{"url_path":"/sec/sund/10-k/2026/item-1a","section_key":"item-1a","section_title":"Item 1A Risk Factors**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-06-29","source_url":"https://www.sec.gov/Archives/edgar/data/1171838/0001493152-26-031046-index.html","accession_number":"0001493152-26-031046","cik":"0001171838","ticker":"SUND","issuer_name":"Sundance Strategies, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1171838/0001493152-26-031046-index.html","primary_entity_key":"0001171838","primary_entity_name":"Sundance Strategies, Inc."},"word_count":12735,"has_tables":true,"body_markdown":"**Item\n1A. Risk Factors**\n\n \n\nWe\nhave identified the following risks and uncertainties that may have a material adverse effect on our business, financial condition, results\nof operations and future growth prospects. Any of these risks could harm our business. The risks and uncertainties described below are\nnot the only ones we face. The trading price of our common stock could decline due to any of these risks, and investors may lose all\nor part of their investment. These risks should be considered together with the other information contained in this Form 10-K, including\nour consolidated financial statements and related notes.\n\n \n\n**Summary\nof Risk Factors**\n\n \n\nOur\nbusiness is subject to several risks and uncertainties, including those described at length in the Risk Factors section below. We consider\nthe following to be our most material risks:\n\n \n\nRisks\nRelating to Our Business\n\n \n\n \n●\nWe\nhave historically used significant amounts of cash in operating activities since our inception and may continue to use significant\namounts of cash for operating activities in the foreseeable future.\n\n \n●\nWe\nmay not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs and our failure to\nobtain additional financing when needed could force us to delay, reduce or eliminate our product development programs and commercialization\nefforts or cause us to become insolvent.\n\n \n●\nOur ability to execute our business plan depends on obtaining continued\nfinancing.\n\n \n●\nWe\nmay default on our obligations under various debt arrangements, which may accelerate our repayment obligations or otherwise limit\nour access to future financing.\n\n \n●\nOur\nmanagement team relies on outside consultants and others in our industry to make informed business decisions; potential conflicts\nof interest involving those parties who are relied upon could adversely affect the execution of our business model.\n\n \n●\nCurrent\nand future federal regulation under the Dodd-Frank Act’s consumer protection provisions may have an adverse effect on our business\nand our planned business operations.\n\n \n●\nGeneral\neconomic conditions could have an adverse effect on our business.\n\n \n●\nThe\ncosts in time and expense of being a publicly-held company are substantial and will only increase if our business model is successful.\n\n \n●\nInadequate\nfunding will impede execution of our business model.\n\n \n●\nWe\nare new to the bond, life settlement, and financial advisory industry and may not be able to successfully compete in this industry.\n\n \n●\nHistorically,\n99% of our total assets are interests in life settlement policies, resulting in a lack of diversification of assets and concentration\nin assets that are subject to significant fluctuations in value.\n\n \n●\nLimitations\nto the financial model we use may result in inaccurate or incomplete projections of future cash flow from the insurance policies.\n\n \n\n7\n\n \n\n \n\n \n●\nThe\nindividuals insured by the life insurance policies may live longer than their actuarial life expectancies and thereby, cash flows\nfrom life insurance policies may be delayed.\n\n \n●\nHaving\nrelatively few insureds could cause the overall performance to be unduly influenced by a relatively small number of underlying policies\nthat perform better or worse than expected.\n\n \n●\nIncreased\ngeneral market interest rates could increase the carrying costs of the life insurance policies and reduce the related cash flows.\n\n \n●\nChanges\nto foreign banking laws and regulations or decreased lending capacity for life settlements could have a negative impact on ability\nof Holders to obtain loans with respect to purchases of life settlements.\n\n \n●\nHolders\nmay be required to obtain MRI coverage as a condition of our business model, which, if unavailable, could potentially increase our\nrisk of failure.\n\n \n●\nThe\nlapse of life insurance policies will result in the entire loss of our interest in the death benefits from those particular policies.\n\n \n●\nActual\nresults from life settlement products may not match expected results, which could reduce returns and also adversely affect the ability\nto service and grow a portfolio for actuarial stability.\n\n \n●\nThe\nlimited number of sellers of life settlement products in the secondary market may limit the ability to negotiate favorable prices\nin the acquisition of such life settlement interests.\n\n \n●\nWe\ndo not track concentrations of pre-existing medical conditions of insureds in our guidelines for purchasing life settlement products.\n\n \n●\nIf\nlife settlement products are determined to be “securities,” Holders may be required to register as an investment company\nunder the Investment Company Act, which would substantially increase SEC reporting costs and oversight of a Holder’s business\noperations.\n\n \n●\nThere\nis poor liquidity in the secondary market for life insurance and life settlements.\n\n \n\nRisks\nRelated to the Life Insurance Policies\n\n \n\n \n●\nLife\nsettlements, and therefore our common stock, are highly speculative and may lose all of their value.\n\n \n●\nPolicies\nmay be determined to have been issued without an “insurable interest” and could be void or voidable.\n\n \n●\nAdditional\ninsurable interest concerns regarding life insurance policies originated pursuant to premium finance transactions may also result\nin adverse decisions that could effect policies.\n\n \n●\nFraud\nin the application for life insurance can also affect assets and interest in policies.\n\n \n●\nThe\nrisk of litigation with issuing insurance companies could substantially raise our costs of operation and increase our risk of loss.\n\n \n●\nThe\ncontestation of the life insurance policies by the applicable issuing insurance companies could result in the loss of the benefits\nfrom such life insurance policies.\n\n \n●\nIncreases\nin cost of insurance could reduce estimated returns and lower revenues.\n\n \n●\nCarrier\nand service partner credit risk can adversely affect life settlements.\n\n \n●\nThe\ninability to keep track of the insureds could keep us from updating the medical records of the insured.\n\n \n●\nLost\ninsureds can result in a delay or a loss of an insurance benefit that would have a negative effect on revenues and prospects.\n\n \n●\nU.S.\nlife settlement and viatical regulations may result in determination(s) of applicable law violations.\n\n \n●\nState\nprotections for the insolvency of an insurance company are limited.\n\n \n●\nLiability\nfor failing to comply with U.S. privacy safeguards.\n\n \n●\nCyber-attacks\nor other security breaches could have a material adverse effect on our business.\n\n \n●\nU.S.\nprivacy concerns may affect the access to accurate and current medical information regarding the insured under life insurance policies.\n\n \n\nRisk\nFactors Related to Our Common Stock\n\n \n\n \n●\nThere\nis a limited public market for our common stock, and any market that may develop could be volatile.\n\n \n●\nWe\nare an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies\nwill make our common stock less attractive to investors.\n\n \n●\nOur\nmanagement and two stockholders beneficially own approximately 65% of our outstanding common stock and therefore can exert control\nover our business.\n\n \n●\nFuture\nsales of our common stock could adversely affect our stock price and our ability to raise capital in the future, resulting in our\ninability to raise required funding for our operations.\n\n \n\n8\n\n \n\n** **\n\n**Risk\nFactors Relating to Our Business**\n\n \n\n**We\nhave historically used significant amounts of cash in operating activities since our inception and may continue to use significant amounts\nof cash for operating activities in the foreseeable future.**\n\n \n\nWe\nhave historically used substantial amounts of cash in operating activities. To date, our operations have not generated sufficient cash\nflow to fund our operations, and we have relied on cash provided by financing activities, including amounts received under notes payable\nand lines-of-credit with related parties. Should we default under these obligations, it may also limit our ability to obtain future financing\nfrom related or third parties.\n\n \n\nOur\ninability to access capital may limit our ability to adequately fund our operations. In order to continue to fund our operations, including\nthe potential purchase of NIBs, we will need to raise substantial amounts of capital. Absent additional financing, we will not have the\nresources to execute our business plan.\n\n \n\n**We\nmay not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs and our failure to obtain\nadditional financing when needed could force us to delay, reduce or eliminate our product development programs and commercialization\nefforts or cause us to become insolvent.**\n\n \n\nWe\nwill need to raise additional funds through future equity or debt financings in the near future to meet our operational needs and capital\nrequirements. We can provide no assurance that we will be successful in raising funds pursuant to additional equity or debt financings\nor that such funds will be raised at prices that do not create substantial dilution for our existing stockholders. Given the volatility\nof our stock price, any financing that we undertake could cause substantial dilution to our existing stockholders.\n\n \n\nTo\ndate, we have financed our operations primarily through net proceeds from the issuance of capital stock and debt financings. We do not\nknow when or if our operations will generate sufficient cash to fund our ongoing operations. We cannot be certain that additional capital\nwill be available as needed on acceptable terms, or at all.\n\n \n\nWe\nmay raise additional funds in equity or debt financings or enter into credit facilities in order to access funds for our capital needs.\nAny debt financing obtained by us in the future would cause us to incur additional debt service expenses and could include restrictive\ncovenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for\nus to obtain additional capital and pursue business opportunities. In addition, future equity investors may require, as a condition to\ntheir investment, that all or a portion of our outstanding debt be converted to equity, and our debtholders may not be willing to do\nso. If we raise additional funds through further issuances of equity or convertible debt securities, and/or if we convert all or a portion\nof our existing debt to equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company,\nand any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock.\nIf we are unable to obtain adequate financing on terms satisfactory to us when we require it, we may significantly scale back our operations\nor we may become insolvent. If this were to occur, our ability to continue to grow and support our business and to respond to business\nchallenges could be significantly limited.\n\n \n\n**Our ability to execute our business plan depends on obtaining continued\nfinancing.**\n\n \n\nSince\ninception, we have experienced recurring operating losses and negative cash flows and we expect to continue to generate operating\nlosses and consume significant cash resources for the foreseeable future. Our ability to fund operations and execute our business\nplan depends on continued access to debt and equity financing, including financing from related parties. Although management has\nconcluded that no substantial doubt exists regarding the Company’s ability to continue as a going concern for the one-year period following the issuance of these financial statements, there can be no assurance that additional\nfinancing will be available on acceptable terms, or at all, to support our longer-term business objectives.\n\n \n\n9\n\n \n\n \n\nManagement believes these actions, together with existing cash resources\nand available borrowing capacity under current financing arrangements, will provide sufficient liquidity to meet operating needs for at\nleast the next 12 months from the issuance of these financial statements. However, our ability to execute our longer-term business strategy\nwill depend on obtaining additional financing, and there can be no assurance that such financing will be available on favorable terms\nor at all.\n\n \n\n**Inadequate\nfunding will impede execution of our business model.**\n\n \n\nAt\npresent, we are a minor participant in both the life settlement market and in the bond advisory industry. We face significant competition\nfrom much larger competitors. We will need substantial additional funds to effectively compete in these industries, and no assurance\ncan be given that we will be able to adequately fund our current and intended operations. We expect to finance our operating working\ncapital requirements, with proceeds from planned public and/or private offerings of our securities and debt financing. There can be no\nassurance that we will be successful in raising debt or equity capital or that we will be successful in raising additional capital in\nthe future on terms acceptable to us, or at all. If we are not able to obtain sufficient funding to execute our business strategies,\nwe may be required to scale back or discontinue our operations, which would materially adversely affect our financial condition and results\nof operations.\n\n \n\n**We\nmay default on our obligations under various debt arrangements, which may accelerate our repayment obligations or otherwise limit our\naccess to future financing.**\n\n \n\nIf\nwe fail to make timely repayments of amounts received under notes payable and lines-of-credit with related parties or the 8% convertible\ndebenture agreement we will be in default of such obligations, which could materially adversely affect our operations and financial condition.\nOur default under these obligations may also limit our ability to obtain future financing from related or third parties, which would\nmaterially adversely affect our operations and our ability to execute our business strategy.\n\n \n\n**Our\nmanagement team relies on outside consultants and others in our industry to make informed business decisions; potential conflicts of\ninterest involving those parties who are relied upon could adversely affect the execution of our business model**\n\n \n\nOur\nmanagement team has relied and will continue to rely on consultants and service providers in our industry. Many of these consultants\nor service providers represent or provide services to others in this industry, and no assurance can be given that we, as a small competitor\ncompeting with larger competitors in our industry, will be able to engage these consultants. In addition, our inability to retain such\nconsultants would negatively affect our ability to identify and evaluate life insurance products for purchase. Even as our management\naccumulates expertise in this industry, we will still rely on the expertise of outside consultants for a variety of information, including\nvaluation, life expectancies, actuarials and other matters specific to life insurance policies. If we cannot obtain such services at\nan affordable price, our business will be harmed.\n\n \n\n**Current\nand future federal regulation under the Dodd-Frank Act’s consumer protection provisions may have an adverse effect on our business\nand our planned business operations.**\n\n \n\nOn\nJuly 21, 2010, President Barack Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank\nAct”). The Dodd-Frank Act contains significant changes to the regulation of financial institutions including the creation of new\nfederal regulatory agencies and the granting of additional authorities and responsibilities to existing regulatory agencies to identify\nand address emerging systemic risks posed by the activities of financial services firms. The Dodd-Frank Act also provides for enhanced\nregulation of derivatives and asset-backed securities offerings, restrictions on executive compensation and enhanced oversight of credit\nrating agencies. The provisions include a new independent Bureau of Consumer Financial Protection to regulate consumer financial services\nand products, and life settlement transactions may be within the scope of its jurisdiction. Actions taken by the Bureau of Consumer Financial\nProtection may have material adverse effects on the life settlement industry and could affect the value of insurance policies. In addition,\nthe Dodd-Frank Act also limits the ability of federal laws to preempt state and local consumer laws. Prospective investors should be\naware that the changes in the regulatory and business landscape as a result of the Dodd-Frank Act could have an adverse impact on us\nand the entities from which we may acquire NIBs and similar life settlement products.\n\n \n\n10\n\n \n\n** **\n\n**General\neconomic conditions could have an adverse effect on our business.**\n\n \n\nChanges\nin general economic conditions, including, for example, interest rates, investor sentiment, market and regulatory changes specifically\naffecting the insurance industry, competition, technological developments, political and diplomatic events, tax laws, and other factors\nnot known to us today, can substantially and adversely affect our business and prospects. There continues to be uncertainty about the\nprospects for growth in the U.S. economy as well as economies of other countries, driven by factors such as rising government debt levels,\nprospective Federal Reserve (and similar foreign bodies) policy shifts, the withdrawal of government interventions in financial markets,\nchanging consumer spending patterns, and changing expectations for inflation and deflation. These factors have adversely affected the\nfinancial markets and the claims-paying ability of many insurers. Such uncertainties and general economic trends can affect the ability\nto obtain funds to finance life settlement products. None of these risks are or will be within our control.\n\n \n\n**The\ncosts in time and expense of being a publicly-held company are substantial and will only increase if our business model is successful.**\n\n \n\nWe\nare required to file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports respecting certain events on Form\n8-K, along with proxy or information statements for any meeting of stockholders or written consents of stockholders holding sufficient\nsecurities to effect corporate actions. Most of these reports require generating and compiling significant accounting, legal and financial\ninformation, including audited year-end financial statements and reviewed quarterly financial statements. The preparation of these reports,\ntheir review by management and professionals and the auditing and review process of such financial statements consumes significant resources,\nin terms of management time and focus, as well as expenses related to legal, accounting and audit fees. It is difficult to quantify these\ncosts, but we believe them to be not less than between approximately $175,000 and $250,000 annually. As our business grows, these costs\ncan only increase.\n\n \n\n**We\nare new to the bond, life settlement, and financial advisory industry and may not be able to successfully compete in this industry.**\n\n \n\nWe\nonly recently began providing advisory services relating to bond issuances and life settlement transactions. In order for these operations\nto be successful, we will need to develop sufficient expertise and establish relationships with clients. Identifying and acquiring clients\nin this industry will require us to compete with other larger, more experienced, and better capitalized service providers and we may\nnot be successful in developing such client relationships. If we are not able to successful market our advisory business, our financial\ncondition and results of operations will be materially adversely affected.\n\n \n\n**Historically,\n99% of our total assets are interests in life settlement policies, resulting in a lack of diversification of assets and concentration\nin assets that are subject to significant fluctuations in value.**\n\n \n\nAlthough\nwe currently have no ownership in life settlement policies, generally speaking, our previous investment in NIBs was usually the primary\nasset on our balance sheet. Life settlement products like NIBs are subject to substantial fluctuations in value, primarily based upon\nmatters that are not within our control, such as the current health and life expectancy of the insureds underlying our NIBs, the solvency\nof the Holders of the policies and the Holders’ Lender, the Holders’ financing costs and ability to acquire policies and\nthe solvency of the insurance companies. Each of these factors can result in significant fluctuations of the value of the life insurance\npolicies underlying the NIBs, thereby affecting potential future interests.\n\n \n\n**Limitations\nto the financial model we use may result in inaccurate or incomplete projections of future cash flow from the insurance policies.**\n\n \n\nThe\nfinancial model we utilized to project future cash flows from potential life settlement assets was chosen because of its straight-forward\napproach in calculating expected cash flows. We believe the methodology used in the model is particularly desirable because it has parameters\nthat are easily verifiable and does not require complex calculations or mathematical simulations to confirm results. However, with every\nfinancial model, there are limitations. Most require assumptions to be made. Our model is no exception. Our assumptions may prove to\nbe incorrect and, therefore, our model may be incorrect. Our model relies on actuarial life-expectancy reports prepared by third parties\nfrom which the estimated date of maturity is calculated. It is assumed that these reports were accurately made and properly reflect real\nlife expectancies. Our model also requires other inputs including but not limited to the following: (i) a 15-year period for projections;\n(ii) a distinct number of lives; (iii) a distinct number of policies; (iv) life expectancy tables and projections; (v) premiums; (vi)\nsenior lending fees; (vii) MRI fees; and (viii) insurance, servicing and custodial fees. While this method of modeling cash flows is\nhelpful in setting general expectations of potential returns that might be produced from a given portfolio, there is no way such results\ncan be guaranteed. In addition to our assumptions, there are many factors that may affect the selection of inputs for the model.\n\n \n\n11\n\n \n\n** **\n\n**The\nindividuals insured by the life insurance policies may live longer than their actuarial life expectancies and thereby, cash flows from\nlife insurance policies may be delayed.**\n\n \n\nThe\nactual date of death of an insured with respect to a life insurance policy is uncertain. Life expectancies are projected from the medical\nrecords of the insured and actuarial data based upon the historical experience of similarly situated persons. However, it is impossible\nto predict with certainty any insured’s life expectancy. We have and will continue to base our longevity assumptions on the reports\nof third-party life expectancy providers, among whom there is no uniformity of assumptions, approach or procedure. There are also significant\ndisputes among third-party life expectancy providers regarding the mortality rate relating to certain disease states and the efficacy\nof certain treatments. Some factors that may affect the accuracy of a life expectancy report or other calculation of the estimated length\nof an individual’s life are:\n\n \n\n \n●\nthe\nexperience and qualifications of the medical professional or life expectancy company providing the life expectancy estimate;\n\n \n \n \n\n \n●\nthe\ncompleteness and accuracy of medical records received by the life expectancy company;\n\n \n \n \n\n \n●\nthe\nreliability of, and revisions to, actuarial tables or other mortality data published by public and private organizations or developed\nby a life expectancy company and utilized by its medical professionals;\n\n \n \n \n\n \n●\nthe\nnature of any illness or health conditions of the insured disclosed or undisclosed;\n\n \n \n \n\n \n●\nchanges\nin living habits and lifestyle of an insured and medical treatments, medications and therapies available to and used by an insured;\nand\n\n \n \n \n\n \n●\nfuture\nimprovements in medical treatments and cures, and the quality of medical care the insured receives.\n\n \n\nWe\nrely primarily on various different life expectancy providers. A life expectancy (“LE”), can be considered the life expectancy\nprovider’s “best estimate” as to how long a person would live. We assume that the life expectancies were accurately\ncalculated and properly assessed for purposes of our model. To introduce some “checks and balances” into our cash flow projections,\nwe use at least two LE reports from different third-party LE providers for each policy. We do this to try to avoid any systemic bias\nintroduced by dependency on life expectancies produced by a single source. In addition, our model gives greater weight to the longer\n(and more conservative) of the two LEs. By using such a long/short weighted average, our model attempts to hedge against unexpected longevities\nin a portfolio.\n\n \n\nChanges\nin actuarial based life expectancy methodologies (which are determined by the Society of Actuaries and are amended every three to five\nyears) could have the effect of reducing the internal rate of return on the life insurance policies and could cause increased difficulty\nin financing premiums. If changes are significant, they could lower prices for life insurance policies, but could also lower the value\nof the life insurance policies due to the lower resulting present value of the death benefits forecasted to be paid at later dates. Holders’\nsenior loans require that certain loan to value ratios be maintained and decreases in policy values could result in violations of these\nprovisions. Default by Holders on their senior loans may impair their ability to obtain financing necessary to maintain the life insurance\npolicies.\n\n \n\nIn\naddition, because our cash flow is usually dependent on life insurance policies coming to maturity, if life expectancies prove wrong\ncash flows will change. If the insured lives longer than any or all of the life expectancy appraisals predict, then the amounts available\nto life settlement interests could be diminished, perhaps significantly, due to the additional time during which premiums will have to\nbe paid and financing and other related expenses incurred in order to keep the related policy in force. If the insureds with respect\nto too many life insurance policies live longer than their respective life expectancies, then Holders may have to liquidate such life\ninsurance policies. The market value of such Policies will necessarily be significantly less than the related death benefits.\n\n \n\n12\n\n \n\n** **\n\n**Having\nrelatively few insureds could cause the overall performance to be unduly influenced by a relatively small number of underlying policies\nthat perform better or worse than expected.**\n\n \n\nOur\nlife expectancy actuarial results related to smaller portfolios may not be as reliable as they would be if the underlying portfolios\nwere larger. We understand that Standard & Poor’s has stated that at least 1,000 lives are required to achieve actuarial stability,\nwhile A.M. Best concluded that at least 300 lives are necessary. Having fewer lives in a policy portfolio can cause the overall performance\nof such portfolio to be unduly influenced by a relatively small number of “outliers” where the assets perform better or worse\nthan expected. The industry has sought to mitigate this risk by obtaining MRI coverage, which has the effect of accelerating cash flows\nin cases where the assets underperform and reducing the volatility normally associated with a portfolio with fewer lives.\n\n \n\n**Increased\ngeneral market interests rates could increase the carrying costs of the life insurance policies and reduce the related cash flows.**\n\n \n\nIf\ngeneral market interest rates increase, the value of life insurance portfolios would likely decrease. Some of the Holder’s carrying\ncosts associated with the life insurance policy portfolios (specifically interest payments on the MRI coverage outstanding balance) are\ntied to interest rates. If interest rates increase, the Holder’s carrying costs will increase and the return on our investment\nwill decrease. Because the Holders pay all of the costs associated with the life insurance policy portfolios, an increase in the Holder’s\ncarrying costs will correspondingly decrease the amount of cash flows.\n\n \n\nIn\naddition, if the interest rates used to determine the market value of a life insurance policy change, the present value of the policy\nmay also change. Generally, as interest rates increase, the present value of a life insurance policy decreases. If a Holder is forced\nto sell a policy in a higher interest rate environment, the market price for the policies may be less than the price at which such policy\nwas acquired. Furthermore, Holders are generally obligated under the senior loans financing the purchase of life insurance policies to\nmaintain certain loan to value ratios. If the present value of the life insurance policies decreases significantly, the Holder may be\nin breach of such obligations, which could impair the Holder’s ability to obtain financing necessary to service existing life insurance\npolicies or acquire new policies. As a result, any life insurance portfolios may decline in value or become worthless.\n\n \n\n**Changes\nto foreign banking laws and regulations or decreased lending capacity for life settlements could have a negative impact on the ability\nof Holders to obtain loans with respect to purchases of life settlements.**\n\n \n\nOur\ncurrent business model relies on the availability to the Holders of senior loans from the Holders’ Lender or any other lender.\nIn the event of adverse regulatory changes or reduced capacity for life settlement lending, the Holders could experience the same liquidity\nissues that have plagued other market participants. Changes to the Holders’ Lender’s loan to value requirements, compliance\nwith regulatory large exposure limits and changes to regulatory large exposure limits could also result in liquidity issues for the Holders\nand corresponding liquidity issues for us. As mentioned above, changes in life expectancies could cause decreases in policy values, which\ncould result in loan to value violations and violations of large exposure limits.\n\n \n\n**Holders\nmay be required to obtain MRI coverage as a condition of our business model, which, if unavailable, could potentially increase our risk\nof failure.**\n\n \n\nThe\nMRI is a relatively new product and there are no guarantees that the MRI provider will be able to meet the Holders’ coverage needs.\nIn addition, it is our understanding that there is only one MRI provider. The MRI provider has refused to provide future coverage to\nthe Holders. Without the MRI coverage, the Holders have limited options when the senior loans mature. The Holders’ Lender has demanded\nrepayment of all outstanding amounts under the senior loans.\n\n \n\n13\n\n \n\n** **\n\n**The\nlapse of life insurance policies will result in the entire loss of our interest in the death benefits from those particular policies.**\n\n \n\nThe\nHolders are required to make premium payments on the life insurance policies in order to keep such policies in force. These payments\ngenerally will be made from amounts available to the Holders pursuant to the senior loans, death benefits, and MRI payments, if available.\n\n \n\n**Actual\nresults from life settlement products may not match expected results, which could reduce returns and also adversely affect the ability\nto service and grow a portfolio for actuarial stability.**\n\n \n\nOur\nbusiness model relies on achieving actual results similar to those projected by using actuarial estimates. We believe that the larger\nthe portfolio of policies, the more reliable actuarial estimates will be and, likewise, the greater the likelihood that expected results\nwill be achieved.\n\n \n\nIn\na study published in 2012, A.M. Best concluded that at least 300 lives are necessary to narrow the band of cash flow volatility and achieve\nactuarial stability, while Standard & Poor’s has indicated that actuarial stability is unlikely to be achieved with a pool\nof less than 1,000 lives. While there is a risk with a portfolio of any size that actual yield may be less than expected, we believe\nthat the risk we face is presently more significant given the relatively low number of insureds underlying our potential NIBs as compared\nto rating agency recommendations. Even if our portfolio reaches a size that is actuarially stable according to the rating agencies, we\nstill may experience differences between the actuarial models we use and actual mortalities. Differences between our expectations and\nactuarial models, and actual mortality results, could have a materially adverse effect on our operating results and cash flow. In such\na case, we would face liquidity problems, including difficulties acquiring new NIBs and other life settlement products. Continued or\nmaterial failures to meet our expected results could decrease the attractiveness of our securities in the eyes of potential investors,\nthereby making it even more difficult to obtain capital needed to acquire additional NIBs and obtain desired diversification and expansion\nof the underlying insureds.\n\n \n\n**The\nlimited number of sellers of life settlement products in the secondary market may limit the ability to negotiate favorable prices in\nthe acquisition of such life settlement interests.**\n\n \n\nBecause\nwe are not currently licensed to purchase life insurance policies directly from the insureds, we rely on re-sellers like Del Mar, PCH\nand HFII for such products.\n\n \n\nUnless\nother sources become available, the ability to purchase the life settlement products desired may be limited. In addition, the limited\nnumber of sellers could limit the ability to negotiate favorable prices to purchase life settlement products, which could reduce profitability.\nFurthermore, recent declines in the secondary market for life settlements have limited the availability of pools of life insurance policies,\nresulting in increased price competition.\n\n \n\n**We\ndo not track concentrations of pre-existing medical conditions of insureds in our guidelines for purchasing life settlement products.**\n\n \n\nConcentrations\nof pre-existing medical conditions in insureds could affect the valuation of the portfolios that such policies underlie. We do not track\nconcentrations of pre-existing medical conditions in purchases of life settlement products. Thus, the valuation of such interests and\nour estimates of cash flows therefrom could be inaccurate.\n\n \n\n**If\nlife settlement products are determined to be “securities,” Holders may be required to register as an investment company\nunder the Investment Company Act, which would substantially increase SEC reporting costs and oversight of a Holder’s business operations.**\n\n \n\nOn\nJuly 22, 2010, the SEC released a Staff Report by the Life Settlements Task Force that recommended the SEC consider recommending to Congress\nthat it amend the definition of “security” under the federal securities laws to include life settlement policies as securities.\nOne U.S. Congressman has sought to introduce a bill to make such amendment. While that attempt did not result in any action, there can\nbe no assurance that such a bill will not be passed at some future date. If federal securities laws are indeed amended to include such\npolicies within the definition of “security,” or if courts with relevant jurisdiction interpret existing securities laws\nto that effect, our ability to operate our business under our current business model may be constrained by additional regulatory requirements\nunder the Securities Act, the Exchange Act and the Investment Company Act.\n\n \n\n14\n\n \n\n \n\nSuch\nrequirements could, among other things, limit our or Holder’s ability to change investment policies without stockholder approval,\nprohibit our acquisition of assets from an affiliate without SEC approval, limit leveraging of our assets to one-third of our total asset\nvalue, require accounting for all derivatives as a leverage of assets to the extent that they create an obligation on our part to pay\nout assets to a counterparty ahead of our stockholders and generally require 40% of our directors to be independent directors. In addition,\nintermediaries used to purchase life settlement products may be required to register as broker-dealers or registered investment advisers\nand would otherwise be subject to oversight by the SEC and the Financial Industry Regulatory Authority, which require adherence to numerous\nrules and regulations. Such regulations could substantially increase our compliance and reporting costs, which would negatively affect\nprofitability.\n\n \n\n**There\nis poor liquidity in the secondary market for life insurance and life settlements.**\n\n \n\nThe\nsecondary market for life insurance policies and life settlements is relatively illiquid, and it is often difficult to sell life insurance\npolicies or interests in life insurance policies at attractive prices, if at all. The ability to sell life insurance policies may be\nmade even more difficult due to the nature in which the policies were originated, especially with respect to policies where the premiums\nwere financed by the original owner, creating an increased risk associated with holding such policies. Holders may be limited in their\nability to liquidate assets if they need to do so in order to raise funds to pay premiums, or otherwise.\n\n \n\n**Life\nsettlements, and therefore our common stock, are highly speculative and may lose all of their value.**\n\n \n\nLife\nsettlements are highly speculative investments. With respect to life insurance policies, it is not possible to determine in advance either\nthe exact time that a life insurance policy will reach maturity (i.e., at the death of the insured) or the profit, loss or return on\nan investment in a life insurance policy. The longer the period between the purchase of a life settlement and the payout on the underlying\npolicy at maturity, the lower return will be because of the cost to maintain the underlying policies.\n\n \n\nIn\naddition, no assurance can be given that any life insurance policy will perform in accordance with projections, and any such life insurance\npolicy may decline in value. Consequently, there can be no assurance that, to the extent we invest in NIBs, we will realize a positive\nreturn on our investment. These types of investments should be considered to be highly speculative in nature. This, in turn, may directly\naffect the amount and timing of funding sought or received by us, which in turn will affect our ability to conduct our business. Thus,\nan investment in our Company is suitable only for investors having substantial financial resources, a clear understanding of the risk\nfactors associated with such investments and the ability to withstand the potential loss of their entire investment.\n\n \n\n**Risks\nRelated to the Life Insurance Policies**\n\n \n\n**Policies\nmay be determined to have been issued without an “insurable interest” and could be void or voidable.**\n\n \n\nState\ninsurance laws in the United States require that an insurance policy may only be initially procured by a person that has an insurable\ninterest in the continuance of the life of the insured. Whether an owner has an insurable interest in the insured is a question of applicable\nstate law. The general concept is that a person with an insurable interest is a person that has a continuing interest in the insured\nremaining alive, whether through the bonds of love and affection or due to certain recognized economic relationships. Typically this\nincludes the insured, the insured’s spouse and children, and in some states, other close relatives. In some jurisdictions, however,\nthis could also include entities such as the insured’s creditors, employer, business partners or certain charitable institutions.\nIt also typically includes a trust that owns a life insurance policy insuring the life of the grantor or settlor of the trust where the\nbeneficiaries of the trust are persons, who, by virtue of certain familial relationships with the grantor or settlor, also have an insurable\ninterest in the life of the insured.\n\n \n\nA\npolicy purchased by a person without an insurable interest may, depending on relevant state insurance law, be (i) void, (ii) voidable\nby the insurer that issued the policy and/or (iii) subject to the claims of the insured’s presumptive beneficiaries, such as his\nor her spouse or other family members. In some states, the insured must consent to the purchase of a policy by a person other than the\ninsured.\n\n \n\n15\n\n \n\n \n\nGenerally,\nstate insurance law is clear that an individual has an insurable interest in his or her own life and may procure life insurance on his\nor her own life and may name any person as beneficiary. However, if a person purchases insurance on his or her own life for the benefit\nof a party who does not have an insurable interest in the life of the insured for the purpose of evading the insurable interest laws,\nthe purchase may be viewed under applicable state law as a violation of the state’s insurable interest laws. Should the issuer\nown an interest in a policy that was originally issued to an owner or for the benefit of a beneficiary (if required) that did not have\nan insurable interest, it is possible that the issuer may not have a valid claim for the death benefits on such policy, and upon the\ndeath of the insured, the issuing insurance company may refuse to pay the death benefits on the policy to us or may be required to pay\nthe death benefit to other beneficiaries of the insured. Should any such claims be successful in relation to the policies underlying\nNIBs, we could lose some or all the amounts we have invested in NIBs, although in some states the issuing insurance company may be required\nto repay the premiums if it rescinds the policy. Some states, such as New Jersey, allow the carrier to retain all the premiums in the\nevent the policy is rescinded, and some states, such as Delaware, require premiums to be returned in cases where the policy is successfully\nchallenged by the carrier. Even if such claims are unsuccessful, significant amounts may need to be expended in defending such claims,\nthereby reducing the amounts we may receive from NIBs and other life settlement interests we may purchase.\n\n \n\nConcern\nalso exists regarding the applicability of state insurable interest requirements applicable to the purchase of a policy by an insured\nor a person with an insurable interest in the life of the insured in circumstances in which the owner of the policy obtains a loan secured\nby the policy to finance the payment of premiums on the policy, often referred to as a premium finance transaction. A substantial number\nof the life insurance policies underlying NIBs have been originated pursuant to premium finance transactions. While it is generally accepted\nby state law that an individual has an insurable interest in his or her own life, it is possible that a court might construe a premium\nfinance transaction as an attempt to evade the requirement that an insurable interest exist at the time an insurance policy is issued.\nIf the borrower in such a transaction is found to be acting, in fact, on behalf of a premium finance company to procure an insurance\npolicy, it is possible that a court might find that the real party in interest is the premium finance company, which by itself would\nnot have an insurable interest sufficient to support the insurance policy. As a result, the insurance policy may be void or subject to\nattack, which could diminish the value of the policy. States have varying precedent on this subject. California, New York and Florida\nhave case law that is very favorable to the policy owner (*see*Lincoln v. Jack Teren and Jonathan S. Berck, as trustee of the\nJack Teren Insurance Trust (Superior Court of the State of California, San Diego), Alice Kramer v. Lockwood Pension Services,\nInc., et al., (United States District Court – Southern District of New York)). These courts have held life insurance policies\nto be enforceable even where the policies were clearly purchased with an intent to sell the policies in the future. Florida has case\nlaw that is also favorable (*see*PrucoLife Insurance Company v. Wells Fargo (Florida Supreme Court, which held that a policy\nmay not be contested after the expiration of the policy’s contestability period). Delaware has laws which benefit the insurance\ncarrier and others that are more favorable to the policy owner (*see* PHL Variable Insurance Co. vs. Price Dawe, (Supreme\nCourt of Delaware) and Principal Life Insurance Company v. Lawrence Rucker 2007 Insurance Trust (District Court of Delaware)).\nThese courts have invalidated policies where the original policy owners financed the policies and did not intend to purchase the policies\nwith their own money and further intended to ultimately sell the policies in the life settlement markets. However, the Rucker case did\nprovide that premium financing could qualify as an insured procuring a policy and satisfy requirements related to insurable interest.\nThere is also legislation in most states regulating premium financing that must be complied with for policies originated after the legislation\nwas enacted.\n\n \n\nAlso,\nin every state that has addressed the question other than New York and Michigan, the expiration of an insurance policy’s contestability\nperiod may not cut off the insurer’s ability to raise the insurable interest issue as a defense to the payment of the policy proceeds.\n\n \n\nOne\nor more states could adopt legislation that would require a holder of an insurance policy to have an insurable interest in the insured\nat the time a policy is purchased and at the time of death of the insured. Neither us nor the Holders will have an insurable interest\nin the insureds polices acquired by or on our behalf. If such legislation were to be adopted without a ‘grandfathering’ provision\n(i.e., so as not to be applicable to insurance policies then in force), then we may be unable to collect the proceeds on the death benefits\nof the insured persons under our NIBs purchased prior to the enactment of such legislation and our NIBs would be worthless.\n\n \n\n16\n\n \n\n** **\n\n**Additional\ninsurable interest concerns regarding life insurance policies originated pursuant to premium finance transactions may also result in\nadverse decisions that could effect policies.**\n\n \n\nThe\nlegality and merit of “investor-initiated” or “stranger-originated” life insurance products have been questioned\nby members of the insurance industry, including by many life insurance companies and insurance regulators. For example, the New York\nDepartment of Insurance issued a General Counsel’s opinion in 2005 concluding that a premium finance program that was coupled with\nthe right of the policy owner to put the financed insurance policy to a third party violated New York’s insurable interest statute\nand may also constitute a violation of New York State’s prohibition against premium rebates/free insurance. More recently, many\nstates have enacted laws expressly defining and prohibiting stranger-originated life insurance (“STOLI”) practices, which\nin general involve the issuance of life insurance policies as part of or in connection with a practice or plan to initiate life insurance\npolicies for the benefit of a third-party investor who, at the time of the policy issuance, lacks a valid insurable interest in the life\nof the insured. Under these laws, certain premium finance loan structures are treated as life settlements and, accordingly, may not be\nentered into at the time of policy issuance and for a two or five-year period, thereafter, depending on the state. Certain court decisions\nover the past few years may also increase concerns with premium-financed policies. In 2011, the Delaware Supreme Court stated in PHL\nVariable Insurance Company v. Price Dawe 2006 Insurance Trust that the key focus in insurable interest cases is who paid the premiums.\nWhile the decision was not issued in connection with a premium financed policy, investors were concerned with how the court would apply\nsuch reasoning to premium financed policies. This concern was alleviated in the 2012 Delaware District Court case of Principal Life\nInsurance Company v. Lawrence Rucker 2007 Insurance Trust that concluded that “an insured’s ability to procure a policy\nis not limited to paying the premiums with his own funds; borrowing money with an obligation to repay would also qualify as an insured\nprocuring a policy.”\n\n \n\nWe\ncannot predict whether a state regulator, insurance carrier or other party will assert that any policies should be treated as having\nbeen issued as part of a STOLI transaction or otherwise were issued in contravention of applicable insurable interest laws. This risk\nis greater where the insured materially misstated his or her income and/or net worth in the life insurance application. Decisions in\nFlorida have increased the risk that challenges to premium financed policies may be decided in favor of the issuing insurance company.\nMoreover, because the life insurance policies are often originated in the same or a similar manner and in a limited number of states\n(generally, California and Wisconsin, although the insured may reside in other states), there is a heightened risk that an adverse court\ndecision or other challenge or determination by a regulatory or other interested party with respect to a policy could have a material\nadverse effect on a significant number of other policies, including the rescission of policies or the occurrence of other actions that\nprevent us from being entitled to receive or retain the net death benefit related to the policies. Concerns of such nature could also\nnegatively affect the market value and/or liquidity of the life insurance policies.\n\n \n\n**Fraud\nin the application for life insurance can also affect assets and interest in policies.**\n\n \n\nThere\nare risks that policies may be procured based on fraud or misrepresentation in connection with the application for the policy. Types\nof fraud that have enabled carriers to rescind or void the related policies successfully include, among others, misrepresentations concerning\nan insured’s financial net worth and/or income, need for and purpose of the life insurance protection, medical history and current\nphysical condition, including age and whether the insured is a smoker. Such risk of fraud and misrepresentation is heightened in connection\nwith life insurance policies for which the premiums are financed through premium finance loans or other structured programs. In particular,\nthere is a significant risk that applicants and potential insureds may not answer truthfully or completely questions related to whether\nthe life insurance policy premiums will be financed through a premium finance loan or otherwise, the applicants’ purpose for purchasing\nthe policy or the applicants’ intention regarding the future sale or transfer of the life insurance policy. Such risk may be further\nincreased to the extent life insurance agents communicate to applicants and potential insureds regarding potential premium finance arrangements\nor profits to be made on policies that will be sold after the contestability period. If an insured has made any material misrepresentation\non his/her application for life insurance, there is a heightened risk that the insurance company will contest or successfully rescind\nor void the related policy, although an issuing insurance company may not be able to raise such claims after the expiration of the contestability\nperiod. There has been significant litigation regarding whether or not a policy can be contested for fraud after the expiration of the\ncontestability period. Florida, California and New York have concluded that a carrier may not contest a policy after the contestability\nperiod. New Jersey and Delaware have allowed such contests by the carriers. Even if such fraud in the application could not serve as\na basis to challenge a policy because the contestability period has expired, it may be raised as evidence that the policy was provided\nas part of a STOLI arrangement. Furthermore, such misrepresentations can adversely affect the actuarial value of the death benefit under\nthe related life insurance policies.\n\n \n\n17\n\n \n\n** **\n\n**The\nrisk of litigation with issuing insurance companies could substantially raise our costs of operation and increase our risk of loss.**\n\n \n\nSome\nof the programs relating to the premium finance transactions through which certain underlying insurance policies are originated, or other\nprograms having similar characteristics, may be objectionable to certain life insurance companies and other parties, including certain\nregulators, on the basis of constituting a means of originating stranger-originated life insurance. Additionally, as described above,\nlife insurance policies that are originated through the use of premium finance programs often present a greater risk of there having\nbeen fraud and/or misrepresentations in connection with the issuance of the policies. For these reasons, among others, it is possible\nthat holders may become subject to, or may otherwise become affected by, litigation involving one or more issuing insurance companies\n(either as a plaintiff or a defendant), including claims by an issuing insurance company seeking to rescind a policy prior to or after\nthe death of the related insured. Moreover, such risk may be enhanced with respect to an issuing insurance company that is experiencing\nfinancial difficulty, since a successful claim by an issuing insurance company could reduce its financial liabilities. In the event any\nlitigation involving the policy holder was to occur, the policy holder would bear the costs of such litigation, and would be unable to\npredict its outcome, which could include losing the right to receive (or retain) the proceeds otherwise payable under one or more of\nthe underlying policies.\n\n \n\n**The\ncontestation of the life insurance policies by the applicable issuing insurance companies could result in the loss of the benefits from\nsuch life insurance policies.**\n\n \n\nThe\nability of an issuing insurance company to seek to rescind one or more life insurance policies depends on whether such issuing insurance\ncompany is barred from bringing a rescission action by operation of an incontestability clause contained in the life insurance policies\nor contestability limitations applicable as a matter of state law. Each life insurance policy, in accordance with laws adopted in virtually\nevery state in the United States, contains a provision that provides that, absent a failure to pay premiums, a policy shall be incontestable\nafter it has been in force during the lifetime of the insured for a period of not more than two years after its date of issue. However,\nas stated above, some states recognize an exception to incontestability where there was actual fraud in the procurement of the policy.\nA new contestability period may also arise in connection with information provided on any application for reinstatement of a life insurance\npolicy following lapse of a policy due to non-payment of premiums, or an application for an increase in policy benefits. The successful\ncontestation of the life insurance policies by the applicable issuing insurance companies could materially and adversely affect cash\nflows.\n\n \n\n**Increases\nin cost of insurance could reduce estimated returns and lower revenues.**\n\n \n\nInsurers\npass on a portion of their expenses to operate their business and administer their life insurance policies in the form of policy charges\nborne by each policyholder. In the event an insurer experiences significantly higher than anticipated expenses associated with operation\nand/or policy administration, the insurer has the right to increase the charges to each of its policy owners. In the event the charges\nto a life insurance policy are materially increased, additional premium payments may be required to maintain enforceability of such policy.\n\n \n\nAXA\nEquitable issued cost-of-insurance, referred to herein as “COI,” increases on eleven (11) of the previously held life insurance\npolicies underlying our prior NIBs. In addition, one Transamerica and one Lincoln policy, both of which were Policies underlying our\nprior NIBs, were subject to increased COI’s. Other carriers have been issuing COI increases that impact life insurance policies\nheld by large settlement funds. Multiple lawsuits, including class actions, against Phoenix Life, Lincoln National Insurance Company,\nAXA Equitable, Banner Life, and Transamerica Life Insurance Company are currently ongoing. However, most of these lawsuits are in the\nvery early stages.\n\n \n\n**Carrier\nand service partner credit risk can adversely affect life settlements.**\n\n \n\nHolders\nare subject to the credit risk associated with the viability of the various insurance companies that issued the life insurance policies.\nThe insolvency of an issuing insurance company or a downgrade in the ratings of an issuing insurance company could have a material adverse\nimpact on the value of a policy issued by such issuing insurance company, as the collectability of the related death benefits and the\nability of such issuing insurance company to pay the cash surrender value or other amounts agreed to be paid by the issuing insurance\ncompany may be reduced. Any such impairment of the claims-paying ability of the issuing insurance company could materially and adversely\naffect the value of the policies issued by such insurance company, the ability of the Holder to pay the premiums due on other insurance\npolicies and the Holders ability to pay any required policy premiums, fees and expenses of the service providers and our other expenses,\nwhich could materially and adversely affect the value of a policy.\n\n \n\n18\n\n \n\n** **\n\n**The\ninability to keep track of the insureds could keep us from updating the medical records of the insured.**\n\n \n\nIt\nis important for the Holder of the life insurance policies to track the health status of an insured and keep information current, which\nis done by contacting the insured and/or other designated persons and obtaining updated medical records from an insured’s physician.\nThere are significant U.S. federal and state laws relating to privacy of personal information that affect the operations of the servicer\nand its ability to properly service the policies, especially with regard to obtaining current information from an insured’s physician.\n\n \n\nUnder\nthe Health Insurance Portability and Accountability Act or HIPAA, the federal law that governs the release of medical records from medical\nrecord custodians, an insured may revoke his or her authorization for previously authorized third parties to receive medical records\nat any time, leaving the Holder unable to receive additional medical records.\n\n \n\nThe\nHolder may have to rely on a third-party servicer to track an insured, especially if states continue to adopt laws that would limit the\nability of a person other than a licensed life settlement provider or its authorized representative to contact insureds for tracking\npurposes and the servicer may lose contact with such insured. For example, the insured may move and not notify the servicer or any other\nthird party that has authority to contact the insured. The servicer attempts to maintain contact information for the insured and/or one\nor more close family friends or relatives whenever possible so it can maintain contact with the insured. Additionally, the servicer subscribes\nto various databases that use public records and other information to track individuals. The servicer also subscribes to death notification\nservices which use Social Security and public records information to notify the servicer if an insured has passed away so that it can\nbegin the process of obtaining a death certificate and arranging for the payout of the policy. Changes to the Social Security Administration’s\nDeath Master File have resulted in the elimination of many state records that were previously included in the Death Master File. The\nnumber of new records being added to the Death Master File has been reduced by approximately 40%. Thus, it has become necessary to enhance\nalternative methods for learning of an insured’s death. On average, it now takes longer to learn about an insured’s death\nas compared to periods prior to the changes in the Death Master File.\n\n \n\nDespite\nthese various tracking methods, it is still possible for the Holder to lose contact with an insured, making any additional updates of\nthe insured’s medical condition impossible. There can also be no assurance that the Holder will learn of an insured’s death\non a timely basis. Delays in receiving insurance proceeds result in a decrease in the death benefit.\n\n \n\n**Lost\ninsureds can result in a delay or a loss of an insurance benefit that would have a negative effect on revenues and prospects.**\n\n \n\nOccasionally,\nthe issuing insurance company may encounter (or assert) situations where the body of the insured or reasonable other evidence of death\ncannot be located and/or identified. For example, the insured may have been lost at sea and there may not be proof of death available\nfor several years or at all. Alternatively, the fact that the original beneficiaries no longer have any financial interest in a claim\nunder the policy may mean that the issuing insurance company faces practical obstructions to recording accurately and in a timely manner\nthe death of the insured. In the event of a “lost” insured, the death claim may be delayed for up to seven years by the issuing\ninsurance company. Under these circumstances, typically, the claim will then be paid with interest from the date that the insured was\noriginally presumed lost. Nonetheless, it remains possible that it will be difficult or impossible to locate and/or identify an insured\nto establish proof of death and, as a result, the related issuing insurance company may significantly delay (but not ultimately avoid)\npayment of the underlying death benefit. This delay could result in a longer than anticipated holding period for a policy which, in turn,\ncould result in a loss.\n\n \n\nThe\ndeath of an insured must have occurred to permit the servicer to file a claim with the issuing insurance company for the death benefit.\nObtaining actual knowledge of death of an insured, as discussed above, may prove difficult and time-consuming due to the need to comply\nwith applicable law regarding the contacting of the insured’s family to ascertain the fact of death and to obtain a copy of the\ndeath certificate or other necessary documents in order to file the claim. The death benefit typically increases subsequent to death\nby an interest rate that is less than the interest rate under the senior loan; thus, the policy proceeds become less valuable as time\npasses.\n\n \n\n19\n\n \n\n** **\n\n**U.S.\nlife settlement and viatical regulations may result in determination(s) of applicable law violations.**\n\n \n\nThe\npurchase and sale of insurance policies in the secondary market from the policy’s original owner and among secondary market participants\nis subject to regulation in approximately 45 states and Puerto Rico. The scope of the regulations and the consequences of their violation\nvary from state to state. In addition, within a given state, the regulations may vary based upon the life expectancy of the insured at\nthe time of sale or purchase. In many states, a policy on an insured with a life expectancy of two years or less is referred to as a\n“viatical settlement” or a “viatical.” A policy on an insured with a life expectancy of more than two years is\nreferred to as a “life settlement.” The Holders have not, and do not intend to, purchase viatical settlements and should\nnot be subject to the regulatory regimes that govern these policies. However, the states vary in their technical definitions of viatical\nsettlements and life settlements, and state insurance regulators, who are charged with interpretation and administration of insurance\nlaws and regulations, vary in their interpretations. Therefore, despite expectations, it may be possible that under the rules of a particular\nstate, a policy that is not commonly thought of as a viatical settlement may meet the technical definition thereof. Engaging in the purchase\nor sale of life settlements or viatical settlements in violation of applicable regulatory regimes could result in fines, administrative\nand civil sanctions and, in some instances, criminal sanctions. United States and state securities laws could have an adverse effect\non the Holders’ ability to liquidate any policies we or they believe should be sold.\n\n \n\nIt\nis possible that, depending on the facts and circumstances attending a particular sale of a life insurance policy, a sale could implicate\nstate and federal securities laws. The failure to comply with applicable securities laws in connection with dealings in life settlement\ntransactions could result in fines, administrative and civil sanctions and, in some instances, criminal sanctions. In addition, parties\nmay be entitled to a remedy of rescission regarding such transactions. State guaranteed funds give some protection for payments under\nlife insurance policies, but no assurance can be given that we will benefit from them.\n\n \n\n**State\nprotections for the insolvency of an insurance company are limited.**\n\n \n\nWith\nrespect to the life insurance policies, the payment of death benefits by issuing insurance companies is supported by state regulated\nreserves held by the issuing insurance companies and, under certain circumstances and in limited amounts that vary from state to state,\nstate-supported life and health insurance guaranty associations or funds. However, such reserves and guaranty funds, to the extent in\nexistence, may be insufficient to pay all death benefits under the life insurance policies issued by an issuing insurance company if\nsuch issuing insurance company becomes insolvent. Even if such guaranty funds are sufficient, the obligation of a state guaranty fund\nto make payments may not be triggered in certain circumstances.\n\n \n\nThe\nbenefits of most or all of such state supported guaranty funds are capped per insured life (irrespective of the number of policies issued\nand outstanding on the life of such individual), which caps are generally less than the net death benefits of the insurance policies.\nGuaranty fund laws often include aggregate limits payable with respect to any one life across different types of insurance policies,\ngenerally $300,000 to $500,000 depending on the state. Most state guaranty funds are statutorily created and the legislatures may amend\nor repeal the laws that govern them. In addition, most state guaranty fund laws were enacted with the stated goal of assisting policy\nholders resident in such states. Therefore, non-resident policyholders, beneficiaries, and claimants may not be covered or may be covered\nonly in limited circumstances. As a result, state guaranty funds will likely provide little protection to us in the event of the insolvency\nof an issuing insurance company. In addition, in the event of an issuing insurance company’s insolvency, courts and receivers may\nimpose moratoriums or delays on payments of cash surrender values and/or death benefits.\n\n \n\n**Liability\nfor failing to comply with U.S. privacy safeguards.**\n\n \n\nBoth\nfederal and state statutes safeguard an insured’s private health information. In addition, insureds frequently have an expectation\nof confidentiality even if they are not legally entitled to it. If any of the entities providing services related to the life insurance\npolicies properly obtains and uses otherwise private health information, but fails to maintain the confidentiality of such information,\nsuch service provider may receive complaints from the affected individuals, their families and relatives and, potentially, interested\nregulatory authorities. Because of the uncertainty of applicable law, it is not possible to predict the outcome of such disputes.\n\n \n\n20\n\n \n\n \n\nAdditionally,\nit is possible that, due to a misunderstanding regarding the scope of consents that a service provider possesses, such service provider\nmay request and receive from health care providers information that it in fact did not have a right to request or receive. Once again,\nif a service provider receives complaints for these acts, it is not possible to predict what the results will be. This uncertainty also\nincreases the likelihood that a service provider may sell, or cause to be sold, life insurance policies in violation of applicable law,\nwhich could potentially result in additional costs related to defending claims or enduring regulatory inquiries, rescinding such transactions,\npossible legal damages and penalties and probable reduced market value of the affected life insurance policies. Each of the foregoing\nfactors may delay or reduce the return on life insurance policies.\n\n \n\n**Cyber-attacks\nor other security breaches could have a material adverse effect on our business.**\n\n \n\nIn\nthe normal course of business, we may have access to sensitive and confidential information regarding insureds. Although we devote significant\nresources and management focus to ensuring the integrity of our systems through information security and business continuity programs,\nour facilities and systems, and those of third party service providers, are vulnerable to external or internal security breaches, acts\nof vandalism, computer viruses, misplaced or lost data, programming or human errors or other similar events.\n\n \n\nInformation\nsecurity risks have increased recently in part because of new technologies, the use of the Internet and telecommunications technologies\n(including mobile devices) to conduct financial and other business transactions and the increased sophistication and activities of organized\ncrime, perpetrators of fraud, hackers, terrorists and others. In addition to cyber-attacks or other security breaches involving the theft\nof sensitive and confidential information, hackers recently have engaged in attacks designed to disrupt key business services, such as\ncustomer-facing websites. We are not able to anticipate or implement effective preventive measures against all security breaches of these\ntypes, especially because the techniques used change frequently and because attacks can originate from a wide variety of sources. We\nemploy detection and response mechanisms designed to contain and mitigate security incidents, but early detection may be thwarted by\nsophisticated attacks and malware designed to avoid detection.\n\n \n\nThe\naccess by unauthorized persons to, or the improper disclosure by us of, confidential information regarding the insureds could result\nin significant legal and financial exposure, supervisory liability, damage to our reputation or a loss of confidence in our business,\nwhich could have a material adverse effect on our business, financial condition or results of operations.\n\n \n\n**U.S.\nprivacy concerns may affect the access to accurate and current medical information regarding the insured under life insurance policies.**\n\n \n\nThe\nvalue of a life insurance policy is inherently tied to the remaining life expectancy of the insured and information necessary to perform\nthis valuation may not be available at the time of purchase or sale. For example, if a policy is being purchased in the secondary market\nfrom an entity that had earlier purchased the policy directly from the insured, it is likely that the insured made his or her medical\nrecords available at the time of his or her sale of the policy to the initial purchaser. However, if necessary consents were not obtained\nfrom the insured, it is possible that this information cannot legally be made available at the time of the subsequent purchase of the\npolicy. If it is legally available to the subsequent purchaser, it is possible that such information is outdated and of little utility\nfor a current evaluation of the remaining life expectancy of the insured. Even if the insured granted a general consent that gave the\nowner of the policy the right to subsequently request and receive medical information from the insured’s health providers, it is\npossible for the insured to subsequently revoked such consent. Likewise, it is possible that, under applicable law, the consent expires\nafter a certain period of time. Even if the consent is effective, without the cooperation of the insured, it may be difficult to convince\nthe insured’s health care providers of the consent’s efficacy and such health providers may be reluctant to release medical\ninformation. These impediments to accessing current medical information can prove to be a significant obstacle to the proper valuation\nof a policy at the time of either the policy’s purchase or sale.\n\n \n\n21\n\n \n\n** **\n\n**Risk\nFactors Related to Our Common Stock**\n\n \n\n**There\nis a limited public market for our common stock, and any market that may develop could be volatile.**\n\n \n\nThe\nmarket for our common stock has been limited due to, among other factors, low public float of our common stock, low trading volume and\nthe small number of brokerage firms acting as market makers. There were 19,241,922  shares of our common stock held by non-affiliates\nas of March 31, 2026. Thus, our common stock will be less liquid than the stock of companies with broader public ownership, and, as a\nresult, the trading price for shares of our common stock may be more volatile. Among other things, trading of a relatively small volume\nof our common stock may have a greater impact on the trading price for our stock than would be the case if our public float were larger.\nIn addition, because our common stock is thinly traded, its market price may fluctuate significantly more than the stock market in general\nor the stock prices of other companies listed on major stock exchanges. The average daily trading volume for our stock has varied significantly\nfrom week to week and from month to month, and the trading volume often varies widely from day to day. Because of the limitations of\nour market and volatility of the market price of our stock, investors may face difficulties in selling shares at attractive prices when\nthey want to.\n\n \n\nAn\nactive trading market for shares of our common stock may never develop or be sustained. If no trading market develops, securities analysts\nmay not initiate or maintain research coverage of our company, which could further depress the demand for our common stock. As a result,\ninvestors may be unable to sell their shares of our common stock when they want to sell. The limited market for our shares may also impair\nour ability to raise capital by selling additional shares and our ability to acquire other companies or technologies by using our common\nstock as consideration. The following may result in short-term or long-term negative pressure on the trading price of our shares, among\nother factors:\n\n \n\n \n●\nConditions\nand publicity regarding the life settlement market and related regulations generally;\n\n \n●\nRegulatory\ndevelopments in the life settlement market;\n\n \n●\nLack\nof listing for our common stock;\n\n \n●\nLack\nof shares of our common stock in public float;\n\n \n●\nLack\nof market makers with respect to our common stock;\n\n \n●\nInability\nto raise needed capital;\n\n \n●\nLow\nvolume of trading of our common stock;\n\n \n●\nPrice\nand volume fluctuations in the stock market at large, which do not relate to our operating performance; and\n\n \n●\nComments\nby securities analysts or government officials, including those with regard to the viability or profitability of the life settlement\nindustry generally or with regard to our ability to meet market expectations.\n\n \n\nThe\nstock market has occasionally experienced extreme price and volume fluctuations unrelated to particular companies’ operating performance.\n\n \n\n**We\nare an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies\nwill make our common stock less attractive to investors.**\n\n \n\nWe\nare an emerging growth company under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For as long as we continue to\nbe an emerging growth company, we intend to take advantage of certain exemptions from various reporting requirements that are applicable\nto other public companies including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic\nreports and proxy statements, exemptions from the requirements of holding a nonbinding advisory stockholder vote on executive compensation\nand any golden parachute payments not previously approved, exemption from the requirement of auditor attestation in the assessment of\nour internal control over financial reporting and exemption from any requirement that may be adopted by the Public Company Accounting\nOversight Board. If we do, the information that we provide stockholders may be different than what is available with respect to other\npublic companies. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions.\nIf some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and\nour stock price may be more volatile.\n\n \n\n22\n\n \n\n \n\nWe\nwill remain an emerging growth company until the earliest of (1) the end of the fiscal year in which the market value of our common stock\nthat is held by non-affiliates exceeds $700 million as of the end of the second fiscal quarter, (2) the end of the fiscal year in which\nwe have total annual gross revenues of $1.235 billion or more during such fiscal year, (3) the date on which we issue more than $1 billion\nin non-convertible debt in a three-year period or (4) the end of the fiscal year following the fifth anniversary of the date of the first\nsale of our common stock pursuant to an effective registration statement filed under the Securities Act. Decreased disclosures in our\nSEC filings due to our status as an “emerging growth company” may make it harder for investors to analyze our results of\noperations and financial prospects.\n\n \n\n**Our\nmanagement and two stockholders beneficially own approximately 66% of our outstanding common stock and therefore can exert control over\nour business.**\n\n \n\nMembers\nof our management team and three stockholders together beneficially own approximately 66% of our outstanding common stock. This percentage\nof stock ownership is significant in that it could carry any vote on any matter requiring stockholder approval, including the subsequent\nelection of directors, who in turn appoint all officers. As a result, these persons control the Company, regardless of the vote of other\nstockholders. As a result, other stockholders may not have an effective voice in our affairs.\n\n \n\n**Future\nsales of our common stock could adversely affect our stock price and our ability to raise capital in the future, resulting in our inability\nto raise required funding for our operations.**\n\n \n\nSales\nof substantial amounts of our common stock could harm the market price of our common stock. This also could harm our ability to raise\ncapital in the future. Of the 43,063,441 shares of our common stock that were outstanding as of March 31, 2026, 225,000 of such shares\nare subject to leak-out agreements. Pursuant to such agreements, each of these stockholder’s common stock can only be sold in an\namount equal to 0.25% (1/4%) of our outstanding securities (to be defined for all purposes thereof as the amount indicated in our most\nrecent filing with the SEC) during each of the four quarterly periods beginning on January 1, 2017; 0.01 (1%) of our outstanding securities\nduring each of the next four successive quarterly periods, all on a non-cumulative basis, meaning that if no common stock was sold during\nany quarterly period while common stock was qualified to be sold, such shares of common stock cannot be sold in the next successive quarterly\nperiod (the “Leak-Out Period”). Notwithstanding the foregoing, any stockholder subject to a lock-up/leak-out agreement that\nowns less than 100,000 shares of common stock that are covered thereby, is allowed to sell such stockholder’s common stock. Our\nremaining outstanding shares are mostly freely tradable under Rule 144 and certain limitations on the number of shares that can be sold\nquarterly by “affiliates” of the Company as defined under the Securities Act. Any sales of substantial amounts of our common\nstock in the public market, or the perception that those sales might occur, could harm the market price of our common stock. See the\ncaptions “Market Price of Common Stock and Related Matters” and “Security Ownership of Certain Beneficial Owners and\nManagement” of Part II, Item 5, below for further information. Further, certain stockholders have “piggy-back” registration\nrights afforded to them if we file a registration statement with the SEC; these shares or any registered securities we may register can\nalso have an adverse effect on any market for our common stock.\n\n \n\nWe\nwill not solicit the approval of our stockholders for the issuance of authorized but unissued shares of our common stock unless this\napproval is deemed advisable by our Board of Directors or is required by applicable law, regulation or any applicable stock exchange\nlisting requirements. The issuance of additional shares would dilute the value of our outstanding shares of common stock."}