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 teach girls and under-served minorities STEM filling a massive gap in the ed-tech market. While it is projected that over 1 million tech jobs will go unfilled by 2022, women and minorities are greatly under-represented. We make the only coding product for kids specifically designed for this market. We have sold over 30,000 coding robots for girls in the consumer market and have entered into a collaboration launching school product and curriculum targeting both girls and boys in 2020.
SmartGurlz aims to be a leading force in bringing equity to tech, the LeapFrog of smart connected-toys with $200 million in revenue and $1 billion company valuation.

Milestones

SmartGurlz US Inc. (“SG Inc.” or the “Company”) is a Delaware corporation incorporated on May 3, 2017. The Company provides a line of friendly self-balancing robots and action dolls that engage and encourage girls to learn to code, allowing girls six and up to immerse themselves in Science, Technology, Engineering, and Math (“STEM”).

SmartGurlz A/S (“SG AS”) was initially formed on April 29, 2015 as a private limited company (“ApS”) in Denmark with the purpose to develop, manufacture, and market STEM products. On August 23, 2016, SG AS was converted to a stock corporation.

Merger
On August 21, 2017, a stock exchange agreement was approved and executed by the board of
directors. Pursuant to this exchange agreement, the three shareholders holding all authorized and
outstanding shares of SG AS agreed to exchange all their shares of SG AS for a proportional amount
of the total authorized shares of SG Inc. This resulted in 767 shares of SG AS stock exchanged for
1,000,000 shares of SG Inc. Upon the execution of the agreement, SG AS became a wholly-owned
subsidiary of SG Inc. under an acquisition transaction and has been retroactively consolidated to these
financial statements. There was no change in relative control between the three shareholders as a result
of this stock exchange. 

Since then, we have:

• NEW ROUND! $2.7M raised. Join blue-chip investors like Morgan Stanley and NYU
• Proven - More than $2M in revenue with a 4+ rating on Amazon.
• Covid-19 Program - Educated nearly 1,000 kids via e-learning during the pandemic.
• Expanding into lucrative remote learning and home-schooling market after pandemic
• Expanding into $40B Ed-tech market- Signed a deal with former LEGO education distributor, Pitsco Education
• Powerful PR - Featured on CNN, Fox and Friends, Fox Business News, Forbes and Financial Times.
• Strong Team - Includes former VP of Hasbro, EVP of LeapFrog and host of MythBusters.

Historical Results of Operations

Our company was organized in May 2017 and has limited operations upon which prospective investors may base an evaluation of its performance.

• Revenues & Gross Margin. For the period ended December 31, 2019, the Company had revenues of $303,840 compared to the year ended December 31, 2018, when the Company had revenues of $381,870. Our gross margin was 4.56% in fiscal year 2019, compared to 35.2% in 2018.
• Assets. As of December 31, 2019, the Company had total assets of $627,664, including $199,502 in cash. As of December 31, 2018, the Company had $353,986 in total assets, including $30,123 in cash.
• Net Loss. The Company has had net losses of $891,377 and net losses of $839,527 for the fiscal years ended December 31, 2019 and December 31, 2018, respectively.
• Liabilities. The Company's liabilities totaled $2,640,725 for the fiscal year ended December 31, 2019 and $1,475,670 for the fiscal year ended December 31, 2018.

Related Party Transaction

Refer to Question 26 of this Form C for disclosure of all related party transactions.

Liquidity & Capital Resources

To-date, the company has been financed with $396,300 in debt, $700,000 in equity, and $1,555,829 in convertibles.

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 6 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

Smartgurlz US Inc cash in hand is $340,000, as of September 2020. Over the last three months, revenues have averaged $35,000/month, cost of goods sold has averaged $6,000/month, and operational expenses have averaged $20,000/month, for an average net margin of $9,000 per month. Our intent is to be profitable in 24 months.

Covid-19 caused us to delay the schools market launch of Smart Buddies which was an estimated $500,000 of revenue this year. We were able to do direct to consumer sales and expect a good holiday sales bump

We have done about $200,000 in revenue and expect to close with another $100-150,000 this year. Due to Covid-19, we expect school sales to pick up and we are currently negotiating a new UK contract.  Although we cannot guarantee it, we anticipate our expenses being about $200,000 for the year by the end of 2020.

In terms of other financing options, we have cash-on-hand and we have the possibility for additional debt financing by our partners