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The following discussion of our financial condition and results of operations
should be read in conjunction with the condensed financial statements and the
notes to those financial statements that are included elsewhere in this report.
Our discussion includes forward-looking statements based upon current
expectations that involve risks and uncertainties, such as our plans,
objectives, expectations and intentions. Actual results and the timing of events
could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors, including those set forth under
the Risk Factors, Forward-Looking Statements and Business sections in this
report. We use words such as “anticipate,” “estimate,” “plan,” “project,”
“continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,”
“could,” and similar expressions to identify forward- looking statements.
Overview
Effective
Plan of Merger (“Merger Agreement”) whereby we acquired all of the outstanding
shares of
prior to consummation of the Merger Agreement Exworth Management owned 74% of
our outstanding shares of common stock and 91% of the outstanding shares of
digital assets. Prior to the Merger, we were a “shell” company with no
commercial operations and had generated no revenues other than nominal interest
income. The transaction effected through the Merger Agreement was accounted for
as a reverse recapitalization.
acquirer and we, Strategic, were treated as the acquired company for financial
reporting purposes
The discussion below pertains to our financial results for the three months
ended
analysis of our financial condition and results of operations prior to the
formation of
and Exchange Commission
loans that are collateralized by digital assets including Bitcoin and will
accept other types of alternative collaterals such as eCommerce account
receivables, recursive payments of subscriptions, IP and copyrights, though the
only form of collateral that has been accepted to date is Bitcoin. The target
customers are individuals and commercial enterprises that hold digital assets
and are seeking liquidity without selling their digital assets, with limited or
no access to obtain credit lines or business loans from conventional financial
institutions. We provide term loans, up to two years, to these individuals and
commercial enterprises.
Results of Operations Revenue
Interest income, our major source of income, was
months ended
2022
portfolio, a consumer loan secured by Bitcoin. The LTV ratio of our loan
portfolio as of
respectively. The LTV ratio has as high as 83% and as low as 48% during the
three months ended
Loan admin service income, was
31, 2023
provides loan admin services to a related party. The Company serves as a third
party that acts as a liaison between the lender and borrower of a loan.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended
31, 2023
and
it primarily includes the legal and professional expenses related to the
consummation of the Merger Agreement
For the three months ended
accounting and other professional expense related to company’s daily operation.
Fair Value Adjustment on Repledged Collateral
Fair value adjustment on repledged collateral for the three months ended
31, 2023
and nil, which was attributable to the increase in the price of repledged
Bitcoin during the period. Under loan agreements with borrowers, we may, from
time to time, repledge certain collateral with financial partners for capital
management purposes. We regularly monitor such repledging transactions as well
as the credit standing of our financial partners in order to maintain sufficient
available capital.
Interest Expense
Interest expense for the three months ended
from the inception to
pursuant to a master loan agreement we entered with a
loan has a term of 24 months with quarterly interest-only payments with
principal to be paid at maturity. No margin call was initiated by our lender
during the period from inception of the loan to
16
Amortization of Loan Origination Fee
Our lender charged a 1% origination fee of the principal amount that we
borrowed. The origination fee was deducted from the loan principal and will be
amortized evenly through the loan term. Total amortization of loan origination
fee for the three months ended
inception to
Net Loss
Our net loss was
was primarily driven by the increase in the price of the Bitcoin that we pledged
to our lender. Among the more significant factors that may cause our net income
to vary from period to period are: 1) the number of loans; 2) the interest rates
that we charge our borrowers; 3) the interest rate that we pay to our lenders;
4) the fair market value of collateral held by us or pledged to our lenders; and
5) The allowance for loan loss of our loans.
Liquidity and Capital Resources
As of
been prepared assuming that we will continue as a going concern. The condensed
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classifications of liabilities that may result should we be unable to
continue as a going concern. To date, we have financed our operations through a
private placement of equity raising approximately
a master loan agreement with a
collateralized by pledging our customers’ collateral. The balance on the loan As
of
unamortized origination fee of
collateralized with 100 Bitcoins.
In assessing our liquidity, we monitor and analyze our cash-on-hand, operating
and capital expenditure commitments. We believe our current working capital is
sufficient to support our operations for the next twelve months. However, if we
are unable to raise additional capital, we may not be able to execute our
business plan. We will use our limited personnel and financial resources in
connection with developing our business plan, including developing a proprietary
software platform, issuing equity or debt securities, or obtaining additional
credit facilities. The issuance and sale of additional equity would result in
dilution to our existing shareholders. The incurrence of indebtedness would
result in increased fixed obligations and could result in operating covenants
that would restrict our operations. Our obligation to bear credit risk for
certain financing transactions we facilitate may also strain our operating cash
flow. We have no commitments for the purchase of our equity and, should we need
to raise capital, we cannot assure you that financing will be available in
amounts or on terms acceptable to us, if at all.
We have elected to use the extended transition period for complying with new or
revised accounting standards under Section 102(b)(2) of the JOBS Act, which
allows us to delay the adoption of new or revised accounting standards that have
different effective dates for public and private companies until those standards
apply to private companies. As a result of this election, our financial
statements may not be comparable to companies that comply with public company
effective dates.
There are no limitations in our certificate of incorporation on our ability to
borrow funds or raise funds through the issuance of capital stock to fund our
working capital requirements. Our limited resources and lack of recent operating
history may make it difficult to borrow funds or raise capital. Such inability
to borrow funds or raise funds through the issuance of capital stock required to
facilitate our business plan may have a material adverse effect on our financial
condition and future prospects, including the ability to fund our business plan.
To the extent that debt financing ultimately proves to be available, any
borrowing will subject us to various risks traditionally associated with
indebtedness, including the risks of interest rate fluctuations and
insufficiency of cash flow to pay principal and interest, including debt of an
acquired business.
17 Cash Flow
The following summarizes key components of our cash flows for the three months
ended
From March 16, 2022
For the Three (Inception)
Months Ended through
March 31, 2023 March 31, 2022
Net cash (used in) operating activities $ (75,515 ) $ (50,000 )
Net cash (used in) provided by financing activities (15,000 ) 50,000
Net decrease in cash (90,515 ) -
Cash, beginning 241,727 -
Cash, ending $ 151,212 $ -
Operating Activities
Cash used in operating activities resulted primarily from operating expenses for
the operation of our digital asset-backed loan business as well as general and
administrative expenses. Net cash used in operating activities was
the three months ended
net loss of
on repledged collateral of
expenses of
Net cash used in operating activities was
inception to
Agreement.
Investing Activities
There were no investing activities for the three months ended
for the period from the inception to
Financing Activities
Net cash (used in) provided by financing activities was
respectively, for the three months ended
the inception to
proceeds from Exworth Management for business operation.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely
to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
Critical Accounting Policies
Our significant accounting policies are disclosed in Note 2 of our Financial
Statements included elsewhere in this report.
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