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 December 22, 2022, we entered into and consummated an Agreement and Plan of Merger ("Merger Agreement") whereby we acquired all of the outstanding shares of Exworth Union and it became our wholly-owned subsidiary. Immediately 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 Exworth Union. Exworth Union is engaged in providing loans collateralized by 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. Exworth Union was determined to be the accounting 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 March 31, 2023 and for the period commencing March 16, 2022, the date Exworth Union was formed and ending March 31, 2022. For a discussion and analysis of our financial condition and results of operations prior to the formation of Exworth Union please refer to filings made with the U.S. Securities and Exchange Commission before consummation of the Merger Agreement.

Exworth Union, a Delaware corporation, was formed on March 16, 2022. It provides 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 $8,679 and nil for the three months ended March 31, 2023 and for the period from the inception to March 31, 2022. As of March 31, 2023 and December 31, 2022, we have 1 loan in our loan portfolio, a consumer loan secured by Bitcoin. The LTV ratio of our loan portfolio as of March 31, 2023 and December 31, 2022 was 48% and 83%, respectively. The LTV ratio has as high as 83% and as low as 48% during the three months ended March 31, 2023.

Loan admin service income, was $3,950 and nil for the three months ended March 31, 2023 and for the period from the inception to March 31, 2022. The Company 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 March 31, 2023 and for the period from the inception to March 31, 2022 were $65,284 and $50,000, respectively. For the period from the inception to March 31, 2022 it primarily includes the legal and professional expenses related to the consummation of the Merger Agreement

For the three months ended March 31, 2023, it primarily includes legal, 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 March 31, 2023 and for the period from the inception to March 31, 2022 was $1,196,172 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 March 31, 2023 and for the period from the inception to March 31, 2022 was $8,679 and nil, respectively, incurred pursuant to a master loan agreement we entered with a U.S. based lender. The 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 December 31, 2022.




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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 March 31, 2023 and for the period from the inception to March 31, 2022 was $1,736 and nil, respectively.





Net Loss

Our net loss was $945,851 and $34,236, respectively, for the three months ended March 31, 2023 and for the period from the inception to March 31, 2022, which 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 March 31, 2023 and December 31, 2022, we had cash of $151,212 and $241,727, respectively. The accompanying condensed financial statements have 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 $350,000. We also entered into a master loan agreement with a U.S. based lender. The loan is non-recourse and collateralized by pledging our customers' collateral. The balance on the loan As of March 31, 2023 and December 31, 2022 is $1,379,608 and $1,377,872, net of unamortized origination fee of $8,968 and $10,704, respectively, and 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.





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Cash Flow

The following summarizes key components of our cash flows for the three months ended March 31, 2023 and for the period from the inception to March 31, 2022:





                                                                             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 $75,515 for the three months ended March 31, 2023. Cash consumed in operations reflects our net loss of $945,851, offset by non-cash items including a fair value adjustment on repledged collateral of $1,196,172, and less deferred income tax benefit of $308,323 and changes in prepaid expense $4,196 and accounts payable and accrued expenses of $15,053.

Net cash used in operating activities was $50,000 for the period from the inception to March 31, 2022, which related to the consummation of the Merger Agreement.





Investing Activities

There were no investing activities for the three months ended March 31, 2023 and for the period from the inception to March 31, 2022.





Financing Activities

Net cash (used in) provided by financing activities was $15,000 and $50,000, respectively, for the three months ended March 31, 2023 and for the period from the inception to March 31, 2022, which related to the (repayment to) and 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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