This discussion summarizes the significant factors affecting our consolidated
operating results, financial condition, liquidity and capital resources at and
during the three months ended
Forward-looking Statements
This quarterly report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") that are based on management's beliefs and assumptions and on information
currently available to management. For this purpose any statement contained in
this report that is not a statement of historical fact may be deemed to be
forward-looking, including, but not limited to, statements relating to our
future actions, intentions, plans, strategies, objectives, results of
operations, cash flows and the adequacy of or need to seek additional capital
resources and liquidity. Without limiting the foregoing, words such as "may",
"should", "expect", "project", "plan", "anticipate", "believe", "estimate",
"intend", "budget", "forecast", "predict", "potential", "continue", "should",
"could", "will" or comparable terminology or the negative of such terms are
intended to identify forward-looking statements, however, the absence of these
words does not necessarily mean that a statement is not forward-looking. These
statements by their nature involve known and unknown risks and uncertainties and
other factors that may cause actual results and outcomes to differ materially
depending on a variety of factors, many of which are not within our control.
Such factors include, but are not limited to, economic conditions generally and
in the industry in which we and our customers participate; competition within
our industry; legislative requirements or changes which could render our
products or services less competitive or obsolete; our failure to successfully
develop new products and/or services or to anticipate current or prospective
customers' needs; price increases; employee limitations; or delays, reductions,
or cancellations of contracts we have previously entered into; sufficiency of
working capital, capital resources and liquidity and other factors detailed
herein and in our other filings with the
Forward-looking statements are predictions and not guarantees of future performance or events. Forward-looking statements are based on current industry, financial and economic information which we have assessed but which by its nature is dynamic and subject to rapid and possibly abrupt changes. Our actual results could differ materially from those stated or implied by such forward-looking statements due to risks and uncertainties associated with our business. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements and we hereby qualify all our forward-looking statements by these cautionary statements.
These forward-looking statements speak only as of their dates and should not be unduly relied upon. We undertake no obligation to amend this report or revise publicly these forward-looking statements (other than pursuant to reporting obligations imposed on registrants pursuant to the Exchange Act) to reflect subsequent events or circumstances, whether as the result of new information, future events or otherwise.
The following discussion should be read in conjunction with our financial statements and the related notes contained elsewhere in this report and in our other filings with the Commission.
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."
13
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.
During the latter part of the fiscal year ended
During the latter part of the year ended
On
14 Plan of Operations
Life Settlements 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 through debt or equity financing. The Company has no current source of operating revenues. When we hold NIBs we may be required to expend funds on premiums, interest and servicing costs to protect our interest in NIBs, though we have no legal responsibility nor adequate funds for these payments. In the event that neither party fulfils the financial obligations pertaining to the premiums, interest and servicing costs, we would be required to evaluate our investment in NIBs for possible adverse impairment.
When we hold NIBs, we use an estimation methodology to project cash flows and returns as presented. The estimation model requires many assumptions, including, but not limited to the following: (i) an assumption that the distinct number of lives in our portfolio would exhibit similar experience to a statistically diverse portfolio from which mortality tables have been created; (ii) an assumption that the life expectancies (the "LE" or "LEs") provided by LE providers represent the actuarial mean of the life expectancies of the insureds in our portfolio, (iii) the weighted average of the LEs provided by the LE providers represents an appropriate method for adjusting for discrepancies in the LEs; (iv) life expectancy tables and projections are accurate; (v) the minimum premiums calculated based on the in-force illustrations provided by life insurance carriers are accurate and will not change over the course of the lifetime of our portfolio; and (vi) the Holders' Lender fees, MRI fees, and insurance, servicing and custodial fees will not change materially over time. While this method of modeling cash flows is helpful in providing a theoretical expectation of potential returns that might be produced from our NIBs portfolio, actual cash flows and returns inevitably will be different (possibly materially) due to the fact that predicting the exact date of death of any individual is virtually impossible. The provision of a theoretical cash flow model is by no means any guarantee of any results. The actual performance of these NIB interests (as well as our future expectations as to what such performance might be) may differ substantially from our expectations, especially if any of the assumptions change or differ from our initial assumptions.
Results of Operations
Three-Months Ended
Interest Income
Due to the Company not holding NIBs, no interest income was recorded for the
three months ended
General & Administrative Expenses
General and administrative expenses totaled
Other Income and Expenses
During the three months ended
For the three months ended
During the three months ended
15 Income Taxes
During the three months ended
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
Debt
At
Critical Accounting Policies and Estimates
See Consolidated Financial Statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
© Edgar Online, source