Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this offering. Some of the information contained in this discussion and analysis, including information regarding the strategy and plans for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We produce Kaffi — a line of incredible tasting, high protein, functional coffee drinks. We currently have 3 SKUs: Keto Latte, New Orleans & Iced Mocha and plan to introduce 3 more plant based SKUs next year.

In 5 years, our goal is to be a national brand on shelves in every grocery store, as well as available direct to consumers.

Milestones

Smari Organics, Inc. was incorporated in the State of California in December 2011.

Since then, we have:

• The functional coffee drink market is one of the fastest growing segments of the huge beverage market.
• We have perfected the taste profile for Kaffi, creating what we believe to be the best tasting functional drink on the market
• We have an experienced team working in the CPG space for years.

Historical Results of Operations

• Revenues & Gross Margin. For the period ended December 31, 2019, the Company had revenues of $355,813 compared to the year ended December 31, 2018, when the Company had revenues of $751,809. Our gross margin was -18.96% in fiscal year 2019, compared to 30.95% in 2018.
• Assets. As of December 31, 2019, the Company had total assets of $548,331, including $274,142 in cash. As of December 31, 2018, the Company had $591,729 in total assets, including $54,271 in cash.
• Net Loss. The Company has had net losses of $1,395,291 and net losses of $1,190,543 for the fiscal years ended December 31, 2019 and December 31, 2018, respectively.
• Liabilities. The Company's liabilities totaled $112,427 for the fiscal year ended December 31, 2019 and $380,468 for the fiscal year ended December 31, 2018.

Liquidity & Capital Resources

To-date, the company has been financed with $5,227,999 in equity and $50,000 in debt.

After the conclusion of this Offering, should we hit our minimum funding target, our projected runway is 12 months before we need to raise further capital.

We plan to use the proceeds as set forth in this Form C under "Use of Funds". We don’t have any other sources of capital in the immediate future.

We will likely require additional financing in excess of the proceeds from the Offering in order to perform operations over the lifetime of the Company. We plan to raise capital in 12 months. Except as otherwise described in this Form C, we do not have additional sources of capital other than the proceeds from the offering. Because of the complexities and uncertainties in establishing a new business strategy, it is not possible to adequately project whether the proceeds of this offering will be sufficient to enable us to implement our strategy. This complexity and uncertainty will be increased if less than the maximum amount of securities offered in this offering is sold. The Company intends to raise additional capital in the future from investors. Although capital may be available for early-stage companies, there is no guarantee that the Company will receive any investments from investors.

Runway & Short/Mid Term Expenses

Smari Organics, Inc. cash in hand is $82,488, as of March 2020. Over the last three months, revenues have averaged $19,667/month, cost of goods sold has averaged $33,070/month, and operational expenses have averaged $92,889/month, for an average burn rate of $106,292 per month. Our intent is to be profitable in 36 months.

We experience a drop in revenues from 2018 to 2019 because we discontinued the yogurt line in March of 2019 and started up the Kaffi line in April / May 2019.

Since the date of our financials, we have been increasing the number of our accounts so we need working capital for production.  We are also taking advantage of online selling in the next two months.  

We hope (but not guarantee) that revenues will significantly increase as we add more stores and launch our online presence during the Summer. By the end of this year, our goal is to generate $76,000/month in revenues and $136,000/month in expenses, although COVID19 could have an impact on our revenue and / or supply chain over the next 6 months.

We have two investors high net worth investors that have been supporting the company for several years that we could solicit for additional capital if need be. In addition, we have applied for the SBA emergency loan that which we believe to have a favorable approval rate.