NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
September
30, 2018
(1)
ORGANIZATION AND 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, 2018, which was filed with the SEC on October 16,
2019. The results from operations for the six-month period ended September 30, 2018, are not necessarily indicative of the results
that may be expected for the fiscal year ended March 31, 2019.
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”). The Company is 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.” Since the Company’s inception its operations have been primarily
financed through sales of equity, debt financing from related parties and the issuance of notes payable and convertible debentures.
Currently, the Company is focused on the purchase of net insurance benefit contracts (“NIBs”) based on life settlements
or life insurance policies.
Accounting
Treatment When the Company Holds NIBs
The
Company does not take possession or control of the policies. The owners of the life settlements or life insurance policies (the
“Owners” or “the Holders”) acquire such policies at a discount to their face value. On settlement, the
Company receives the net insurance benefit after all borrowings, interest and expenses have been paid by the Owners out of the
settlement proceeds.
The
Owners are variable interest entities (VIEs), for which the Company has a variable interest, but is not the primary beneficiary.
The Company’s investment in NIBs (see Note 4) were issued by the Owners (i.e. the VIEs). The Company’s maximum exposure
to loss in the variable interest entities is limited to the investment in NIBs balance. The Company does not have the power to
direct activities of the VIEs. Further, the Company does not have the contractual obligation to absorb losses of the VIEs.
The
investment in NIBs is a residual economic beneficial interest in a portfolio of life insurance contracts that have been financed
by an independent third party via a loan from a lender and, in certain cases, insured via a mortality risk insurance product or
mortality re-insurance (“MRI”). Future expected cash flow and positive profits are defined as the net insurance proceeds
from death benefits after senior debt repayment, mortality risk repayment, and service provider or other third-party payments.
SUNDANCE
STRATEGIES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
September
30, 2018
NIBs
are generally in the form of participating debt certificates (“PDC”), and although the two terms are interchangeable,
the Company typically refers to them as NIBs. According to the terms of the PDCs, the PDCs provide both variable and fixed interest
return to the Company from the Owners of the policies in the form of accrued yield. The variable interest varies by individual
PDC, and is calculated as 99% to 100% (depending on the PDC) of the positive profits from the life insurance assets held by the
Owners of the policies. The fixed interest also varies by individual PDC, and is either 1% or 2% per annum of the par value of
the PDCs held by the Company. The NIBs agreements between the Company and the Owners of the policies contain a provision that
allows for the Owners to redeem the NIBs at any point, conditional upon paying to the Company the par value of the NIBs, as well
as any unpaid accrued yield relating to fixed and variable interest. In aggregate, the sum of the par value plus unpaid accrued
interest is in excess of the Company’s initial investment. The Company is not responsible for maintaining premiums or other
expenses related to maintaining the underlying life insurance contracts. Therefore, the investment in NIBs balance on the Company’s
balance sheet does not increase when premiums or other expenses are paid.
The
Company accounted for its investment in NIBs at the initial investment value increased for interest income and decreased for cash
receipts received by the Company and impairment losses. At the time of transfer or purchase of an investment in NIBs, we estimated
the future expected cash flows and determined the effective interest rate based on these estimated cash flows and our initial
investment. Based on this effective interest rate, the Company calculated accretable income, which was recorded as interest income
on investment in NIBs in the statement of operations. Our projections were based on various assumptions that are subject to uncertainties
and contingencies including, but not limited to, the amount and timing of projected net cash receipts, expected maturity events,
counter party performance risk, changes to applicable regulation of the investment, shortage of funds needed to maintain the asset
until maturity, changes in discount rates, life expectancy estimates and their relation to premiums, interest, and other costs
incurred, among other items. These uncertainties and contingencies are difficult to predict and are subject to future events that
may impact our estimates and interest income. As a result, actual results could differ significantly from these projections. Therefore,
subsequent to the purchase and on a regular basis, these future estimated cash flows were evaluated for changes. If the determination
was made that the future estimated cash flows should be adjusted to the point of a material change in revenue, a revised effective
yield was calculated prospectively based on the current amortized cost of the investment, including accrued accretion. Any positive
or adverse change in cash flows would result in a prospective increase or decrease in the effective interest rate used to recognize
interest income. Any significant adverse change in the cash flows that may have resulted in the recognition of an “other-than-temporary
impairment” (“OTTI”), and would be evaluated by the Company accordingly.
We
evaluate the carrying value of our investment in NIBs for impairment on a regular basis and adjust our total basis in the NIBs
using new or updated information that affects our assumptions. We recognized impairment on a NIB contract when the fair value
of the beneficial interest was less than the carrying amount of the investment, plus anticipated undiscounted future premiums
and direct external costs, if any, and if there are adverse changes in cash flow. We had not recognized any impairment on our
investment in NIBs from inception, through the year ended March 31, 2017.
Current
Operations
Between
May 2018 and July 2018, the Owners entered into agreements that completed a strict foreclosure transaction that transferred these
policies from the owners to the lenders in full satisfaction of the loan obligation. As a result of the foreclosure, the Company
has lost its position in the residual benefits of the policies and recognized a $22,950,126 impairment on the NIBs and $1,936,311
impairment of related interest receivable during the year ended March 31, 3018. Management concluded that the foreclosure event
represented the culmination of conditions that provided indications affecting the realization of the Company’s investment
in NIBs assets during the fiscal year ended March 31, 2018. As a result, the Company recorded the impairment of the NIBs during
the fiscal year ended March 31, 2018, and changed the classification of the Investment in NIBs from Held to Maturity to Available
for Sale.
On
July 11, 2018, the Company issued 800,000 common shares in return for obtaining the remaining 27.8% ownership of certain NIBs.
The transaction was recorded at $17,840, the estimated fair value of the common stock issued (which management believes
approximated the fair value of the NIBs received on the date of the transaction). The additional NIBs acquired were reflected
as an increase to the Investment in NIBs account, and the NIBs were immediately impaired on the date of the transaction, bringing
the total impairment recognized on the NIBs to $22,967,966 plus $1,936,311 of impairment on accrued interest receivable.
SUNDANCE
STRATEGIES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
September
30, 2018
At
September 30, 2018, the Company had fully impaired the Investment in NIBs, and the value of those assets were $0.
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. Dilutive common stock equivalents are
primarily comprised of stock options. Potentially dilutive shares resulting from convertible debt agreements are evaluated using
the if-converted method, and such amounts were not dilutive.
For
the six months ended September 30, 2018 and 2017, options to exercise 400,000 shares were excluded because they were anti-dilutive.
For the six months ended September 30, 2017 there were 2,106,875 options outstanding (including the 400,000 shares mentioned above)
that were excluded because their effect would have been antidilutive. During the six months ended September 30, 2018, 1,706,875
options expired.
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 in Note 2, below.
(2)
NEW ACCOUNTING PRONOUNCEMENTS
Adopted
During the Six Months Ended September 30, 2018
The
Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, 2015-14,
2016-8, 10,11 and 12 and 2017-13 – Revenue from Contracts with Customers, which provides a single, comprehensive revenue
recognition model for all contracts with customers. The core principal of the ASUs is that an entity should recognize revenue
when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. The ASUs also requires additional disclosure about the nature, amount,
timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes
in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In July 2015, the FASB deferred the effective
date of this standard. As a result, the standard and related amendments is effective for the Company for its fiscal year beginning
April 1, 2018, including interim periods within that fiscal year. Early application is permitted, but not before the original
effective date of April 1, 2017. Entities are allowed to transition to the new standard by either retrospective application or
recognizing the cumulative effect. The ASUs are not applicable to securitized beneficial interests that derive accreted yields
and, therefore the Company will continue to follow the guidance in ASC 325-40. The adoption of this standard did not have an impact
on the consolidated financial statements.
In
January 2016, the FASB issued ASU 2016-01 regarding Financial Instruments, which amended guidance on the classification and measurement
of financial instruments. Under the new guidance, entities will be required to measure equity investments that are not consolidated
or accounted for under the equity method at fair value with any changes in fair value recorded in net income, unless the entity
has elected the new practicability exception. For financial liabilities measured using the fair value option, entities will be
required to separately present in other comprehensive income the portion of the changes in fair value attributable to instrument-specific
credit risk. Additionally, the guidance amends certain disclosure requirements associated with the fair value of financial instruments.
The standard is effective for the Company’s fiscal year beginning April 1, 2018, including interim reporting periods within
that fiscal year. The adoption of this standard did not have an impact on the consolidated financial statements.
SUNDANCE
STRATEGIES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
September
30, 2018
In
August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments.
Historically, there has been a diversity in practice in how certain cash receipts/payments are presented and classified in the
statement of cash flows. To reduce the existing diversity in practice, this update addresses the eight cash flow issues as listed
in the pronouncement. The amendments in this update are effective for fiscal years beginning April 1, 2018, and interim periods
within that fiscal year. Early adoption is permitted. The adoption of this standard did not have a material impact on the Company’s
financial statements.
In
October 2016, the FASB issued ASU 2016-17, Consolidation - Interests held through Related Parties that are under Common Control,
which alters how a decision maker needs to consider indirect interests in a variable interest entity (VIE) held through an entity
under common control. Under the new ASU, if a decision maker is required to evaluate whether it is the primary beneficiary of
a VIE, it will need to consider only its proportionate indirect interest in the VIE held through a common control party. The amendments
in this Update are effective for fiscal years beginning April 1, 2017, including interim periods within that fiscal year. The
adoption of this guidance did not have a material effect on the consolidated financial statements, as the Company has no related
parties under common control that have the characteristics of a primary beneficiary of a variable interest entity.
On
May 10, 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting, which amends the scope of modification accounting
for share-based payment arrangements, provides guidance on the types of changes to the terms or conditions of share-based payment
awards to which an entity would be required to apply modification accounting under ASC 718. For all entities, the ASU is effective
for the Company’s fiscal year beginning April 1, 2018, including interim periods within that annual reporting period. Early
adoption is permitted, including adoption in any interim period. The adoption of this standard did not have material impact on
the Company’s financial statements as the Company does not expect to make future modifications to existing share based payment
awards.
Not
Yet Adopted
In
February 2016, the FASB issued ASU 2016-02 related to the accounting for leases. This pronouncement requires lessees to record
most leases on their balance sheet, while expense recognition on the income statement remains similar to current lease accounting
guidance. The guidance also eliminates real estate-specific provisions and modifies certain aspects of lessor accounting. Under
the new guidance, lease classification as either a finance lease or an operating lease will determine how lease-related revenue
and expense are recognized. The pronouncement is effective for the Company’s fiscal year beginning April 1, 2019, and for
interim periods within that fiscal year. The adoption of this standard is not expected to have an impact on the consolidated financial
statements because leases are month-to-month and not material to the Company’s financial statements.
In
June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses. ASU 2016-13 requires entities to report “expected”
credit losses on financial instruments and other commitments to extend credit rather than the current “incurred loss”
model. These expected credit losses for financial assets held at the reporting date are to be based on historical experience,
current conditions, and reasonable and supportable forecasts. This ASU will also require enhanced disclosures relating to significant
estimates and judgments used in estimating credit losses, as well as the credit quality. The amendments are effective for the
Company’s fiscal year beginning April 1, 2020, including interim periods within that fiscal year. The Company is currently
evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial statements and results of operations.
The
Company has reviewed all other 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, 2018
(3)
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, 2018, the Company had $6,933
of cash assets, compared to $936,902 as of March 31, 2018. As of September 30, 2018, the Company had access to draw an additional
$5,762,992 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, 2018, the Company’s average monthly operating expenses were approximately $95,000,
which includes salaries of our employees, consulting agreements and contract labor, general and administrative expenses and legal
and accounting expenses. The Company anticipates these monthly expenses to decrease to approximately $60,000 over the next 12
months. In addition to the monthly operating expenses, the Company continues to pursue other debt and equity financing opportunities,
and as a result, a financing expenses of $98,199 and $619,806 were incurred during the three and six months ended September 30,
2018, respectively. As management continues to explore additional financing alternatives, the Company is expected to spend an
additional $300,000 to $600,000 over the next 12 months related to these efforts. Outstanding Accounts Payable as of September
30, 2018 totaled $145,656, and other accrued liabilities totaled $179,733. 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 2020. 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
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. Due to the foreclosure on the NIBs mentioned
above, the company has no current source of operating revenues. In order to purchase NIBs, the Company will need to raise additional
capital or secure alternative sources of debt financing.
(4)
STOCKHOLDERS' EQUITY
On July 11, 2018, the Company issued 800,000 common shares in return for obtaining the remaining 27.8% ownership
of certain NIBs. As stated in Note 1, the transaction resulted in the recording of an impairment expense of $17,840, the estimated
fair value of the common stock issued (which management believes approximated the fair value of the NIBs received on the date of
the transaction). The transaction brought the total shares of common stock issued and outstanding to 44,928,441 as of September
30, 2018.
(5)
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.
SUNDANCE
STRATEGIES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
September
30, 2018
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.
As
mentioned in Note 1, due to the foreclosure that occurred between May 2018 and July 2018, the NIBs held by the Company were fully
impaired and had no fair value at September 30, 2018 and March 31, 2018.
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, 2018.
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.
(6)
NOTES PAYABLE, RELATED PARTY
As
of September 30, 2018 and March 31, 2018, the Company had borrowed $1,092,008 and $829,508 respectively, excluding accrued interest,
from related parties.
On
July 25, 2018, the Company borrowed $125,000 under a new, unsecured promissory note from Mr. Glenn S. Dickman, a stockholder and
member of the Board of Directors (see Note 9). This promissory note bears interest at a rate of 8% annually and is due August
31, 2020 (see Note 9 for detail on the due date extensions). As of September 30, 2018, accrued interest on this note totaled $1,849.
As
of September 30, 2018, the Company had borrowed $137,500, exclusive of accrued interest, under the note payable and lines of credit
agreement with the Chairman of the Board of Directors and a stockholder. The agreement allows for borrowings of up to $4,600,000.
As of September 30, 2019, the balance of this note payable was due August 31, 2019 (see Note 9 for detail on the due date extension).
The note payable incurs interest at 7.5% per annum. During the three months ended September 30, 2018 the Company borrowed an additional
$137,500 of principal under this agreement and made no repayments. As of September 30, 2018, accrued interest on this agreement
totaled $6,703.
As
of September 30, 2018, the Company had borrowed $829,508, exclusive of accrued interest, under the note payable and lines of credit
agreement with Radiant Life, LLC, an entity partially owned by the Chairman of the Board of Directors. The agreement allows for
borrowings of up to $2,130,000. As of September 30, 2019, the balance of this note payable was due November 30, 2020. The note
payable incurs interest at 7.5% per annum. During the three months ended September 30, 2018 the Company neither borrowed nor repaid
any principal under this agreement. As of September 30, 2018, accrued interest on this agreement totaled $46,956.
The
interest associated with the Notes Payable, Related Party of $55,508 and $20,427 is recorded on the balance sheet as an Accrued
Expense obligation at September 30, 2018 and March 31, 2018, respectively. There are no covenants associated with any of these
three agreements.
SUNDANCE
STRATEGIES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
September
30, 2018
(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 August 31, 2019. Subsequent to September 30, 2018, the Company agreed to amend
the 8% Convertible Debenture Agreement and extended the due date and conversion rights to December 1, 2020 (see Note 9 for detail
on the due date extension). As of September 30, 2018, and March 31, 2018, the Company owed $0 under the agreement, excluding accrued
interest. The associated interest of $124,225 at September 30, 2018 and March 31, 2018 is recorded on the balance sheet as an
Accrued expense obligation.
(8)
COMMITMENTS, CONTINGENCIES AND LEGAL MATTERS
Between
May 2018 and July 2018, the lenders foreclosed on the loans associated with the underlying life insurance policies and the Company
has recorded a $24,886,437 impairment on the NIBs during the year ended March 31, 2018. As mentioned in Note 1, an additional
impairment of $17,840 was recognized during July 2018, in connection with the Company's acquisition of the
remaining 27.8% ownership of certain NIBs, which were also foreclosed upon.
(9)
SUBSEQUENT EVENTS
Subsequent
to September 30, 2018, the following events transpired:
In
April 2013, 50,000 shares were transferred from a private party affiliate to a third-party service provider in exchange for future
services to be rendered on behalf of the Company. Effective November 6, 2018, the Company cancelled the 50,000 shares, as the
agreed upon services were never performed. Also on November 6, 2018, 35,000 shares were issued to a third party for future services
to be rendered on behalf of the Company. The remaining 15,000 shares were reissued to the original private party affiliate.
Effective
December 5, 2018, Ty D. Mattingly resigned his position on the Company’s Board of Directors. On December 6, 2018, Glenn
S. Dickman and Stephen E. Quesenberry were named to the Company’s Board of Directors.
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. The Company anticipates
paying the $0.05 per share repurchase price upon a major financing event, as agreed upon between the Company and the stockholders.
As of the date of this filing, the shares have been cancelled, but the related repurchase price has not yet been paid by the Company.
On
December 6, 2018, the Company awarded three of its directors 300,000 shares each of the Company’s stock, in lieu of director
compensation resulting in compensation expense of approximately $20,000. The shares granted include a vesting period through
March 2019.
On
February 8, 2019 the note payable, related party agreement that allowed for borrowings of up to $4,600,000 was extended from August
31, 2019 to November 30, 2020. Also on February 8, 2019, the note payable, related party agreement that allowed for borrowings
of up to $2,130,000 was amended to extend the due date from November 30, 2018 to November 30, 2020.
On
October 22, 2019, the Company agreed to amend the 8% convertible debenture agreement with Satco International, Ltd.,
to extend the due date and conversion rights from August 31, 2019 to December 1, 2020.
On
November 5, 2019, the Company agreed to amend the agreement to extend the due date on the promissory note with Glenn S. Dickman
from August 31, 2020 to November 30, 2021 or at the immediate time when alternative financing or other proceeds are received.
In addition, the Company agreed to provide Mr. Dickman warrants for 450,000 shares of common stock at an exercise price of $0.05
per share. The warrants have a 5-year exercise window from the date of the extension agreement.
Subsequent
to September 30, 2018, the Company has borrowed an additional $1,101,000 on the three Notes Payable, Related Party lines of credit
agreements. As of November 15, 2019, the outstanding principal balances of all Notes Payable, Related Party totaled $2,193,008
and the outstanding principal balance of the Convertible Debenture is $0.