SAMSARA LUGGAGE, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-K)

The following MD&A and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to assist you in understanding our historical results of operations during the periods presented and our financial condition. This MD&A should be read in conjunction with our consolidated financial statements and accompanying notes to the consolidated financial statements, and contains forward-looking statements that involve risks and uncertainties. See the section entitled “Forward-Looking Statements” above.


Overview and Outlook


The Company was incorporated on May 7, 2007 under the name of, “Darkstar Ventures, Inc.“under the laws of the state of nevada. Currently, the company develops and sells smart luggage products.


Results of Operations


Year ended December 31, 2021 compared to the year ended December 31, 2020


Revenue


The Company generates revenue through the sale and distribution of smart luggage products. Turnover for the year ended December 31, 2021 totaled
$345,000compared to $468,000 for the year ended December 31, 2020. The decline in total revenue was primarily due to lower luggage sales during the COVID-19 pandemic.


Costs of Revenue


The cost of sales includes the purchase of raw materials and the cost of production. Cost of revenue during the year ended December 31, 2021 totaled
$293,000compared to $285,000 for the year ended December 31, 2020. Costs included inventory write-downs as well as increased shipping and storage costs.


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Gross Profit



During the year ended December 31, 2021Total gross profit $52,000, representing a gross profit margin of 15%. During the year ended December 31, 2020Total gross profit $183,000 representing a gross profit margin of 39%.


Operating Expenses


Operating expenses total $2,013,000 during the year ended December 31, 2021compared to $1,636,000 during the year ended December 31, 2020i.e. a net increase of $377,000. The increase in operating expenses is mainly due to the increase in the growth of the Company’s activities. Operating expenses include stock-based compensation of approximately $300,000.


Financing Income (expenses)


Financing costs totaled $1,856,000 during the year ended December 31, 2021
compared to a financing income of $313,000 during the year ended December 31, 2020 a net increase of 2,169,000. The increase in financing costs is mainly attributable to the increase in expenses with respect to the warrants issued and the convertible component of the convertible loan, net interest expenses mainly attributable to the conversion of the warrants into common shares of the Company



Net Loss



We suffered a net loss of $3,817,000 for the year ended December 31, 2021compared to a net loss of $1,140,000 for the year ended December 31, 2020 for the reasons described above.

Cash and capital resources

Liquidity is the ability of a business to generate funds to support current and future operations, meet obligations, and otherwise operate on an ongoing basis. Important factors in managing liquidity are funds generated from operations, levels of accounts receivable and accounts payable, and capital expenditures.


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From December 31, 2021the Company has $827,000 of cash, total current assets of $974,000and the total current liabilities of $1,674,000creating a working capital deficit of $700,000. From December 31, 2020the Company has $54,000 of cash, total current assets of $211,000and the total current liabilities of
$1,127,000creating a working capital deficit of $916,000.

The increase in our working capital deficit is mainly attributable to the increase in $528 the fair value of the convertible component of a convertible loan, which was mitigated by an increase in $773 in cash and cash equivalents.

Net cash used in operating activities was $849,000 for the year ended December 31, 2021versus cash used in operating activities $614,000 for the year ended December 31, 2020. The main uses of the Company’s cash were professional support, research and development expenses, sales and marketing expenses and working capital.

Net cash used in investing activities was $0 for the year ended December 31, 2021compared to the net cash generated by investing activities of $0 for the year ended December 31, 2020.

Net cash provided by financing activities was approximately $1,622,000 for the year ended December 31, 2021against approximately $191,000 for the year ended December 31, 2020. We have primarily funded our operations through the sale of our common shares and the issuance of debt securities. Due to our operating losses, we relied heavily on funding our cash requirements through the issuance of common stock and debt. There can be no assurance that we will succeed in raising the necessary funds to execute our business plan.

Need for additional funding

Obtaining additional financing is essential to the implementation of our business plan. If and when we secure the additional funding required, we should be able to fully implement our business plan. If we are unable to raise additional funds, we will not be able to pursue our business plan and we could fail completely. We currently have no committed sources of funding.


Going Concern Consideration


The above conditions raise substantial doubt as to our ability to continue our business. Our independent auditors have included an explanatory paragraph in their report on the accompanying financial statements regarding concerns about our ability to continue as a going concern. Our financial statements contain additional notes describing the circumstances that led to this disclosure by our independent auditors. Although we anticipate that our current operations will provide us with cash resources, we believe that existing cash will not be sufficient to fund planned operations and projects over the next 12 months. Therefore, we believe that we will need to increase our sales, achieve profitability and raise additional funds to finance our future operations. Any significant equity or debt financing will likely result in significant dilution to our existing shareholders. There can be no assurance that additional funds will be available on terms acceptable to us, or at all.

To address these risks, we must, among other things, successfully implement and execute our business and marketing strategy around our products, continuously develop and update our website, respond to competitive developments, reduce our financing costs and attracting, retaining and motivating qualified personnel. . There can be no assurance that we will be successful in meeting these risks, and failure to do so could have a material adverse effect on our business prospects, financial condition and results of operations.


Seasonality


We do not expect our sales to be affected by seasonal demands for our products.

Off-balance sheet arrangements

We have no off-balance sheet arrangements.

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