2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our financial statements included in this Form 10-Q are as follows:

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included.  Operating results for the interim period ended December 31, 2013 are not necessarily indicative of the results that can be expected for the full year.

3

CROWN ALLIANCE CAPITAL LTD

FINANCIAL STATEMENTS

December 31, 2013

(Stated in US Dollars)

4

CROWN ALLIANCE CAPITAL LTD

BALANCE SHEETS

(Stated in US Dollars)

(Unaudited)

The accompanying notes are an integral part of these financial statements.

F-1

CROWN ALLIANCE CAPITAL LTD

INTERIM STATEMENTS OF OPERATIONS

(Stated in US Dollars)

(Unaudited)

The accompanying notes are an integral part of these financial statements.

F-2

CROWN ALLIANCE CAPTIAL LTD

INTERIM STATEMENTS OF CASH FLOWS

(Stated in US Dollars)

(Unaudited)

Supplemental cash flow information - Note 12

The accompanying notes are an integral part of these financial statements.

F-3

CROWN ALLIANCE CAPITAL LTD

NOTES TO THE FINANCIAL STATEMENTS

September 30, 2013

(Stated in US Dollars)

(Unaudited)

Note 1

Basis of Presentation

While the information presented in the accompanying December 31, 2013 interim financial statements is unaudited, it includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim period presented in accordance with the accounting principles generally accepted in the United States of America.  In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.  These interim financial statements should be read in conjunction with the Company’s June 30, 2013 audited financial statements (notes thereto) included in the Company’s Annual Report on Form 10-K.

Operating results for the six months ended December 31, 2013 are not necessarily indicative of the results that can be expected for the year ending June 30, 2014.

Note 2

Nature of Operations

The Company was incorporated in the state of Nevada, United States of America on March 4, 2010.  The Company was an exploration stage company and was formed for the purpose of acquiring exploration and development stage mineral properties.  The Company’s year-end is June 30.

On June 4, 2010, the Company incorporated a wholly-owned subsidiary, KRC Exploration LLC (“KRC”) in the State of Nevada, United States of America (“USA”) for the purpose of mineral exploration in the USA.

On August 31, 2011, the Company changed its business focus to the development of a portfolio of life settlement policies and sold KRC to the former president.

On January 30, 2012, the Board of Directors approved a change in name from Kinetic Resources Corp. to Crown Alliance Capital Limited and a forward-split of its Common Stock on the basis of 17.85715 shares of Common Stock for one share of Common Stock held by shareholders of record at the close of business on February 10, 2012.

On March 15, 2013, the Board of Directors approved a forward-split of its Common Stock on the basis of five shares of Common Stock for one share of Common Stock held by shareholders of record at the close of business on March 31, 2013.

On March 20, 2013, the Board of Directors approved an increase in the number of authorized common shares of the Company from 90,000,000 to 450,000,000.

All share and per share data has been retroactively adjusted to reflect the effect of the forward-splits.

F-4

CROWN ALLIANCE CAPITAL LTD

NOTES TO THE FINANCIAL STATEMENTS

September 30, 2013

(Stated in US Dollars)

(Unaudited)

Note 2

Nature of Operations - (cont’d)

On March 15, 2012, the Company entered into its first contract to acquire life settlement policies.  The agreement closed on October 31, 2013.

Note 3

Summary of Significant Accounting Policies

The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and are stated in US dollars.  Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates, which may have been made using careful judgment. Actual results may vary from these estimates.

The financial statements have, in management’s opinion, been properly prepared within the framework of the significant accounting policies summarized below:

Cash and cash equivalents

The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.  There were no cash equivalents held at December 31, 2013 or June 30, 2013.

Exiting Development Stage

The Company was in the development stage through June 30, 2013.  In October 2013, the Company acquired the remaining life policy in the contract entered into on March 15, 2012 and secured funding to purchase additional policies.  As of July 2013, the Company became fully operational and as such was no longer considered a development stage company.  During the period that the Company was considered a development stage company, the Company incurred accumulated losses of approximately $871,916.

Earnings per share

In accordance with accounting guidance now codified as FASB ASC Topic 260, “Earnings per Share,”  basic earnings per share (“EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method.  Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive.  

F-5

CROWN ALLIANCE CAPITAL LTD

NOTES TO THE FINANCIAL STATEMENTS

September 30, 2013

(Stated in US Dollars)

(Unaudited)

Note 3

Summary of Significant Accounting Policies - (cont’d)

Investments in Insurance Contracts

The Company adopted FASB ASC Topic 325-30 “Investments in Insurance Contracts” and accounts for life settlement contracts using the investment method.  Life settlement contracts will be initially recognized at the transaction price.  Any additional costs, such as premiums paid, will be capitalized.  In accordance with ASC 230, “Statement of Cash Flows”, cash paid towards acquiring and maintaining life settlement policies will be treated as an investing outflow while the receipt of proceeds over the cash invested will be shown as an operating cash flow with return of investment and premiums shown as investing inflows.

Stock-based Compensation

The Company is required to record compensation expense, based on the fair value of the awards, for all awards granted after the date of the adoption.

Foreign Currency Translation

Assets and liabilities denominated in a foreign currency are translated at the exchange rate in effect at the balance sheet date and capital accounts are translated at historical rates.  Income statement accounts are translated at the average rates of exchange prevailing during the period.  Translation adjustments from the use of different exchange rates from period to period are included in the Accumulated Other Comprehensive Income account in Stockholder’s Equity, if applicable.

Transactions undertaken in currencies other than the functional currency of the entity are translated using the exchange rate in effect as of the transaction date.  Any exchange gains and losses are included in the Statement of Operations.

F-6

CROWN ALLIANCE CAPITAL LTD

NOTES TO THE FINANCIAL STATEMENTS

September 30, 2013

(Stated in US Dollars)

(Unaudited)

Note 3

Summary of Significant Accounting Policies - (cont’d)

Newly Issued Accounting Pronouncements

The Company has reviewed issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have an impact on its results of operations or financial position.

Note 4

Prepaid Expenses

As of December 31, 2013, prepaid expenses were $67,005 (June 30, 2013 - $1,125,900).  Prepaid expenses consist prepaid management fees of $4,694 (June 30, 2013 $nil); advance premiums paid on life policies of $9,108 (June 30, 2013 - $nil) and consulting fees related to a consultant which will be amortized over the life the agreement of $53,203 (June 30, 2013 - two consulting agreements aggregating $1,125,900).  Of the total prepaid expenses, at December 31, 2013, $nil (June 30, 2013 - $979,497) is attributable to prepaid stock-based compensation.

Note 5

Property and equipment

As of December 31 and 2012, depreciation expense was $2,152 and $6,377, respectively.

F-7

CROWN ALLIANCE CAPITAL LTD

NOTES TO THE FINANCIAL STATEMENTS

September 30, 2013

(Stated in US Dollars)

(Unaudited)

Note 6

Financial Instruments

Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.

In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs.  The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.  Each fair value measurement is reported in one of the three levels which are determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

Level 1 -

inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

Level 2 -

inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 -

inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

The carrying value of the Company’s financial assets and liabilities which consist of cash, prepaid expenses, accounts payable and accrued liabilities in management’s opinion approximate their fair value due to the short maturity of such instruments.  These financial assets and liabilities are valued using level 3 inputs, except for cash which is at level 1.  Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, exchange, or credit risks arising from these financial instruments.

F-8

CROWN ALLIANCE CAPITAL LTD

NOTES TO THE FINANCIAL STATEMENTS

September 30, 2013

(Stated in US Dollars)

(Unaudited)

Note 7

Related Party Transactions

On February 8, 2012, the Company entered into an Employment Agreement with the President of the Company.  Pursuant to the agreement the President will receive a signing bonus of $25,000 and $180,000 per annum February 8, 2012 until February 8, 2013 (the initial term) for services rendered plus reimbursement of the Company’s expenses.

The initial term shall be automatically renewed for up to 3 years successive years in consecutive one year periods. The agreement will continue in force unless either party gives notice of termination not more than 270 days and not less than 30 days prior to the then existing term of employment.

The annual base compensation pursuant to the employment agreement is as follows:

$180,000 until February 8, 2013;

$200,000 until February 8, 2014;

$255,000 until February 8, 2015;

$255,000 per annum thereafter, - unless renewal terms are renegotiated

The Agreement also allows in addition to the base salary noted above for bonus payments to be made as deemed reasonable at the time by the Board of Directors either as cash, or grants of stock options.  On March 26, 2013, the Board of Directors approved and paid a bonus to the president of $35,000.

As of December 31, 2013, accounts payable and accrued liabilities includes $nil (June 30, 2013 - $3,207) in respect of unpaid management fees and prepaid expenses includes $4,694 (June 30, 2013 - $nil) in respect of management fees.  Management fees for the six month period ended December 31, 2013 includes $100,000 (six month period to December 31, 2012 - $90,000) pursuant to this agreement.

On June 18, 2013, the Company issued a promissory note for $95,000 and received $95,000 in exchange.  The promissory note is unsecured, bears interest at 14% per annum, and was due on or before July 18, 2013.  On July 18, 2013 the terms of the note were amended to due upon demand.  The Company accrued $6,556 (six month period ended December 31, 2012 - $nil) of interest expense in respect of this note payable, The Company repaid $10,000 of the principal and has also paid $1,567 of the interest due.  At December 31, 2013 accrued interest of $4,989 (June 30, 2013 - $437) was recorded.  

F-9

CROWN ALLIANCE CAPITAL LTD

NOTES TO THE FINANCIAL STATEMENTS

September 30, 2013

(Stated in US Dollars)

(Unaudited)

Note 8

Notes payable

Note 1

On October 31, 2013, the Company issued a promissory note for $200,000 and received $200,000 cash in exchange.  The note bears interest at 15% per annum, which is payable in monthly instalments and is secured by a life policy with a value of $2,000,000.  The note becomes due upon the maturity of the security or March 30, 2017, whichever is earlier.  During the six month period ended December 31, 2013 the Company paid interest of $5,000 (six months ended December 31, 2013 - $nil).

Note 2

On October 31, 2013, the Company issued a promissory note for $300,000 and received $300,000 cash in exchange.  The note bears interest at 15% per annum, which is payable in monthly instalments and is secured by a life policy with a value of $2,000,000.  The note becomes due upon the maturity of the security or March 30, 2017, whichever is earlier.  During the six month period ended December 31, 2013 the Company paid interest of $7,500 (six months ended December 31, 2013 - $nil).

Note 3

On October 31, 2013, the Company issued a promissory note for $1,000,000 and received $1,000,000 cash in exchange.  The note bears interest at 15% per annum, which is payable in monthly instalments and is secured by a life policy with a value of $2,000,000.  The note becomes due upon the maturity of the security or March 30, 2017, whichever is earlier.  During the six month period ended December 31, 2013 the Company paid interest of $25,000 (six months ended December 31, 2013 - $nil).

Note 9

Capital Stock

The authorized common stock of the Company consists of 450,000,000 shares of common stock with par value of $0.001 and 10,000,000 shares of preferred stock with a par value of $0.001. As of December 31, 2013 the Company had 195,746,848 (June 30, 2013 - 212,703,620) common stock and zero (June 30, 2013 - zero) preferred stock outstanding.

F-10

CROWN ALLIANCE CAPITAL LTD

NOTES TO THE FINANCIAL STATEMENTS

September 30, 2013

(Stated in US Dollars)

(Unaudited)

Note 9

Capital Stock (cont’d)

a)

Issued

On May 31, 2013 the Company received $23,775 pursuant to a share subscription agreement to acquire 43,228 common shares at $0.55 per share.  The Company received Cdn$25,000 as subscription proceeds.  On September 6, 2013 the stock was issued.

On December 13, 2013 2,000,000 shares were returned to the transfer agent and cancelled due to the rescission of the consultancy agreement with Caro Capital LLC (“Caro”) entered into on May 14, 2013. Caro had purchased these shares under the consultancy agreement for $2,000.  Under ASC 505-50, the shares were recorded at their fair market value of $1,320,000.  Upon rescission, the Company recorded a reduction to share capital of $2,000 and a reduction to additional paid-in capital of $1,318,000, resulting in a reversal of the recorded expense and remaining prepaid expense in the quarter ended December 31, 2013.  As such, the Company recognized a $340,503 recovery of stock-based consulting fees resulting from expenses recorded as of June 30, 2013, a $662,600 recovery of stock-based consulting fees for the six months ended December 31, 2013 and recorded a reduction to prepaid expenses of $316,897.  Without this one-time recovery, the Company would have recognized a net loss of $ 266,350 and $251,511 for the three and six months ended December 31, 2013, respectively.

On December 13, 2013, three shareholders returned 15,000,000 shares to the Company for cancellation without consideration.  No value was assigned to the cancelled shares.

b)

Share Purchase Warrants

A summary of changes in share purchase warrants for the six months ended December 31, 2013 and the year ended June 30, 2013 is presented below:

F-11

CROWN ALLIANCE CAPITAL LTD

NOTES TO THE FINANCIAL STATEMENTS

September 30, 2013

(Stated in US Dollars)

(Unaudited)

Note 9

Capital Stock - (cont’d)

b)

Share Purchase Warrants - (cont’d)

As at December 31, 2013, share purchase warrants were outstanding for the purchase of common shares as follows:

Note 10

Commitments

On March 16, 2013, the Company entered into a lease agreement for a term of two years commencing April 1, 2013.

As of December 31, 2013, the Company’s commitment for annual minimum future lease payments under office rental agreements are as follows:

On May 14, 2013, the Company entered into a Consultancy agreement with Caro Capital LLC. (“Caro”) which expired on November 14, 2013.  Pursuant to the agreement the Company was to receive consultancy services with respect to investor relations, sourcing financing and introducing the Company to investment managers and analysts.  As compensation for services rendered the Company issued Caro 2,000,000 common shares with a fair value of $1,320,000 for proceeds of $2,000 which was being amortised over the period of the Contract.  Additionally, the Company was to pay a monthly retainer of $2,000 during the term of the agreement.  During the six months ended December 31, 2013 the contract was rescinded and deemed null and void.  Resulting from this, Caro returned the 2,000,000 shares received to the Company for cancellation.  Upon the cancellation of the shares, the Company recorded a recovery of stock-based consulting fees of $1,003,103 in the statement of operations for the six month period ended December 31, 2013 (See Note 9).

F-12

CROWN ALLIANCE CAPITAL LTD

NOTES TO THE FINANCIAL STATEMENTS

September 30, 2013

(Stated in US Dollars)

(Unaudited)

Note 11

Investments in Life Settlement Policies

On March 15, 2012, the Company entered into its first contract to acquire four life settlement policies for the aggregate sum of $570,000, payable on or before April 23, 2012.  Pursuant to the agreement the Company is responsible for all premiums payable pursuant to the terms of the policies and are entitled to fifty percent of the death benefits of those policies not formally closed pursuant to the terms of the agreement.  ASC 325-30, Investments in Insurance Contracts, provides that a purchaser may elect to account for its investments in life settlement contracts based on the initial investment at the purchase price plus all initial direct costs. Continuing costs (e.g., policy premiums, statutory interest and direct external costs, if any) to keep the policy in force are capitalized. The Company has elected to use the investment method and refer to the recorded amount as the carrying value of the policies.  The contract to acquire these life policies closed on October 31, 2013.

On June 19, 2012, the Company acquired one of the four life settlement policies.  The face value of the policy is $500,000 with a remaining life expectancy of 4.01 years.  As of December 31, 2013, the carrying value of the policy is $171,434 (June 30, 2013 - $153,375).

On December 28, 2012, the Company acquired the second life settlement policy pursuant to the above agreement.  The face value of the policy is for $2,000,000 with a remaining life of 3.33 years.  As of December 31, 2013, the carrying value of the policy is $552,076 (June 30, 2013 - $462,076).  This policy is being used as collateral for secured financing agreements (See Note 8).

During January 2013, one life settlement policy which the Company had not yet formally acquired pursuant to the agreement matured upon the death of the insured.  The Company received proceeds equal to one half of the net proceeds less acquisition costs paid by Universal Settlements International Inc. aggregating $452,923.  At Maturity the Company had capitalized into life settlement premiums paid an amount of $83,715 in respect of this policy.

On October 31, 2013, the Company acquired the third life settlement policy pursuant to the above agreement.  The face value of the policy is for $1,000,000 with a remaining life of 4.56 years.  As of December 31, 2013, the carrying value of the policy is $229,003 (June 30, 2013 - $462,076).

On November 11, 2013, the Company negotiated the acquisition of a further life settlement policy.  The face value of the policy is for $1,000,000 with a remaining life of 7.35 years.  As of December 31, 2013, the carrying value of the policy is $57,250 (June 30, 2013 - $nil)

F-13

CROWN ALLIANCE CAPITAL LTD

NOTES TO THE FINANCIAL STATEMENTS

September 30, 2013

(Stated in US Dollars)

(Unaudited)

Note 11

Investment in Life Settlement Policies - (cont’d)

The Company evaluates the carrying value of their investment in life settlement policies on a regular basis and adjusts their total basis in the policies using new or updated information that affects their assumptions about remaining life expectancy, credit worthiness of the policy issuer, funds needed to maintain the asset until maturity, discount rates and potential return.

The Company recognizes impairment on individual policies if the expected undiscounted cash flows are less than the carrying amount of the investment, plus anticipated undiscounted future premiums and capitalizable direct external costs, if any. Impairment of policies is generally caused by the insured significantly exceeding the estimate of the original life expectancy, which causes the original policy costs and projected future premiums to exceed the estimated maturity value.

The Company does not believe the life settlement policies to be impaired as of December 31, 2013.

Estimated premiums to be paid for each of the five succeeding fiscal years to keep all three remaining policies in force as December 31, 2013, are as follows.

Note 12

Supplemental cash flow information

F-14

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.”   These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.  Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  

Company Overview

We are a publicly reporting Nevada corporation formed March 4, 2010.  Our business is focused on acquiring an ongoing portfolio of life settlement policies and to eventually build our own portfolio of policy purchases.  A life settlement is the purchase of a life insurance policy at a discount from face value from a person who no longer needs or wants the policy.  The policy owner receives a lump sum settlement and the title for the policy is transferred to the third party, which pays the future premiums due on the policy and eventually collects the death benefit.

Overview of Life Settlements

A life settlement (also sometimes known as a "viatical" if the life insured has less than 2 years to live) is the purchase of a life insurance policy at a discount from face value from a person who no longer needs or wants the policy.  The policy owner receives a lump sum settlement and the title for the policy is transferred to the third party, which pays the future premiums due on the policy and eventually collects the death benefit.

Traditionally, policy owners of a life insurance contract would get access to the value built up in a policy while they are living by surrendering the policy for its cash value, withdrawing some of the accumulated surplus value (if there is any), or borrowing against the cash value. Generally, the actual value that can be accessed through these options is fairly limited. Life settlements are an alternative for those wishing to sell their policy. With a life settlement, the owner of the policy can sell their beneficial interest in a policy for cash - a life settlement. The owner often receives a higher value compared to the traditional options and is relieved from paying future premium obligations.

5

There is a network of licensed brokers throughout the United States through whom an individual or institution may purchase or sell an insured person's life insurance policy. These brokers represent the insured person, and they effectively 'shop' out or list for sale these insurance policies through their networks. Competing bids from life settlement companies or institutional buyers are received by the broker, who in time chooses to whom the policy will be sold. Like the real estate market, the highest offer usually secures the asset. The purchase of a life insurance policy asset is referred to as a life settlement transaction.

Life settlements are potentially profitable because the purchaser acquires a policy at a discount from the face value which is based on the insured person's life expectancy and the purchaser’s desired return on capital.  The investor then continues to pay the premiums and collects the death benefit when the policy matures. The annual rates of return that purchasers can expect typically vary between 8% and 12%. In the case of an early maturity (i.e death of an insured) the return on investment can be substantially higher. In the case where the insured person lives longer than anticipated, the return on investment will be lower, and can potentially be negative.

There are many reasons for policies becoming available for settlement. These include:

·

Policy-holder is terminally ill and requires funds to pay medical and/or living expenses

·

Policy-holder no longer needs coverage

·

Change in business ownership makes policy obsolete

·

Key-man leaves the business

·

Policy-holder needs to raise cash

·

Non-profit organization owns a policy insuring the life of a key donor or benefactor who no longer wants to pay premiums

·

Estate tax reform in USA

·

Growing number of sophisticated market participants

Further regulation, demographics and a low national savings rate will drive the expansion of supply to the life settlement market. The demographic of the baby boomer generation, people born in the U.S. between 1945 and 1965, is well known and is moving towards retirement with minimal savings relative to expected post-retirement expenditures.

U.S. Life Settlement Industry

The life settlement industry began in the late 1980's. The first year of credible data available is from 1989 when about $2 million in life insurance (face amount) was purchased. This figure has grown to approximately $12 billion in 2006. Processes and technologies allowing for more efficient transfer of life policies were established in the late 90's. The life settlements market developed and began to provide liquidity to a growing segment of Americans holding life insurance policies that they no longer needed.

6

Though individuals have many reasons for exiting their policies, few are aware of the life settlements marketplace and either accepts the cash surrender value from the insurance company (often only a fraction of what the policy could be worth in the life settlement market) or let the policy lapse. The fundamental reason for the rapid growth of the life settlements market is consumer value. The life settlements purchaser can pay more than cash surrender value and still expect a competitive rate of return on their investment.

A report by Conning Research states that as of 2005, there was approximately US $9 trillion of life insurance in force in the US. Estimates place the US life settlement market potential between USD $240 and USD $600 billion." Bernstein Equity Research indicates that from 1990 to today the life settlement industry has grown from nil to over US $12 Billion and is expected to grow more than 10 fold to over US $125 Billion over the next several years.

Plan of Operations

Our primary objective will be to build a diversified inventory of life insurance policies both through new investment and the re-investment of the proceeds of matured policies. Initial management and administration of our current life settlements portfolio will be provided by Universal Settlements International Inc. (“USI”) under an Administrative Services Agreement.  USI is a Canadian company based in Burlington, Ontario. USI was incorporated in 1997 and has been operating in the life settlements sector for over a decade. USI facilitates the sale of interests in the benefits of U.S. life insurance policies to both institutional and individual purchasers and deals in numerous markets with representation across North America, South America, Central America, Asia and Europe. Further information on USI can be found on USI's website, www.universalsettlements.com.  

Pursuant to the Administrative Services Agreement, USI has agreed to provide, on a non-exclusive basis, a number of services relating to the administration of our life settlement contracts and additional services. These services include dealing with change of ownership and change of beneficiary issues, verifying coverage under a policy, monitoring and validating premium payments required to be made, tracking each insured, managing claims, dealing with group insurance plans, maintaining records and reports on all insureds, and such other services as may be requested from time to time by us, including identifying additional policies for purchase. The Services Agreement has a fixed term of five (5) years with a mutual early termination provision of 90 days without cause. Fees for services will be charged by USI on a per policy basis.  

After acquiring an initial portfolio of life settlement contracts with the assistance of USI, we intend to focus on growing our portfolio of life settlement policies going forward. The primary strategy will be to acquire additional life settlement policies that meet certain criteria and pricing guidelines, including the following:

·

Policies must be issued in the United States on US lives.

·

Policies must be issued by insurance companies rated at least "A-" or equivalent by AM Best, Moody's or S&P.

7

·

Policies must be beyond any contestability and suicide period.

·

Policies must allow for irrevocable beneficiary designations and absolute assignment of ownership.

·

Policies must allow for coverage for the whole life of the insured or allow for conversion so that coverage will continue for the whole life of the insured.

·

The cost of each policy acquired will be influenced by five major factors:

o

Face value of the policy upon maturity.

o

Annual premium on the policy.

o

Life expectancy (LE) of the insured.

o

Administration costs associated with the policy.

o

Competitive bids from other potential purchasers.

Sources for New Portfolio Acquisitions

We will use our own network of licensed providers and brokers throughout the United States to purchase policies. Each U.S. state has different licensing requirements and, consequently, we will only transact with providers and brokers who have demonstrated they have met these licensing requirements and show financial reliability.

Process and Procedures for Policy Purchases

Each life settlement will be subject to the due diligence process as described below:

1.

Due Diligence Underlying a Policy Purchase

We will source policies which meet our criteria from Qualified Service Providers (QSP’s). If a policy meets the criteria, we will conduct due diligence to ensure that the policy is valid and meets the necessary standards. Due diligence will include:

·

Obtaining verification of coverage (VOC) from the insurance company. VOC will confirm various policy details such as: face amount, premium, issue date, contestability, loans, withdrawals, lapses of coverage, beneficiary and ownership information, etc.

·

Obtaining and reviewing actual policy or copy of policy.

·

Obtaining a Physician's Statement of Mental Competency for the owner of policy.

·

Analyzing policy illustrations.

8

·

Obtaining an authorization to procure and subsequent analysis of medical records.

2.

Required Documents for Due Diligence

Documents listed below are required as part of the due diligence process:

·

Consent to Release Medical Information (Notarized)

We must be able to receive all medical documentation for at least 5 years from all physicians that an insured person may have in order to obtain an accurate life expectancy evaluation. We must also have the ability to receive updated medical records as the situation requires.

·

Letter of Competency (Signed by attending Physician)

This ensures that an insured person is aware of what they are doing and that they are of sound mind.

·

Release and Consent to Change Beneficiaries (Notarized)

All current beneficiaries must sign off with the acknowledgement that they understand and consent to being removed as beneficiaries.

·

Authorization to Provide Death Certificate (Notarized)

This allows us to acquire a death certificate in a legal and timely manner.

·

Seller's Premium Indemnification Letter (Notarized)

This ensures that all premiums are paid up to the point where ownership and beneficiary rights have been transferred.

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Special Power of Attorney (Notarized)

This gives us the authority to contact and obtain any required information from doctors or insurance companies.

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Personal Information of the Insured and their Contact Information

We must be able to monitor and track the insured. Contact is maintained either directly with an insured or through a friend, family member, lawyer, physician or financial planner.

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Payment Instructions

This details the method of payment to an insured for their rights to ownership and beneficiary status once the closing of a policy purchase occurs.

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3.

Life Expectancy (LE) Evaluations

Insured persons who seek to sell their policies on the secondary market usually retain qualified representation to facilitate the sale. These policy brokers typically provide all medical information and LE evaluations to us so that we are able to make an informed bid on a policy. The LE evaluation is completed by independent LE evaluators who have experience in the mortality assessment domain.

We will utilize the following LE providers to determine life expectancy:

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American Viatical Services of Woodstock, Georgia, USA.

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21st Services of Minneapolis, Minnesota, USA.

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Examination Management Services, Inc. of Waco, Texas, USA.

·

Fasano Associates of Washington, DC, USA.

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ISC Services of Clearwater, Florida, USA.

USI research indicates that over the last several years, LE evaluators have become more conservative in their reports, largely due to the adoption of updated mortality tables.  

4.

Closing

If a policy meets all necessary criteria and the due diligence process has been completed to our satisfaction, the parties enter into a "Policy Funding Agreement" which is the agreement between the policy owner and us as the buyer of the policy. The following documents are required for the closing of each individual transaction:

·

Contract between us and the seller of the policy.

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LE reports from 2 (two) approved list of LE providers.

·

Original insurance policy (certified true copy if original is lost). Identification for the insured, such as copy of social security card or driver's license. If the owner is a trust or corporation, a copy of the trust or a corporate resolution showing individuals who have signing authority.

·

Completed and signed tax forms for all sellers and brokers.

·

Executed Ownership and Beneficiary Change forms.

·

Funds are not disbursed to the owner or brokers until all changes are reflected in insurance company records.

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5.

Change of Ownership

We will review and verify all policy information to ensure accuracy and to verify that there have been no changes, and submit the Absolute Assignment of Ownership and Beneficiary Change forms to the insurance company. Once the executed change forms are received back from the insurance company verifying that we are the owner and beneficiary of the policy, we will disburse funds as directed.

6.

Tracking

Insured persons whose policies have been purchased by us are tracked by qualified personnel in our office and reporting occurs on a regular basis. Tracking includes the following:

·

Periodic contact with the insured, attending physician of record, or a designated person such as a family member.

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Weekly social security death index checks.

·

Other database checks on a monthly basis.

·

Health statements of insured from attending physician on an as needed basis.

·

Regularly updated information reports.

·

Updated medical reports from primary physician on an as needed basis.

·

Updated life expectancy reports from qualified providers on an as needed basis.

·

Alerts when premium payments are due.

7.

Premiums Management

·

Obtaining and analyzing completed VOC (verification of coverage) forms from insurance companies for each policy. VOC forms indicate policy information, cash value figures and premium data.

·

Monitoring and validating premium payments required to be made.

·

Providing us with a premiums due schedule at least 30 days in advance of required payments.

·

Confirming receipt of premium payment by Insurance companies

·

Obtaining and analyzing updated premium illustrations as required.

·

Performing premium optimization analysis as appropriate.

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8.

Claims Management

Whenever there is a maturity, we submit a death claim to the insurance company. This process involves obtaining the death certificate, obtaining necessary claim documents from the insurance company, submitting of completed documentation to the insurance company and following up verbally and in writing with the insurance carrier on the claim status until such time as the death benefit is paid to us. The death benefit check is sent directly to us by the insurance company.

As part of our long term growth strategy, we intend to vertically integrate and internalize some of the services which will initially be outsourced. There are cost reductions that could be achieved in policy tracking costs, premium management, claims management, and agent commissions.

We can accomplish vertical integration by either buying existing companies that provide the above services or creating an internal employee pool to accomplish these tasks. By integrating the above functions, we could potentially provide these services to other life settlement companies and develop an additional income stream.

Results of operations for the three and six months ended December 31, 2013 and 2012.

During the three months ended December 31, 2013, we did not earn any revenue.  Our total net expenses and net income for the quarter ended December 31, 2013 were $736,753.  Our operating results reflect net income for the period due to the rescission of our consulting agreement with Caro Capital, LLC.  Upon rescission of its consulting agreement, Caro Capital, LLC returned for cancellation the 2,000,000 shares of common stock previously issued to it as compensation.  This resulted in our recording a recovery of stock-based consulting fees of $1,003,103.  Without this one-time recovery, our net loss for the three months ended December 31, 2013 would have been $266,350. By comparison, during the three months ended December 31, 2012, we generated no revenues and had total net expenses and a net loss of $121,106.

During the six months ended December 31, 2013, we did not earn any revenue.  Our total net expenses and net income for the quarter ended December 31, 2013 were $100,858.  Our operating results for the period include a recovery of stock-based consulting fees of $340,503.  Without this recovery item, our net loss for the six months ended December 31, 2013 would have been $441,361. By comparison, during the six months ended December 31, 2012, we generated no revenues and had total net expenses and a net loss of $251,511.

We began the acquisition of our initial portfolio of life settlements on March 15, 2012, when we entered into a Policy Purchase agreement (the “Agreement”) with Universal Settlements International, Inc. (“USI”).  Pursuant to the Agreement, we agreed to purchase all rights, title, and interest in a portfolio of four (4) life insurance policies for a total purchase price of $570,000.  On October 31, 2013, we completed the purchase of the last of the four policies we agreed to purchase under the Agreement with USI. We have previously completed the purchase of two of the four policies under the Agreement with USI. A third policy previously matured prior to completion of our purchase and we received payment of a portion of the total proceeds under that policy. Our final payment to USI in the amount of $120,000, made October 31, 2013, completed our purchase of the last of the four policies covered by the Agreement with USI.

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Estimated premiums to be paid for each of the five succeeding fiscal years to keep all three remaining policies purchased under the Agreement, as of December 31, 2013, are as follows.

On November 11, 2013, we purchased an additional life insurance policy from USI under a Policy Purchase Agreement.  The policy has a face value of $1,000,000 and was purchased for a price of $57,250.

Our portfolio of life insurance policies now consists of a total of four (4) policies with a total face value of $4,500,000.  As discussed in Liquidity and Capital Resources, below, one of those policies with a face value of $2,000,000 is being used as collateral for a secured financing.

Liquidity and Capital Resources

As of December 31, 2013, we had current assets of $1,073,399, consisting of cash in the amount of $1,006,394 and prepaid expenses of $67,005.  As of December 31, 2013, we had current liabilities of $194,219, consisting of accounts payable and accrued liabilities in the amount of $104,230, accrued interest payable to a related party of $4,989 and a note payable to a related party of $85,000. On June 18, 2013, our sole officer and director, Lorraine Fusco, lent us the sum of $95,000 under a Promissory Note.  The Note bears interest at a rate of fourteen percent (14%) per year.  The Note was originally due on or before July 18, 2013.  The Note was subsequently amended to be due and payable upon demand.  The Company repaid $10,000 of the principal and has also paid $1,567 of interest due.

On October 31, 2013, we closed a secured debt financing with the receipt of funding the amount of $1,500,000. A total of three (3) investors lent us a total of $1,500,000 under three individual Promissory Notes and Security Agreements (the “Notes”) each signed and dated October 24, 2013. The Notes bear interest at an annual rate of fifteen percent (15%), with monthly payments of accrued interest due to the note holders on the last day of each month beginning November 30, 2013. The notes are secured by our interest in a life insurance policy having a face value of $2,000,000. The Notes are due and payable in full upon the maturity of the life insurance policy pledged as collateral, but no later than March 30, 2017.

We will require substantial additional funding in order to continue the development of our business of acquiring a portfolio of life settlement policies. Although we are currently seeking and raising additional equity funding, we have no firm arrangements for financing and can provide no assurance that such funding will be received in an amount sufficient to pursue our planned line of business.

Off Balance Sheet Arrangements

As of December 31, 2013, there were no off balance sheet arrangements.  

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information required by this Item.

Item 4. Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2013.  This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, Lorraine Fusco.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2013, our disclosure controls and procedures were not effective.  There have been no changes in our internal controls over financial reporting during the quarter ended December 31, 2013.

Management determined that the material weaknesses that resulted in controls being ineffective are primarily due to lack of resources and number of employees. Material weaknesses exist in the segregation of duties required for effective controls and various reconciliation and control procedures not regularly performed due to the lack of staff and resources.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Limitations on the Effectiveness of Internal Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error.   Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

Item 1A: Risk Factors

A smaller reporting company is not required to include this Item.  Risk factors for our current line of business can be found in our Annual Report on Form 10-K for the fiscal year ended June 30, 2012, filed on September 27, 2012.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

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SIGNATURES

In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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