The following selected consolidated financial data as of and for the years ended March 31, 2013, 2014, 2015 and 2016 have been derived from the audited consolidated financial statements:
(1) Non-accrual status of income recognition was removed as of January 2014.
(2) Includes an $826,665 obligation which was a result of a restructuring with the prior owners of the life insurance portfolios underlying our NIBs
(3) Gain on Extinguishment of debt as a result of a restructure and amendment to the PCH Secured Promissory Note payable.
We are engaged in the business of purchasing residual economic interests in a portfolio of life settlements. A life settlement is the sale of an existing life insurance policy to a third party for more than the policy’s cash surrender value, but less than the face value of the policy benefit. After the sale, the new policy holder will pay the premiums due on the policy until maturity and then collect the settlement proceeds at maturity.
We do not purchase or hold life insurance policies but, rather, hold a contractual right to receive the net insurance benefits, or NIBs, from a portfolio of life insurance policies held by a third party. These NIBs represent an indirect, residual ownership interest in a portfolio of individual life insurance policies and they allow 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.
Our plan of operation for the next 12 months is to continue the acquisition and possible sale of NIBs. This is not a market sector without competition and, at present, we are a minor competitor. We will need substantial additional funds to effectively compete in this industry 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 our NIBs or through debt or equity financing. We may be required to expend not less than approximately $113.1 million on premiums, interest and servicing costs over the next five years to protect our interest in our NIBs, though we have no legal responsibility or adequate funds for these payments. These payments are currently being made through an unrelated senior lending facility.
Interest income on investment in NIBs totaled $3,909,171 and $2,454,478 for the years ended March 31, 2016, and 2015, respectively. The increase is primarily due to the additional interest income generated by the additional NIBs we acquired in March and September of 2015.
General and administrative expenses totaled $3,597,439 and $2,338,265 during the years ended March 31, 2016, and 2015, respectively. A significant portion of these expenses were professional fees, payroll and travel expenses. Included in the general and administrative expenses for the fiscal year ended March 31, 2016 is an $826,665 obligation which was a result of a restructuring with the prior owners of the life insurance portfolios underlying our NIBs. This obligation constituted the majority of the period increase in general and administrative expenses.
Other income and expenses primarily consist of interest on the notes payable and lines-of-credit due to related-parties and a convertible debenture. During the years ended March 31, 2016, and 2015, interest expense has accrued in the amount of $233,244 and $287,203, respectively. The decrease in interest expense from 2015 to 2016 was primarily due to the reduction in fees associated with related-party debt.
During the fiscal years ended March 31, 2016, and 2015, we recorded no taxable income and elected to not record net deferred tax assets relating to tax net operating loss carryforwards as a result of us placing a 100% valuation allowance on our deferred tax assets.
During the period from April 1, 2013, through December 31, 2013, our investment in net insurance benefits was on a non-accrual status. This decision was primarily based on the initial incremental uncertainty experienced by us during the first three quarters of the fiscal year ended March 31, 2014, after closing of the acquisition on our first pool of qualified NIBs. Management concluded these uncertainties were significantly mitigated in the fourth quarter of the year ended March 31, 2014, as additional experience and information was obtained, including the observation of the proper functioning of the entire system in response to the death of an insured in the fourth quarter. Non-accrual status was removed effective January 1, 2014. Interest income on investment in NIBs totaled $2,454,478 and $508,411 for the years ended March 31, 2015, and 2014, respectively. The increase is primarily due to recording four full quarters of accretion in 2015 compared to only one quarter in 2014. In addition, a lesser portion of the 2015 increase in interest income is due to the acquisition of additional NIBs in March, 2015.
Other income and expenses primarily consist of interest on the note payable related-party and notes payable, gain on extinguishment of debt and interest income. During the fiscal years ended March 31, 2015, and 2014, interest expense has accrued in the amount of $287,203 and $122,452, respectively. The increase in interest expense in 2015 was primarily due to interest and fees resulting from the increase and consolidation of outstanding notes payable related-party.
During the fiscal years ended March 31, 2015, and 2014, we had no taxable income.
As a result, we believe that we will need to raise approximately $45 million in additional funds through equity or debt financing to continue our business model and to effectively compete in the life settlement industry during 2016 and beyond. Although we are actively pursuing opportunities to raise additional equity and debt capital, funding may not be available to us on acceptable terms, or at all. Also, market conditions may prevent us from accessing the debt and equity capital markets. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences or other terms that adversely affect our stockholders’ rights or further complicate raising additional capital in the future. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable, for any reason, to raise needed capital, we may need to reduce, or discontinue, operations.
As of March 31, 2016, we had incurred cumulative net losses of $373,799. We raised $11,942,500 (gross) in our private placement that commenced in April 2013. Net cash provided by financing activities totaled $2,270,178 and $1,560,000 for the years ended March 31, 2016, and 2015, respectively. The increase in cash from financing activities was primarily related to the proceeds from the issuance of notes payable and from drawing on lines-of-credit we have with related parties, as well as proceeds from the issuance of a convertible debenture.
For the years ended March 31, 2016 and 2015, we recorded net cash used in operating activities of $2,792,831 and $1,998,842, respectively. During September 2015, we obtained ownership and control of a portfolio of policies due to the cancellation of the Del Mar ATA. On September 10, 2015, the Company received $1,094,335 as a result of the rights associated with a matured policy in the newly obtained portfolio. These proceeds were allocated as follows: (i) $547,308 to reimburse the Company for expense payments made to or on behalf of Del Mar, (ii) $239,415 to pay off a note receivable (including interest) and (iii) $307,612 as a refund of advance payments previously made to or on behalf of Del Mar as part of the Del Mar ATA.
We had cash assets at March 31, 2015, and 2014, of $336,370 and $375,212, respectively. 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 operations. Although management is actively pursuing opportunities to raise additional equity and debt capital, there is no assurance that we will be able to raise sufficient additional debt or equity financing. We do not anticipate having adequate cash flows from operations for three to four years, and until a revenue stream has been established, we will require debt or equity funding to fund our current and intended business. If management is unsuccessful in these efforts, discontinuance of operations is a possibility.
During March 2015, we agreed to pay $150,000 in cash, issue 1,130,000 shares of common stock and forgive a note receivable with an outstanding amount of $150,000 in exchange for relief of a $1,493,254 note payable and the receipt of NIBs. The net consideration given for the relief of the note payable and receipt of NIBs totaled $1,493,254 and $7,846,746, respectively, for a total of $9,340,000. The holder of the shares issued pursuant to the transaction was given the right to require us to redeem 187,500 shares for $8.00 per share ($1,500,000 in total). The 1,130,000 common shares, including the 187,500 shares subject to the redemption right, were issued on June 9, 2015.
Consolidated Statements of Stockholders’ Equity for the Years Ended March 31, 2016, 2015 and 2014
Consolidated Statements of Cash Flows for the Years Ended March 31, 2016, 2015 and 2014
We have audited the accompanying consolidated balance sheets of Sundance Strategies, Inc. as of March 31, 2016 and 2015 and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended March 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sundance Strategies, Inc. at March 31, 2016 and 2015, and the results of its operations and its cash flows for each of the three years in the period ended March, 2016, in conformity with accounting principles generally accepted in the United States of America.
par value $0.001; 44,128,441 and 43,185,941 shares issued and outstanding, respectively
Notes Receivables Exchanged for Advance for Investment in NIBs $ -
Fair Value of Warrants Issued as Stock Issuance Costs $ -
Common Stock to be Issued and Note Payable and Note Receivable settled for Investment in Net Insurance Benefits $ -
Exchange Note Payable and Accrued Interest for Temporary Equity $ 1,500,000
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” or “we”). The Company is engaged in the business of purchasing or acquiring and selling 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.” Currently, the Company is focused on the purchase and sale of net insurance benefit contracts (“NIB”) based on life insurance policies. The Company does not take possession or control of the policies. The Holder of the life insurance policies acquire such policies at a discount to their face value. The Holder has available credit to pay premiums and expenses on the underlying policies until settlement. On settlement, the Company receives the net insurance benefit after all borrowings, interest and expenses have been paid by the Holder out of the settlement proceeds.
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.
Weighted-average number of dilutive common stock equivalents outstanding during the year
Outstanding common stock equivalents not included in the computation of diluted net loss per common share totaled 1,766,374 as of March 31, 2015 and 1,208,152 as of March 31, 2014. These common stock equivalents were not included in the computation because to do so would have been antidilutive.
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 expected term of the stock option, and the expected volatility of the Company’s common stock over the period equal to the expected term of the grant. The Company estimates forfeitures at the date of grant and revises the estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
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 transfer or 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 period ended March 31, 2016.
Principles of Consolidation, The consolidated financial statements include the accounts of the Company and its subsidiary. The subsidiary is wholly owned. All material intercompany accounts and transactions are eliminated in consolidation.
In August 2014, the FASB issued ASU 2014-15 Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The new standard provides guidance around management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s financial statements.
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 fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the effect of the adoption of this guidance on the consolidated financial statements.
In March 2016, the FASB issued ASU 2016-06 related to the embedded derivative analysis for debt instruments with contingent call or put options. This pronouncement clarifies that an exercise contingency does not need to be evaluated to determine whether it relates only to interest rates or credit risk. Instead, the contingent put or call option should be evaluated for possible bifurcation as a derivative in accordance with the four-step decision sequence detailed in FASB ASC 815-15, without regard to the nature of the exercise contingency. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016. The Company does not believe the adoption of this guidance will have a material effect on the consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The new standard is designed to simplify the areas of share based payments relating to income tax consequences. ASU 2016-09 is effective for the Company for its fiscal year beginning April 1, 2017. The Company is currently evaluating the effect of the adoption of this guidance on the consolidated financial statements.
Investment in NIBs for the fiscal year ended March 31, 2016, and 2015 were as follows:
During March 2015, the Company agreed to pay cash, issue common stock and forgive a note receivable in exchange for relief of a note payable and the receipts of NIBs. The net consideration given for the NIBs totaled $7,846,746 (see Notes 11 and 15).
The table below describes the underlying life insurance policies relating to our investment in NIBs at March 31, 2016, with an adjustment made to reduce the Life Expectancies by the number of months since the last Life Expectancy report:
The table below describes the future estimated premiums payments, other expenses and interest paid by external parties expected to be paid on the policies for the five years subsequent to March 31, 2016. Significant estimates are made as part of the calculation of the premium payments, other expenses and interest amounts identified in the table below. The following table only includes the percentage of the future estimated premium payments, other expenses and interest relating to the portfolio of which the Company only has partially owned NIBs. The following table does not include all of the estimation factors used by the Company in estimating expected net cash receipts for interest income calculation purposes, and is intended to only provide the estimated premium payments, other expenses and interest amounts related to the policies underlying the Company’s NIBs (totals do not include premiums, expenses and interest paid for prior years):
The projected premiums, interest and expenses were created using the expected remaining life expectancies on the policies and other key assumptions. The expenses and interest calculations were based on the interest rates on the loans to the holders of the policies, current reinsurance interest rates, origination fees, servicing fees and other custodial fees expected during the life of the investment. The lender for the holders of the policies provides the loans at a high rate of interest and loan payments are guaranteed by the MRI or reinsurance coverage. The policy holders receive ongoing fees and a percentage of death benefits when a policy matures which we included in the estimated expenses. The Company receives cash flows from its investments in NIBs after all other loan balances, costs and expenses are paid.
During July 2015, a group of persons located in the United States (the “Purchasers”) acquired the entities that owned all of the portfolios of life insurance contracts underlying the Company’s NIBs. The Purchasers have also agreed to amend the NIBs agreements to provide greater disclosure to the Company and limit permitted expenses to be paid prior to payments to the NIB holders, pending certain regulatory and tax approvals. In connection with this purchase, the Purchasers and the respective owners of these portfolios entered into a Settlement Agreement releasing such owners and their managers from liability related to their ownership and management of the entities that owned the respective portfolios of life insurance contracts. The Purchasers further required releases from the Company and the payment of certain accrued expenses. Accordingly, effective as of July 17, 2015, the Purchasers acquired all of the ownership interests in the entities that owned all of the portfolios of life insurance contracts underlying the Company’s NIBs from their prior owners and executed a Settlement Agreement with such owners and the Company in relation to these matters. The NIBs amendments are in process, and the Company believes the NIBs amendments will be in effect before calendar year end 2016. The Company and Purchasers agreed to indemnify the prior owners of such portfolios against future claims in connection with the issuance of the NIBs or their ownership or management of the entities sold, based on actions that occurred prior to this sale to the Purchasers. During the year ended March 31, 2016, the Company paid an $826,665 obligation related to the ownership change, which is recorded in General and Administrative Expenses. Management of the Company is presently not aware of the existence of any additional payments owed. Neither the purchase of these entities nor the Settlement Agreement resulted in any material change in our NIBs ownership interest. The Company was supportive of the Purchasers acquiring the entities that owned the portfolios of life insurance contracts underlying the Company’s NIBs and was willing to provide the indemnification because it believes this ownership change will result in a reduction of costs and expenses associated with ownership of the NIBs, which should increase their intrinsic value.
The Del Mar ATA involved the purchase of certain life settlement assets consisting of the legal and net beneficial ownership interest in a portfolio of life insurance policies (the “NIBs”), among other assets that are consideration and collateral for certain cash advances and expense payments made by the Company. According to the Del Mar ATA, Del Mar, with the assistance of Europa, was obligated to convert the NIBs and other newly acquired NIBs into “Qualified NIBS.” As soon as Del Mar met its obligation to provide Qualified NIBs to the Company, any remaining NIBs and any other consideration and collateral would be returned or released to Del Mar. The original due date for the conversion was December 31, 2013, which date was subsequently extended several times. On April 30, 2015, the Company finalized an amendment to the Del Mar ATA and the related Europa Agreement to extend the deadline until August 31, 2015.
As Del Mar was unable to provide the required amount of Qualified NIBs by the extended due date of August 31, 2015, effective September 1, 2015, the agreements with Del Mar and Europa were cancelled and the Company obtained full ownership and control of the collateral, which included the above mentioned approximately 72.2% of the NIBs associated with the $84,000,000 face value of life settlement policies and certain rights to net proceeds relating to the Matured Policy.
On September 30, 2015, the Company transferred to Investment in NIBs the remaining balance of advances and expense payments to Del Mar, totaling $3,368,380, which approximates fair value. This amount was residing in advance for investment in NIBs before being transferred to investment in NIBs (see Note 5).
The bulk of the $10,000,000 proceeds paid in connection with the Matured Policy were used to repay loans secured by such Matured Policy. However, on September 10, 2015, the Company received $1,094,335 as a result of the rights associated with the Matured Policy. These proceeds were allocated $239,415 to pay off a note receivable (including interest), $547,308 to reimburse the Company for expense payments made to or on behalf of Del Mar and $307,612 as a refund of advance payments previously made to or on behalf of Del Mar as part of the Del Mar ATA. The $547,308 and $307,612 proceeds, which together total $854,920, were applied to reduce Advance for Investment in NIBs.
On September 10, 2015, the company received $1,094,335 as a result of a matured policy (see Note 6). $239,415 of these proceeds were allocated to pay off the note receivable (including interest).
We also entered into a lease agreement during November 2013 to lease 6,000 square feet of office space on a month-to-month basis in Irvine, California. The total rent agreement for the office space is $9,000 per month, payable in cash.
The Company recognizes the tax effects of transactions in the year in which such transactions enter into the determination of net income regardless of when reported for tax purposes. Deferred taxes are provided in the financial statements to give effect to the temporary differences which may arise from differences in the bases of fixed assets, depreciation methods and allowances based on the income taxes expected to be payable in future years. Minimal development stage deferred tax assets arising as a result of net operating loss carry-forwards have been offset completely by a valuation allowance due to the uncertainty of their utilization in future periods. In the Company’s opinion, it is uncertain whether it will generate sufficient taxable income in the future to fully utilize the net deferred tax asset. Accordingly, a full valuation allowance equal to the deferred tax asset has been recorded.
The provision for income taxes for the years ended March 31, 2016, 2015 and 2014 consists of the following:
The tax effects of significant items comprising the Company’s net deferred taxes as of March 31, 2016, 2015 and 2014, were as follows:
The income tax provision differs from the amount of income tax determined by applying the U.S. federal tax rate of 34% to pretax income from continuing operations for the years ended March 31, 2016, 2015 and 2014 due to the following:
Income tax benefit at U. S. federal statutory rates: $ 28,468 $ (49,892) $ (70,087)
The Company recognizes interest accrued relative to unrecognized tax benefits in interest expense and penalties in operating expense. During the period from January 31, 2013 (date of inception), through March 31, 2016, the Company recognized no income tax related interest and penalties. The Company had no accruals for income tax related interest and penalties at March 31, 2016 and 2015.
The tax years 2012 through 2016 remain open to examination for federal income tax purposes and by other major taxing jurisdictions to which we are subject.
At March 31, 2014, the Company owed $1,455,904, including accrued interest, for notes payable. During the year ended March 31, 2015, the Company had accrued an additional $37,350 in interest. The note incurred interest at 4%, was collateralized by NIBs and was due in April 2015. During June 2015, the note payable and related accrued interest were converted to equity through the issuance of 187,500 shares of common stock and the holder was granted the right to require the Company to redeem the common stock for $8.00 per share. On June 9, 2015, the holder exercised a portion of the redemption right relating to 93,750 shares and, as a result, the Company paid the holder $750,000 to redeem the shares. On March 25, 2016, the holder exercised the redemption right in relation to the remaining shares and on April 12, 2016, the Company paid the holder an additional $750,000 to redeem the remaining shares. At March 31, 2016, the $750,000 associated with the redemption had been classified on the balance sheet as Mandatorily Redeemable Common Stock.
On April 5, 2013, the Company issued 1,700,000 stock options to certain officers, employees and members of the Board of Directors of the Company. The stock options have an exercise price of $0.77 per share. All options have a contractual term of five years.
The remaining 200,000 stock options granted vest in several tranches, wherein 50,000 vested as of the grant date, and the remaining 150,000 stock options vesting in equal tranches on the grant date anniversary for the following three years. The Company valued the 200,000 options using the Black-Scholes option pricing model applying the simplified method under the following assumptions: $1.0294 market price, $0.77 exercise price, 3.5 years expected life, 68% volatility, 0.51% risk free rate.
The 400,000 stock options vest in several tranches, wherein 10% of the options vesting six months after the date of issuance and the remaining options to vest monthly over the next 36 months subject to continuing employment with the Company. The Company valued the 400,000 options using the Black-Scholes option pricing model applying the simplified method under the following assumptions: $5.00 market price, $5.00 exercise price, 3.40 years expected life, 68% volatility, 0.76% risk free rate. On July 22, 2015, the Board of Directors approved an amendment to modify the vesting schedule for stock options issued to the executive. The amendment clarified that the option to purchase 400,000 shares of the Company’s $0.001 par value common stock at $5.00 per share, with a five year term, expiring March 31, 2018, was at a vesting rate of 11,111 stock options monthly, commencing with October, 2013, and ending with September 30, 2016, subject to continued employment with the Company. As a result of this modification, the Company recorded a true-up amortization expense of $98,655 during September 2015, to adjust the amortization of the stock options to the amended vesting schedule as of the modification date of July 22, 2015. In addition, the Company adjusted the going forward quarterly amortization, beginning July 2015, of the stock options from $73,202 to $78,728. No incremental value was applied to the amended stock options and, therefore, the original grant date fair value continues to be applicable.
The Company has recorded stock-based compensation expense of $508,503 related to these options for year ended March 31, 2016.
The remaining 182,571.78 will be recognized as stock based compensation expense ratably over the weighted average service period through September 2016.
During March 2015, we agreed to pay $150,000 in cash, issue 1,130,000 shares of common stock and forgive a note receivable with an outstanding amount of $150,000 in exchange for relief of a $1,493,254 note payable and the receipt of NIBs. The net consideration given for the relief of the note payable and receipt of NIBs totaled $1,493,254 and $7,846,746, respectively, for a total of $9,340,000. (See Notes 5, 11 and 18). Of the 1,130,000 common shares to be issued, 187,500 shares were subject to a redemption right that requires the Company to buy back the shares for $8.00 per share at the option of the holder. The total common stock still subject to the redemption right at March 31, 2016, was recorded as Mandatorily Redeemable Common Stock on the consolidated balance sheet (see Note 11).
If the Company is unable to raise sufficient capital through the planned securities and debt offerings or other alternative sources of financing, management will curtail NIB purchases. Under this plan, expenditures for NIBs will be curtailed.
During April 2016, the Company received an additional $1,417,870 in proceeds associated with the $10,000,000 maturity explained in Note 6 and miscellaneous adjustments to other underlying policies.