant. Uncontrollable uncertainties, such as fluctuation in interest rates, can have an effect
on our Black-Scholes estimate calculations. Such fluctuations and other unforeseen changes in inputs could have a material impact on
the general and administrative expenses within our financial statements. Our estimates forfeitures at the date of grant and revises the
estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
Fair
Value, 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.
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.
We
did not have any transfers of assets and liabilities between Levels 1, 2 and 3 of the fair value measurement hierarchy during the years
ended March 31, 2024, and 2023.
Our
recorded values of cash and cash equivalents, accounts payable and accrued liabilities approximate their fair values based on their short-term
nature. The recorded values of the Notes Payable, Related Parties and Convertible Debenture approximates the fair values as the interest
rate approximates market interest rates.
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