During March, 2015, we agreed to pay cash, issue common stock and forgive a note receivable in exchange for relief of a $1,493,254 note payable (explained in Debt, below) and the receipt of NIBs. The net consideration given for the relief of note payable and receipt of NIBs totaled $1,493,254 and $7,846,746, respectively, for a total of $9,340,000 (of which $150,000 is cash, $150,000 is forgiveness of a note receivable and $9,040,000 is common stock to be issued consideration). Of the 1,130,000 common shares to be issued, 187,500 shares contain a redemption feature that requires the Company to buy back the shares for $8 per share ($1,500,000 in total) at the option of the holder. The 1,130,000 common shares, including the 187,500 shares containing a redemption feature, were issued on June 9, 2015.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sundance Strategies, Inc. at March 31, 2015 and 2014, and the results of its consolidated operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Stock Based Compensation, The Company measures stock-based compensation expense related to employee stock-based awards 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. The Company utilizes the Black-Scholes option pricing model to estimate the fair value of employee stock options. The Black-Scholes model requires the input of highly subjective and complex assumptions, including the estimated fair value of the Company’s common stock on the date of grant,
The Company accounts for its investment in NIBs at the initial investment value increased for interest income and decreased for cash receipts received by the Company. At the time of purchase of an investment in NIBs, we estimate the future expected cash flows and determine the effective interest rate based on these estimated cash flows and our initial investment. Based on this effective interest rate, the Company calculates accretable income, which is recorded as interest income on investment in NIBs in the statement of operations. Subsequent to the purchase and on a regular basis these future estimated cash flows are evaluated for changes. If the determination is made that the future estimated cash flows should be significantly adjusted, a revised effective yield is calculated prospectively based on the current amortized cost of the investment, including accrued accretion. Any positive or adverse change in cash flows that does not result in the recognition of an “other-than-temporary impairment” (“OTTI”) results in a prospective increase or decrease in the effective interest rate used to recognize interest income. We have not recognized any significant adverse change in future estimated cash flows relating to our investment in NIBs from January 31, 2013 (inception) to the periods ended March 31, 2015.
Also on October 29, 2013, the Company entered into an Exclusivity Agreement with the consultant to Europa under the Europa Agreement under which the Company advanced $25,000 to such consultant for services related to the purchase of Qualified NIBs associated with the $400,000,000 in life insurance policies due under the Del Mar ATA.
The Company valued these options using the Black-Scholes option pricing model applying the simplified method for the expected term under the following assumptions: $1.0294 market price, $0.77 exercise price, 2.5 years expected life, 73% expected volatility, 0.30% risk free rate.
During March 2015, the Company agreed to issue 1,130,000 shares of common stock in exchange for relief of a $1,493,254 notes payable (see Notes 5, 11 and 16) and the receipt of NIBs valued at $7,546,746 (see Note 5), for total consideration of $9,040,000. Of the 1,130,000 common shares to be issued, 187,500 shares contain a redemption feature that requires the Company to buy back the shares for $8 per share at the option of the holder. The total common stock subject to redemption feature will be recorded as temporary equity on the consolidated balance sheet once the underlying common stock has been issued (see Note 16). Temporary equity includes securities that: (1) have redemption features that are outside our control; (2) are not classified as an asset or liability; (3) are excluded from stockholders' equity; and (4) are not mandatorily redeemable. Amounts included in temporary equity relate to securities that are redeemable at a fixed or determinable price.