Sundance Strategies, Inc. 10-K

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 Legacy Business (Overview): Our historical business model focused on purchasing or acquiring life insurance policies and related residual interests, such as net insurance benefits (NIBs). These NIBs provided us with the right to receive a portion of settlement proceeds from third-party-held policy portfolios, after associated servicing and financing costs. As of the date of this report, we no longer directly hold NIBs or life insurance policies. 25 Current Focus: Since the latter part of fiscal 2021, our efforts have shifted toward providing professional services to specialty finance groups, bond issuers, and aggregators in the life settlement space. Our role includes advising on portfolio construction and applying proprietary analytics to help structure bond offerings secured by life insurance assets and managed cash. We aim to assist clients with asset assembly, cash management, and support for both investment- and non-investment-grade credit ratings. In exchange, we will be reimbursed for structuring expenses, earn an advisory fee upon closing, and retain residual rights to certain underlying assets post-maturity. For the fiscal year ended March 31, 2025, the Company earned no revenue from bond advisory or portfolio consulting services. Management continues to pursue opportunities, but no definitive engagements were in place as of the date of this report. Results of Operations Fiscal year ended March 31, 2025 compared to March 31, 2024 General & Administrative Expenses General and administrative expenses totaled $604,167 and $531,406 during the years ended March 31, 2025, and 2024, respectively. A significant portion of these expenses were professional fees, payroll, and rent. The increase in general and administrative expenses is due to increased professional fees during 2025. Other Income and Expenses During the years ended March 31, 2025 and 2024, we recognized losses on extinguishment of debt totaling $435,199 and $1,047,729, respectively, in connection with related party debt arrangements. The decrease in loss for the year ended March 31, 2025, reflects a lower volume of debt extensions or modifications that resulted in extinguishment accounting treatment compared to the prior year. During the years ended March 31, 2025 and 2024, we recognized gains on the settlement of debt of $0 and $290,000, respectively. The decline in recognized gains during the year ending March 31, 2025 was due to the absence of any debt settlements or negotiated reductions with vendors. For the years ended March 31, 2025, and 2024, interest expense totaled $349,016 and $410,856 , respectively. The decrease in interest expense was a result of less amortization of debt discount during 2025. For the years ended March 31, 2025, and 2024, expenses incurred pursuing potential financing alternatives totaled $215,000 and $135,000, respectively. The increase in financing-related expenses is primarily attributable to increased costs incurred in connection with bond structuring and placement efforts. Income Taxes During the years ended March 31, 2025, and 2024, the Company recorded a net loss before income taxes of $1,603,382 and $1,834,991, respectively. The reduction in net loss is largely due to decrease in losses from extinguishing debt, partially offset by the lack of gain on settlement of debt. 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, 2025, we had $168,648 of cash, compared to $329,860 as of March 31, 2024. As of March 31, 2025, 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 average approximately $50,000, which includes the salary 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, 2025, totaled $446,885, and other accrued liabilities totaled $880,073. We believe that the available capacity under our existing related party lines of credit, together with our current capital resources, will be sufficient to fund our operating and working capital needs for at least the 12-month period following the issuance of these financial statements. 26 2025 Cash Flows Compared to 2024 Cash Flows For the year ended March 31, 2025, we recorded net cash used in operating activities of $916,212, compared to $666,643 during the prior year. The increase in cash used is primarily attributable to a lower non-cash loss on extinguishment of debt in the year ended March 31, 2025, which resulted in a smaller adjustment to reconcile net loss to operating cash. This was partially offset by the absence of a non-cash gain on the settlement of liabilities that had negatively impacted operating cash flow in the year ended March 31, 2024. For the years ended March 31, 2025, and 2024 no cash was used in or provided by investing activities. During the years ended March 31, 2025, and 2024 net cash provided by financing activities was $755,000, and $995,950, respectively. The Company borrowed on new related party promissory notes and existing notes payable and lines-of-credit in the amounts of $180,950 during the year ended March 31, 2024. Additionally, during the years ended March 31, 2025, and 2024, the Company received $805,000 and $850,000 in proceeds raised by issuance of our common stock through private placement memorandums, respectively. Debt At March 31, 2025, we owed $5,354,633, including accrued interest, for debt obligations. We owed $3,290,058 in principal pursuant to notes payable and lines-of-credits from related parties and $300,000 in other notes payable. As of March 31, 2025, one note payable had a principal balance of $1,159,508 and has been extended to be due on November 30, 2026 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 and has been extended to be due November 30, 2026. The third series of related-party promissory notes had a total principal balance of $826,000 and is due on November 30, 2025. The convertible debenture agreement, which has no principal balance due as of March 31, 2025, is open through August 31, 2026. As of June 30, 2025, 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, which assumes the Company will continue to operate and meet its obligations in the ordinary course of business. As the Company does not currently generate revenue, it will need to rely on related party debt financing and/or additional capital raises to meet its financial obligations. Management believes that existing capital resources, along with availability under related party debt agreements and convertible debentures, will be sufficient to fund operations for at least the next 12 months from the issuance date of these financial statements. While related parties have provided informal assurances of continued support—such as maturity extensions and additional credit capacity—no binding commitments are currently in place. Based on these factors, management has concluded that there is no substantial doubt about the Company’s ability to continue as a going concern through June 2026. Contractual Obligations and Contingencies The following table sets forth payments due by period for fixed contractual obligations by maturity date as of March 31, 2025: Maturity Date Total Year Ended March 31, 2026 Year Ended March 31, 2027 Thereafter Debt Obligations (1) $ 3,590,058 $ 1,126,000 $ 2,464,058 $ - Interest Payable $ 1,764,575 $ 600,280 $ 1,164,295 $ - Total $ 5,354,633 $ 1,726,280 $ 3,628,353 $ - (1) Debt Obligations consist of the principal pusuant to the notes payable from related parties and non-related parties (as mentioned above) 27 Critical Accounting Policies and Estimates 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. We estimate forfeitures at the date of grant and revise 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, 2025, and 2024. 28 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. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not Applicable.