[summary/Discussion] Databased Finance DF1

Hi All!

We’re excited to say hello to everyone and introduce our revolving TinLake pool on centrifuge that provides fair financing for Amazon Sellers. We went live with our first two Sellers on January 11th 2021 and will be adding new brands as the pool grows and evolves. We look forward to answering any question you may have with the help of the Centrifuge team!

Summary

We are pleased to offer prospective capital providers to gain exposure to Data Based Inventory Purchases and their corresponding Limited Exclusive Sales Rights Fees with purchased inventory held by Databased Finance Ltd and underlying data verified by Track.one Limited.

Track.one a Canadian Federal Limited Company based in British Columbia operates inventory data verification services, including acting as one of the eight full Verification Router Service Providers for verification of all Pharmaceutical manufactured for the US market, will act as the Asset Data Verifier (Herein “Track.one” or the “Verifier”) by being granted access to and then analyzing data from third party online sales systems, such as Amazon, and the corresponding product fulfillment companies, such as Fulfilled-By-Amazon, in order to verify the previous sales history and current third party held inventory of online Sellers.

databased.FINANCE Ltd (“databased.FINANCE” or the “Issuer”) a Hong Kong Limited Company will offer for sale to purchasers tokens, as described below, corresponding to certain payment obligations owed to the Issuer under Inventory Purchases and their corresponding Limited Exclusive Sales Rights Fees as received initially from Amazon Sellers and then from other online sales platform brand owners (the “Seller”) .

The Issuer will issue two tranches of ERC-20 tokens: DROP Tokens and TIN Tokens. The DROP Tokens will make up a maximum of 85% of the total asset pool, and will be offered for sale to purchasers on the terms described herein and in the Subscription Agreement provided to prospective purchasers. The TIN Tokens, will make up the remaining balance of the total asset pool, at a minimum of 15% and will be subject to first losses up to the full amount of their value. The TIN Tokens will be purchased by databased.FINANCE Limited and Centrifuge to demonstrate their confidence in the asset pool and to act as a buffer against losses to purchasers in the DROP Tokens.

The Issuer will use Centrifuge, Inc.’s (“Centrifuge”) blockchain protocol system, known as the Tinlake Protocol, to mint the tokens. Issuer’s use of the Tinlake Protocol will be subject to the terms and conditions of that certain Tinlake Protocol Service Agreement, dated as of January 12th 2020 (the “TPSA”), between the Issuer and Centrifuge.

Summary of Terms

About the Inventory Purchaser and Promissory Note Issuer

Founded in 2013 databased.FINANCE Ltd is an inventory management and inventory verification systems specialist having built platforms that verify, manage or control inventory across multiple industries in over 30 countries. databased.FINANCE has lead development projects that track thousands of product lines and run integration and interoperability across systems provided by Oracle, SAP, Rfxcel, Tracelink and many more.

About the Data Based Verification Provider

Founded in 2020 Track.one Limited provides inventory verification services. Its largest market is US Pharmaceuticals where it is one of eight full Product Verification Service Providers and is connected to SAP, Tracelink, Rfxcel and other source of truth platforms allowing it to verify the packet code of any pharmaceutical destined for sale into the United States for FDA Authorized Trading Partners (ATP).

Track.one is granted permission to access a Brand’s seller and fulfillment accounts and then collects and analyzes the data for the seller and the purchaser (databased.FINANCE Ltd).

Pool Description

The Issuer will be financing inventory, initially from Fulfilled by Amazon Sellers and then from other online store brand owners. DF1 will be a revolving evergreen pool and its collateral value will be recalculated for every 30 Day cycle. The pool size will increase in depth as brands increase their inventory and corresponding sales levels. The pool size will increase in breadth as new brands are added to the pool. Capital provided will be used to purchase all of a brand’s inventory, as held on the stated platform, and as controlled by the independent fulfilment provider as ascertained and verified by Track.one. The brand will then pay a sales fee to retain the right to sell the inventory on the relevant online store. As Inventory is sold it can be replenished or repurchased by the seller from databased.FINANCE at the end of each 30 day cycle. Similarly, as the brand buys new inventory to increase its total holdings the new inventory can be included in the current calculation of value.

The pool is a continuous revolving pool, which means we manage long term relationships with each brand. If a brand chooses to repurchase all their inventory, if for example they no longer need finance or have sold the brand to a third party, then the Issuer will distribute any capital requested for withdrawals and then will redeploy the remainder into new purchases of inventory from other brand owners, or disperse back to TIN and DROP holders, reducing the size of the pool. DF1 will be open for investment and withdrawal on a regular basis. The total value of the pool is expected to grow in steps as new brands are added and incrementally as existing brands move up their Amazon or other store seller ratings by better inventory management afforded through their improved cash flow.

DROP purchasers will not receive any payments of principal or interest in respect of any DROP Tokens until such time as the Purchaser elects to redeem such DROP Tokens. Until such redemption, all amounts payable to the Purchaser in connection with the DROP Tokens will be either (i) held in cash by the Issuer, free and clear of any liens or encumbrances, or (ii) deployed by the Issuer to fund the generation of new Underlying Assets.

DROP Tokens will generate a fixed 6% DROP APR and will be senior in right of repayment and redemption to TIN Tokens, which will represent at least 15% of the pool. Databased Finance and Centrifuge have agreed to invest among other purchasers in the TIN tranche to demonstrate their confidence in the asset pool.

Promissory notes will be issued to purchasers from a controlled list of countries, whose local laws and regulations will apply to the purchaser only.

Participating Counter-parties

  • Tin And Drop purchasers
  • Databased Finance Limited who will be purchasing inventory from Fulfilled by Amazon Sellers (it is intended to extend the service to other verifiable online stores and their relevant internal or external fulfilment providers) and issuing promissory notes in return for payment in DAI and will utilize TIN and DROP as means of control and distribution of promissory note payments and returns.

Credit Underwriting

With respect to the brands who are entering into purchase and limited exclusive sales agreements, it is a requirement that their entire sales history with the relevant online store is made available at source from their third party fulfilment provider or providers and from the online sales platform. Risk exposure is managed by use of the online store history and is used to validate any claims made by the seller of actual sales history and the realisable value of their inventory. Only sales recognised on the third party on-line platforms are used in our calculations of theoretical collateral value.

Payment flows

On capitalisation by TIN and DROP holders the issuer will purchase the inventory of each brand and the first sales cycle will begin. The seller will be invoiced for the first cycle’s sales fees, a payment which is due prior to the beginning of the second sales cycle. After no more than 30 days the Non Fungible Token can be burnt and replaced by a new, recalibrated token which takes into account:

  1. Any sales that have occurred in the last month,
  2. The impact those sales have had on the rolling average price of each item,
  3. the reduction in the amount of stock available for sale in proportion to the time it will take to sell it at the newly calculated run rate, and,
  4. any inventory replenishment or new stock lines that have been placed into custody of the fulfillment service all impact the new NFT’s value and risk category.

The net change in value of the NFT is calculated and if it has fallen the deficit is included in the cycle’s invoice along with the sales fee. If it has increased then the seller can opt to draw down more capital from the pool at the beginning of the cycle and will be invoiced for the relevant amount. If the verified inventory levels have not fallen below the Non-Fungible Token’s recorded levels then the Seller can also opt to maintain the existing Non-Fungible Token.

It is not expected that the sellers will want to utilise DAI initially for payment transactions so the issuer will offer both DAI direct and traditional USD banked transfers for each transaction.

Aligned incentives

This pool is designed to align the incentives of the seller with those of the Pool by encouraging sellers to increase the frequency of inventory replenishment creating smaller, lower risk purchase patterns. Each brand is also aware of the target return of the pool, so while their charges may initially be higher than the target they will know that:

  1. By holding only stock that sells,
  2. By paying on time, and,
  3. By gradually increasing their inventory holdings in line with increases in sales,

they can both gain access to more capital and move to a lower average cost of capital. They can also invite other brands to join the pool which, as they will have a shorter payment history will move existing participants to lower rates. These aligned incentives are designed to encourage good behaviour and to appeal to brands who currently don’t have access to funding if they are outside the US or can only access expensive predatory style funding. In our community, capital receives a good return and sellers pay a fair rate based on their risk position within the pool.

INVESTMENT RISK FACTORS

In addition to those risk factors provided in the Subscription Agreement, Annex A to this Executive Summary sets forth additional risk factors related to an investment in DROP or TIN Tokens. Please carefully read the risks described in Annex A, and the risks described in the Subscription Agreement before investing in the DROP or TIN Tokens.

Warning Regarding the Use of Forward-Looking Statements

This Executive Summary contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this Executive Summary regarding purchases, investments, debt instruments, investment companies, investment strategies, future operations, future financial positions, future revenues, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements may include, among other things, statements about expected rates of return and interest rates, the attractiveness of the Tinlake Protocol and the Asset Issuer’s products, the Verifier or the Issuer’s financial performance and operations; and general economic developments which may affect the Issuer, the Verifier or the asset pool.

There can be no assurance that actual events will correspond with the above forward-looking statements and should in no event be considered a guarantee that those future events, activities, occurrences or performances will in fact happen. The information in this Executive Summary concerning the prior experience of the Verifier and the Issuer is not necessarily indicative of the results to be expected in the future.

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Databased Finance DF1 Pool invoices Amazon Sellers a Limited Exclusive Sales Fee every 30 Days or a “Sales Cycle”. Our NFT’s are issued based on these sales cycles. These updates will give high level feedback on what is happening with our revolving and evolving Tinlake pool “DF1”.

Sales Cycle 1 - Pool Update

For our initial launch Databased Finance Limited purchased both the TIN and DROP so we could experience all parts of the process first hand. For the first 30 days the actual pool activity was as follows:

This Cycle Cost Price of Assets Inventory Value
Cycle 1 52,984 Dai 80,348 Dai

Adding Some Colour:

We started with two brands ‘Saddler’ - leather goods and ‘Swiss Reimagined’ watch straps and accessories. Both brands have multiple years of sales history with Amazon.

www.Track.one accessed their Amazon data and priced their inventory on an ‘after-Amazon-Fee’ basis.

The historic data showed record sales for November and December for both brands (good for them!) and a restock that typically occurred in March and September / October.

Sales Cycle 2 - Pool Update

This Cycle Cost Price of Assets Inventory Value
Cycle 2 47,408 Dai 63,855 Dai

Adding Some Colour:

Both Brands showed good sales over the 30 days and paid their sales fee on time* - both of which build their brand ranking score, that will position them in the pool as we add more brands and lower their costs of borrowing.

  • The Pool itself is designed to generate an equivalent APR of 12% to cover TIN, DROP and running costs. Newly added brands sales fees generates more than the average. Brands that have optimised their inventory restocks, paid on time and have a longer history of payments move into a better risk class and pay less than the average.

Sales Cycle 3 - Pool Update

This Cycle Cost Price of Assets Inventory Value
Cycle 3 197,774 Dai 252,867 Dai

Adding Some Colour:

This cycle our first two brands both sold and made replenishments to their inventory. Saddler added some new lines that will be financed when sales of the new items show up in the Amazon sales records.

We also added a new brand to the pool GHU. They have a great business, helping prolong the life of laptops by providing replacement batteries. Their risk category represents their ‘new’ status within the pool ranking but their data shows a well run brand that turns their stock more than 4 times a year on average - this is an example of the type of stock management every brand aspires to. We expect to add more financing for GHU in coming cycles.