UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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Documents incorporated by reference: None
SAMSARA LUGGAGE, INC.
TABLE OF CONTENTS
i
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (“Annual Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “foresee,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. These risks and uncertainties include the following:
| ● | the risks and other factors described under the caption “Risk Factors” under Item 1A of this Annual Report on Form 10-K; |
| ● | our future operating results; |
| ● | our business prospects; |
| ● | any contractual arrangements and relationships with third parties; |
| ● | the dependence of our future success on the general economy; |
| ● | any possible financings; and |
| ● | the adequacy of our cash resources and working capital. |
Because the factors referred to above could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us, you should not place undue reliance on any such forward-looking statements. New factors emerge from time to time, and their emergence is impossible for us to predict. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
This Annual Report should be read completely and with the understanding that actual future results may be materially different from what we expect. The forward-looking statements included in this Annual Report are made as of the date of this Annual Report and should be evaluated with consideration of any changes occurring after the date of this Annual Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Except as otherwise indicated by the context, references in this report to “Company”, “Samsara”, “we”, “us” and “our” are references to SAMSARA LUGGAGE, INC. All references to “USD” or United States Dollar refer to the legal currency of the United States of America.
ii
PART I
ITEM 1. BUSINESS
Overview and Outlook
The Company was incorporated on May 7, 2007 under the name, “Darkstar Ventures, Inc.” under the laws of the State of Nevada. On November 12, 2019, the Company completed its merger with the Delaware corporation that was previously known as “Samsara Luggage, Inc.” (“Samsara Delaware”) in accordance with the terms of the Merger Agreement and Plan of Merger, dated as of May 10, 2019, (the “Merger Agreement”) by and among the Company, Samsara Delaware, and Avraham Bengio, pursuant to which Samsara Delaware merged with and into the Company, with the Company being the surviving corporation (the “Merger”). Following the completion of the Merger, the business of the Company going forward became the business of Samsara Delaware prior to the Merger, namely, the development and sale of smart luggage products.
On October 5, 2020, the Board of Directors of the Company approved, and the holders of a majority of the outstanding shares of our common stock, par value $0.0001 per share, (the “Common Stock”), executed a written consent in lieu of a meeting that approved, amending the Company’s Articles of Incorporation to increase the number of authorized shares of Common Stock from 5,000,000,000 to 7,500,000,000 (the “Authorized Capital Increase”). On November 3, 2020, the Company effected the Authorized Capital Increase by filing with the Secretary of State of the State of Nevada a Certificate of Amendment amending the Company’s Articles of Incorporation to increase the number of authorized shares of Common Stock from 5,000,000,000 to 7,500,000,000.
On March 17, 2021, the Company filed a Certificate of Change with the Secretary of State of the State of Nevada (the “Certificate of Change”) to effect a reverse split of Company’s Common Stock at a ratio of 1-for-7,000 (the “Reverse Stock Split”). The Reverse Stock Split took effect at the open of business on Tuesday, March 23, 2021. As a result of the Reverse Stock Split, each seven thousand (7,000) pre-split shares of Common Stock outstanding automatically combined into one (1) new share of Common Stock without any action on the part of the holders, and the number of outstanding shares Common Stock were reduced from 5,995,825,131 shares to 8,565,465 shares (subject to rounding of fractional shares). No fractional shares were issued in connection with the Reverse Stock Split. The Company issued one whole share of the post-Reverse Stock Split Common Stock to any stockholder who otherwise would have received a fractional share as a result of the Reverse Stock Split.
On May 12, 2022, the Company established a series of redeemable convertible preferred stock (the “Series A Preferred Stock”), par value $0.0001 per share, pursuant to a Certificate of Designation, Preference and Rights of Series A Preferred Stock of the Company (the “Certificate of Designation”). Pursuant to the Certificate of Designation, the Company authorized 1,000,000 shares of the Series A Preferred Stock, which may be convertible into shares of Common Stock, par value $0.0001 per share, of the Company (the “Common Stock”) at the option of the holders thereof at any time after the issuance of the Series A Preferred Stock, at a conversion price equal a Variable Conversion Price (the “Conversion Price”). The “Variable Conversion Price” means 80% multiplied by the Market Price (representing a discount rate of 20%). The “Market Price” means the average of the lowest two (2) Trading Prices (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the latest complete trading day prior to the conversion date. The “Trading Price” means, for any security as of any date, the actual closing price on the OTCQB, OTCQX, Pink Sheets electronic quotation system or applicable trading market (the “OTC”). The Series A Preferred Stock will, with respect to dividend rights and rights upon liquidation, winding-up or dissolution, rank: (a) senior with respect to dividends and right of liquidation with the Company’s Common Stock and (b) junior with respect to dividends and right of liquidation to all existing and future indebtedness of the Company and existing and outstanding preferred stock of the Company. The Series A Preferred Stock shall have no right to vote on any matters requiring shareholder approval or any matters on which the shareholders are permitted to vote. Each share of Series A Preferred Stock will carry an annual dividend in the amount of six percent (6%) of the price per share of Series A Preferred Stock of $1.00 (the “Divided Rate”), which shall be cumulative, payable solely upon redemption, liquidation or conversion. Upon the occurrence of an event of default (as further defined further in the Certificate of Designation), the Dividend Rate shall automatically increase to fifteen percent (15%).
1
Organization and Description of Business
Samsara Luggage is a global smart luggage and lifestyle brand that incorporates innovative design and functional technology into its smart travel products. The Company launched the first product from the Tag Smart collection of smart suitcases in April 2022, as travel resumed to pre-COVID levels. This collection is equipped with Apple AirTag technology, allowing travelers to track their suitcase using the iPhone’s Find My app. Lost luggage became a prominent issue for global travelers during the Summer 2022 travel season. The Tag Smart suitcase offered travelers precise tracking of their suitcase along with immediate information regarding their luggage’s whereabouts. The Tag Smart collection is currently available in two different sizes to accommodate both international and US domestic travel. The newest collection comes in three colors in durable polycarbonate and two colors in a lightweight, aviation-grade aluminum material.
The Company launched Street Smart in February 2023. Street Smart is a curated collection of travel and lifestyle accessories that builds on the fashion element of travel. Included in the collection are a selection of sunglasses, tote bag, stylish ballcaps and a stand-alone portable battery for electronic devices. Street Smart compliments Samsara Luggage’s aesthetic and allows the brand to offer more travel-ready products at varying price points.
Merger Transaction
On November 12, 2019, the Company completed its merger with the Delaware corporation that was previously known as “Samsara Luggage, Inc.” (“Samsara Delaware”) in accordance with the terms of the Merger Agreement and Plan of Merger, dated as of May 10, 2019, (the “Merger Agreement”) by and among the Company, Samsara Delaware, and Avraham Bengio, pursuant to which Samsara Delaware merged with and into the Company, with the Company being the surviving corporation (the “Merger”). Following the completion of the Merger, the business of the Company going forward became the business of Samsara Delaware prior to the Merger, namely, the development and sale of smart luggage products.
On November 6, 2019, the Company filed (1) Articles of Merger with the Secretary of State of the State of Nevada in which the Company amended its Articles of Incorporation to change the Company’s name from “Darkstar Ventures, Inc.” to “Samsara Luggage, Inc.” (the “Name Change”); and (2) a Certificate of Amendment with the Secretary of State of the State of Nevada in which the Company increased the number of authorized shares of Common Stock of the Company from 2,000,000,000 shares of Common Stock to 5,000,000,000 shares of Common Stock and subsequently became effective on November 12, 2019.
In connection with the Merger, the Company and Avraham Bengio entered into an Assignment and Assumption Agreement pursuant to which the Company sold 100% of the issued and outstanding shares of the Company’s wholly-owned Israeli subsidiary, Bengio Urban Renewal and all of the Company’s interest in Bengio Urban Renewal (including all debts and liabilities owed by the Company to Bengio Urban Renewal and the debts of Bengio Urban Renewal to the Company) to Avraham Bengio, the former CEO and principal shareholder of the Company (prior to the Merger).
At the effective time of the Merger, each share of common stock of Samsara, $0.0001 par value, was converted into the right to receive 0.0654 shares of the Company’s common stock, such that the shareholders of Samsara Delaware were issued new shares of the Company representing approximately 80% of the issued and outstanding shares of the Company’s common stock following the completion of the Merger. The exchange rate was determined through arms’-length negotiations between the Company and Samsara Delaware.
On November 13, 2019, the Board of Directors of the Company (the “Board”) amended Section 3 of Article VII of the bylaws of the Company to change the fiscal year end-date of the Company from July 31 to December 31.
On October 5, 2020, the Company’s stockholders approved amending the Company’s Articles of Incorporation to increase the number of authorized shares of common stock from 5,000,000,000 to 7,500,000,000 (the “Authorized Capital Increase”). On November 3, 2020, the Company effected the Authorized Capital Increase by filing with the Secretary of State of the State of Nevada a Certificate of Amendment amending the Company’s Articles of Incorporation to increase the number of authorized shares of common stock from 5,000,000,000 to 7,500,000,000,
Address and Market for Securities
On July 6, 2022, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of the State of Nevada, moving its official headquarters to 135 East 57th Street, Suite 18-130 New York, NY. The Company’s telephone number remains the same, phone: (877) 421-1574. Our website is www.samsaraluggage.com.
Our common shares are quoted on the OTCQB under the symbol “SAML.” On April 2, 2023, the closing price for shares of our common shares as reported on the OTCQB was $0.0326 per share.
2
Bankruptcy, Receivership or Similar Proceeding
We have never declared bankruptcy, have never been in receivership, and have never been involved in any legal actions or proceedings.
Recent Developments
Samsara Luggage entered into strategic partnerships with wireless network operator T-Mobile and luxury lifestyle clothing brand Tommy Bahama after the launch of its Tag Smart collection of smart luggage. The Company began its collaboration with T-Mobile in July of 2022. The two companies conceptualized a new co-branded carry-on suitcase that would merge the Samsara Luggage and T-Mobile aesthetic. Samsara Luggage began the process of designing and manufacturing the Un-carrier On suitcase, a magenta colored carry-on that offered the same tracking technology as the Tag Smart suitcase and a power bank with wireless and USB-C charging capabilities. The Un-carrier On was launched in late November 2022 and garnered significant press.
During this time, Samsara Luggage also made its retail debut in Tommy Bahama stores. Select travel related items including Samsara’s Tag Smart carry-on became available in select Tommy Bahama stores in Florida and New York. Tommy Bahama also added the products to its online e-commerce store. The men’s and women’s clothing brand included the new Samsara Luggage products in its marketing assets for the Tommy Bahama website and social media channels. Samsara Luggage remains in Tommy Bahama stores and on its eponymous website.
Notable Accolades & Press Mentions
The Tag Smart Carry-on won Special Mention in TIME’s list of Best Inventions 2022. The prestigious list was published in early November, just before the launch of the Un-carrier On co-branded suitcase. Conde Nast Traveler included the Tag Smart Carry-on in its print edition, giving the smart suitcase an entire page in its October issue. Along with this special award, the Tag Smart Carry-on was included in several back-to-back “best of” roundups in noteworthy press outlets including Travel + Leisure, Tom’s Guide, Forbes, CBS News and Buy Side from WSJ. With the Tag Smart collection being designed for the AirTag, Apple-focused publications like iMore published stories around the new collection.
Transactions during 2022 (dollars shown below in thousands)
On March 1, 2022, and pursuant to the SPA, YAII PN, Ltd. (“YAII”) exercised its option to convert the Convertible Promissory Note principal in the amount of $35 and accrued interest of $6 into 97,458 shares of Common Stock of the Company. The fair market value of the shares was $56.
On April 25, 2022, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $30 and accrued interest of $4 into 103,963 shares of Common Stock of the Company. The fair market value of the shares was $45.
On May 11, 2022, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $23 and accrued interest of $1 into 113,109 shares of Common Stock of the Company. The fair market value of the shares was $29.
On May 17, 2022, the Company entered into a Series A Preferred Stock Purchase Agreement with 1800 Diagonal Lending LLC f/k/a Sixth Street Lending LLC, a Virginia limited liability company pursuant to which the Company issued and sold 148,062 shares of Series A Preferred Stock for a purchase price of $129, of which the Company received proceeds of $125, net of issuance costs. The Company has accounted for the Series A Preferred Stock as mezzanine equity.
On June 7, 2022, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $13 and accrued interest of $2 into 117,244 shares of Common Stock of the Company. The fair market value of the shares was $36.
On June 28, 2022, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $18 and accrued interest of $1 into 123,288 shares of Common Stock of the Company. The fair market value of the shares was $31.
3
On July 26, 2022, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $13 and accrued interest of $2 into 130,250 shares of Common Stock of the Company. The fair market value of the shares was $38.
On July 27, 2022, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $29 and accrued interest of $0 into 259,404 shares of Common Stock of the Company. The fair market value of the shares was $44.
On August 3, 2022, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $28 and accrued interest of $0 into 295,579 shares of Common Stock of the Company. The fair market value of the shares was $35.
On August 10, 2022, the Company entered into a Series A Preferred Stock Purchase Agreement with 1800 Diagonal Lending LLC f/k/a Sixth Street Lending LLC, a Virginia limited liability company pursuant to which the Company issued and sold 73,312 shares of Series A Preferred Stock for a purchase price of $63, of which the Company received proceeds of $60, net of issuance costs. The Company has accounted for the Series A Preferred Stock as mezzanine equity.
On October 7, 2022, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $32 and accrued interest of $2 into 329,252 shares of Common Stock of the Company. The fair market value of the shares was $43.
On November 23, 2022, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $29 and accrued interest of $1 into 363,498 shares of Common Stock of the Company. The fair market value of the shares was $39.
On November 23, 2022, and pursuant to the SPA, the Preferred A Investor exercised its option to convert 14,466 shares of Series A Preferred Stock into 181,442 shares of Common Stock of the Company.
On November 23, 2022, and pursuant to the SPA, the Preferred A Investor exercised its option to convert 13,500 shares of Series A Preferred Stock into 209,035 shares of Common Stock of the Company.
Transactions during 2021
December 2021 Convertible Loan Agreement (YAII PN, Ltd.)
On December 14, 2021, Samsara Luggage, Inc. (the “Company”) entered into a securities purchase agreement (the “Securities Purchase Agreement”) with YA II PN Ltd., a Cayman Islands exempt company (the “Investor”), pursuant to which the Company sold and issued a convertible debenture in the amount of $500,000 (the “Convertible Debenture”), which is convertible into shares of the Company’s common stock, par value $0.0001 (the “Common Stock”) (as converted, the “Conversion Shares”).
The Convertible Debenture bears interest at a rate of 10% per annum (15% on default) and has a maturity date of one (1) year. The Convertible Debenture provides a conversion right, in which any portion of the principal amount of the Convertible Debenture, together with any accrued but unpaid interest, may be converted into the Company’s Common Stock at a conversion price equal to 80% of the lowest volume weighted average price of the Company’s Common Stock during the ten (10) trading days immediately preceding the date of conversion, subject to adjustment. The Convertible Debenture may not be converted into common stock to the extent such conversion would result in the Investor beneficially owning more than 4.99% of the Company’s outstanding Common Stock (the “Beneficial Ownership Limitation”); provided, however, that the Beneficial Ownership Limitation may be waived by the Investor upon not less than 65 days’ prior notice to the Company. The Convertible Debenture provides the Company with a redemption right, pursuant to which the Company, upon fifteen (15) business days’ prior notice to the Investor, may redeem, in whole or in part, outstanding principal and interest under the Convertible Debenture at a redemption price equal to the principal amount being redeemed plus a redemption premium equal to 5% of the outstanding principal amount being redeemed plus outstanding and accrued interest; however, the Investor shall have fifteen (15) business days after receipt of the Company’s redemption notice to elect to convert all or any portion of the Convertible Debenture, subject to the Beneficial Ownership Limitation.
4
June 2021 Convertible Loan Agreement (YAII PN, Ltd.)
On June 7, 2021, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with the Investor, pursuant to which the Company sold and issued convertible debentures (individually a “Convertible Debenture” and collectively, the “Convertible Debentures”) in the aggregate amount of up to $1,250,000 (the “Purchase Price”), which are convertible into shares of the Company’s common stock, par value $0.0001 (the “Common Stock”) (as converted, the “Conversion Shares”), of which:
| (i) | a Convertible Debenture (the “First Convertible Debenture”) in the principal amount of $500,000 (the “First Convertible Debenture Purchase Price”) was issued upon execution of the Securities Purchase Agreement (the “First Closing Date”); |
| (ii) | a Convertible Debenture (the “Second Convertible Debenture”) in the principal amount of $500,000 shall be issued within one (1) business day following the filing of a registration statement on Form S-1 (the “Registration Statement”) under the Securities Act of 1933, as amended, registering the Conversion Shares issuable upon conversion of the Convertible Debentures with the Securities and Exchange Commission (the “SEC”); and |
| (iii) | a Convertible Debenture (the “Third Convertible Debenture”) in the principal amount of $250,000 (the “Third Convertible Debenture Purchase Price”) shall be issued within one (1) business day following the Registration Statement having been declared effective by the SEC. |
The Convertible Debentures bear interest at a rate of 10% per annum (15% on default) and have a maturity date of one (1) year. The Convertible Debentures provide a conversion right, in which any portion of the principal amount of the Convertible Debentures, together with any accrued but unpaid interest, may be converted into the Company’s Common Stock at a conversion price equal to 80% of the lowest volume weighted average price of the Company’s Common Stock during the ten (10) trading days immediately preceding the date of conversion, subject to adjustment. The Convertible Debentures may not be converted into common stock to the extent such conversion would result in the Investor beneficially owning more than 9.99% of the Company’s outstanding Common Stock (the “Beneficial Ownership Limitation”); provided, however, that the Beneficial Ownership Limitation may be waived by the Investor upon not less than 65 days’ prior notice to the Company. The Convertible Debentures provide the Company with a redemption right, pursuant to which the Company, upon fifteen (15) business days’ prior notice to the Investor, may redeem, in whole or in part, outstanding principal and interest at a redemption price equal to the principal amount being redeemed plus a redemption premium equal to 5% of the outstanding principal amount being redeemed plus outstanding and accrued interest; however, the Investor shall have fifteen (15) business days after receipt of the Company’s redemption notice to elect to convert all or any portion of the Convertible Debentures, subject to the Beneficial Ownership Limitation.
In connection with the Securities Purchase Agreement, the Company executed a registration rights agreement (the “Registration Rights Agreement”) pursuant to which it was required to file the Registration Statement with the SEC for the resale of the Conversion Shares, which went effective on or about August 31, 2021.
April 2021 Convertible Loan Agreement (YAII PN, Ltd.)
On April 6, 2021, the Company entered into a Securities Purchase Agreement (“SPA”) with the Investor, pursuant to which the Investor invested $150,000, and the Company issued a convertible debenture and warrants to the Investor. The $150,000 investment was provided upon signature of the SPA.
The investment bears interest at an annual rate of ten percent (10%) and will be repayable after two years. The investment will be convertible at any time into shares of the Company’s Common Stock at a conversion price equal to the lower of (a) $3.46, or (b) 80% of the lowest the daily dollar volume-weighted average price for the Company’s Common Stock during the 10 trading days immediately preceding the conversion date.
As part of the transaction, the Company issued to the Investor warrants to purchase an aggregate of 10,838 shares of Common Stock, at an exercise price equal to $3.46. The term of each warrant is five years from the issue date. Each warrant may be exercised by cash payment or through cashless exercise by the surrender of warrant shares having a value equal to the exercise price of the portion of the warrant being exercised.
5
Business Strategy
Samsara designs, manufacturers, and sells high quality luggage products to meet the evolving needs of frequent travelers. The Company also seeks to present new technologies within the aluminum luggage industry, including an aluminum “smart” suitcase.
Samsara believes that aluminum is an untapped segment within the premium luggage market, with only few manufacturers currently in the industry. Samsara’s aluminum suitcase contains a 6061 aluminum alloy that combines titanium, magnesium and zinc to create a lightweight and durable natural material. The structure of the suitcase is designed to provide both convenience and ample storage space. The suitcase contains an ergonomic design with a flat top that can be used as a desk allowing the user to work on the go. The suitcase also contains a variety of storage options, including an opening log and a wheel design that creates additional packing space. The suitcase’s interior includes packing bags, toiletry bag, garment bag, and gym bag, all illuminated by an interior LED light. The suitcase comes in two colors, black and gray.
Furthermore, the suitcase contains an anodized coating, which is obtained through an electrolytic process that increases the natural oxide layer of the suitcase. The coated surface provides extra protection and a long-lasting appearance. It provides strength without adding weight and protects the suitcase from scratches, corrosion and weather damage. The anodized coating also gives the suitcase its color.
The “smart” components of the suitcase include a LED light control inside the suitcase and an alert system that informs the owner of the suitcase’s location if the suitcase is opened. Samsara’s proprietary mobile application connects to sensors in the suitcase for 24/7 connectivity. The suitcase’s battery status and LED interior light can be remotely monitored via the mobile application. The suitcase also contains a battery and charging port for charging laptops and mobile phones that is USB-C compatible.
In 2020, Samsara implemented a new marketing strategy and online infrastructure, based on its digital assets and a direct-to consumer (D2C) approach. Most of the Company’s marketing is currently directed to the end consumer and Samsara’s promotional efforts are aimed at the digital world and online sales.
In addition, during the fourth quarter of 2020, Samsara launched Sarah & Sam Fashion and Lifestyle Collection. Sarah & Sam is a part of Samsara’s direct business model prompted by the travel limitations due to the COVID-19 pandemic, leveraging the Company’s established digital assets and manufacturing and fulfillment supply chain capabilities to offer additional consumer products that respond to the changing needs of the market.
Due to COVID-19, Samsara postponed the launch of its Next-Gen line of suitcases that were presented in January 2020 at the Consumer Electronics Show (CES) exhibition. The Company decided to make changes to its business plan and developed alternative product lines to create a new revenue stream during the Corona virus pandemic. These new products are all sold online by Samsara’s digital unit utilizing the Company’s digital assets.
| ● | In March 2020, Samsara launched sales of the “Essentials Kit”, offering protective essentials for travel. |
| ● | In July 2020, Samsara launched the “Nano Weekender Bag”, an overnight travel bag treated with a layer of bacteriostatic Nano protection that prevents colonies of bacteria from developing on fabric. |
| ● | In the fourth quarter of 2020, Samsara expanded its D2C activities with the launch of its “Sarah & Sam” Fashion and Lifestyle Collection on a new dedicated website: www.sarah-sam.com. |
In 2021 Samsara prepared for an expansive launch. The Company focused on strengthening its strategic branding and marketing as well as developing its R&D to expand its product offerings based on the changing needs of the market. Samsara was working closely with the production assembly line to create a more reliable supply chain despite the global disruptions due to the COVID-19 pandemic. The Company was also working on quality assurance to ensure that the products meet the high-standards core to the company’s principles.
6
On the branding and marketing fronts, Samsara began building a library of digital assets that align with the ideal target audience for the upcoming collection. Samsara improved its branding to become more distinctive in the marketplace and mature as a brand with a unique voice. The branding and marketing efforts combined are designed to strategically grow the Samsara community and expand its online reach.
Samsara continued developing new digital marketing assets for the anticipated launch of its next collection of smart luggage, which has evolved to adapt to the changing travel landscape despite the interruptions to the global supply chain.
During the first quarter of 2022, Samsara debuted its first NFT (non-fungible token) on Desperate ApeWives, a leading NFT community. The new NFT named “Sam” is inspired by the sleek, modern style and passion for adventure that the brand embodies. Sam is the company’s first NFT Brand Ambassador and will included in the marketing campaign for Samsara’s newest collection anticipated
(“Sam”)
In May of 2022, Samsara partnered with YouTube Tech and Lifestyle Creator Justine Ezarik (aka iJustine) as part of its new marketing strategy for its newly launched Tag Smart collection of smart luggage. The collaboration aims to help Samsara reach the millions of gadget lovers that follow iJustine’s many social media platforms such as YouTube and Instagram. The unboxing video was unveiled on YouTube and features iJustine highlighting the detail of the new Tag Smart suitcase which incorporates the Apple AirTag so travelers can track their luggage using the Find My app on their iPhone.
In August of 2022, Samsara announced a partnership with iconic island lifestyle brand, Tommy Bahama (NYSE: OXM) to offer select products from its newly launched Tag Smart Collection both in-store and online. Tommy Bahama will add Samsara’s Tag Smart Carry-on to its website in September and in select stores later in Fall 2022. The Tag Smart Carry-on is combined with the Apple AirTag, allowing travelers to easily track their suitcase using the Find My app on their iPhone. In addition, Samsara’s Weekender Bag will also be added to the Tommy Bahama site as a travel accessory that coordinates with the Tag Smart Carry-on
In November of 2022, T-Mobile (NASDAQ: TMUS) unveiled the Un-carrier On — a new smart, very-magenta suitcase in collaboration with Samsara, with the aim of helping people explore the world. The limited-edition Un-carrier On was made available for pre-order starting in November of 2022 at TravelMagenta.com. Samsara received significant press spotlight in connection with the Un-carrier On with T-Mobile. A few of the many notable outlets include Forbes, Fox News and 9to5google.com, who shared outstanding reviews of Samsara’s latest smart suitcase equipped with standout tech features including Tag Smart luggage tracker, wireless charging, and USB-C port for corded charging.
Later that month TIME awarded Samsara’s Tag Smart carry-on with Special Mention in its Best Inventions of 2022 list.
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Research and Development
Samsara performs research and development in the fields of materials, design, and technology to develop new features and functionality, such as Wi-Fi hotspots, SIM cards, GPS, Bluetooth, RFID, built-in batteries, digital scaling, tracking systems, and automated locking.
Samsara’s R&D team is also exploring ways to add new Internet of Things (IoT) components to its existing smart luggage product such as a Samsara online community platform and integration with airline and airport systems. Additionally, Samsara’s R&D team is exploring new composite materials to use in Samsara’s luggage products.
Samsara works with three designers on an ongoing basis, and with NOA Labs Ltd., a Hong Kong company. Samsara’s R&D activities are overseen by David Dahan via Design Boxes Ltd.
Manufacturing
Samsara utilizes two manufacturers in China to manufacture its smart luggage products, GDF / Ming Hing Industries Development Ltd., which manufactures the suitcase, and ABO Electronics (Shenzhen) Co., Ltd., which manufactures the smart unit. In addition, Samsara utilizes to contractors to provide order fulfilment services, FBA Sourcing China (DAPIGOO CO LTD), located in China, and Preferred Depot, located in the United States.
Marketing and Sales
Samsara is selling its smart luggage products direct-to-consumer (D2C) via its own website. Samsara has been building a library of digital assets with the ideal target audience for current sales, and upcoming collections. As a D2C company, Samsara leverages from the company’s established digital assets, manufacturing and fulfillment supply chain capabilities to continue and respond to the changing needs of the market.
Samsara is focusing efforts in improving its branding to become more distinctive in the marketplace and mature as a brand with a unique voice. The branding and marketing efforts combined are designed to strategically grow the Samsara community and expand its online reach.
Competition
Samsara’s primary competitors offering aluminum suitcases in the carry-on luggage market include Away, Rimowa, Samsonite (Tumi), and Zero Halliburton.
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| Competitor | Product | Price | Features | |||||||
| Away | Aleon 21” Carry-On Aluminum Hardside Luggage | $ | 549 | ● | Dimensions: 20.9 x 15.7 x 9.0 inches, Weight: 10.6 lbs, Volume: 2098 cubic inches | |||||
| ● | Lightweight and extremely durable Aircraft Grade Aluminum Frame and Body with two TSA-Approved Resettable Combination Locks | |||||||||
| ● | Interior Compression Packing System will keep items from shifting to the bottom, and prevent wrinkles | |||||||||
| ● | A telescoping handle, 360-degree spinner wheels, double reinforced square corners for extra space, a fitted rubber seal makes the case water-resistant and airtight; piano hinges extend the length of the case for added durability | |||||||||
| ● | 10-year Worry Free Warranty | |||||||||
| Rimowa | Rimowa Topas IATA Carry- On Luggage 21” Inch Multi-wheel 32L TSA Lock Spinner Suitcase Silver | $ | 799 | ● | Dimensions: 21.7“x7.9“x15.7“inch | |||||
| ● | 4 wheel spinners for smooth-rolling mobility in any direction | |||||||||
| ● | The height-adjustable Flex-Divider system on the interior can also be set to accommodate the exact volume of your luggage and keeps your belongings in the greatest possible order | |||||||||
| ● | Integrated in the case, the innovative TSA lock that can be opened without damage during security checks | |||||||||
| Zero Halliburton | Zero Halliburton Geo Aluminum 3.0 International Carry-On (Silver) | $ | 850 | ● | Dimensions: 15x8x21” | |||||
| ● | Made in USA from imported Materials. Utilizes premium anodized aluminum that is as strong as steel but only one-fourth the weight. Innovative and unique double-rib design provides additional strength and durability as well as optimum protection of its contents. The intuitive 3-stage dual-button handle system allows for quicker release for both left and right-handed travelers. | |||||||||
| ● | Designed to securely close using two TSA accepted combination locks that are integrated into the draw-bolt latches. Seals airtight with the addition of a neoprene gasket seal around the opening’s perimeter. | |||||||||
| ● | The spinner wheels provide convenient and controlled ‘by-your-side’ mobility for easy traveling. Our superior piano hinge is used to keep the shells of each case in alignment and adds additional strength and integrity to the seal. | |||||||||
| ● | The interior is divided into two compartments with flat panels in place to hold clothes securely and discreetly. Our signature lining is stain-resistant and non-abrasive to clothes. | |||||||||
| ● | Our newly introduced ZH Global Tracking allows your case to be tracked anywhere in the world, providing additional peace of mind for your travel. | |||||||||
| Samsonite | Samsonite LITE-BOX ALU SPINNER (4 WHEELS) 55CM | $ | 667 | ● | Dimensions: 55 x 40 x 23 cm (including handles, wheels, bottom glides, side pockets and other external parts) | |||||
| ● | Volume: 40 L | |||||||||
| ● | Weight: 4.7 kg | |||||||||
| ● | Warranty: Limited 10 year global warranty | |||||||||
| ● | Model: Spinner (4 wheels) | |||||||||
| ● | Colour: Aluminum | |||||||||
| ● | Material: 100% High-end anodized aluminum | |||||||||
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Intellectual Property
Samsara owns a design patent on its carry-on luggage product, issued in Israel (60249) on April 6, 2017, in the United States (136531) on October 3, 2017, in Europe (004385086-0001) on October 10, 2017, and in China (315400) on October 29, 2017. Samsara also owns registered trademarks on the “Samsara” and “Samsara Luggage” trade names.
Government Regulations
Several aspects of Samsara’s smart luggage products, including its battery, locks and LED lights, are subject to the requirements of federal law relating to aviation and homeland security, as well as international regulation of electronic devices. Part 15 of the FCC Rules requires operation of electronic equipment not to cause harmful interference and to accept any interference received, including interference that may cause undesired operation. The Transportation Security Administration (TSA) recommends that only TSA approved locks be used on luggage, to avoid risk of TSA agents breaking the lock for inspection. The European Union requires all electronic devices to comply with the Restriction of Hazardous Substances (ROHS) regulations which restricts the use of specific hazardous materials found in electrical and electronic products. BS EN 62471 gives universal best-practice recommendations for the photobiological safety of electric lamps and lighting systems, including LED lights. This standard specifies exposure limits, measurement techniques and classification systems to control photobiological and light hazards. The EU radio equipment directive establishes a regulatory framework for placing radio equipment on the market, setting requirements for safety and health, electromagnetic compatibility, and the efficient use of the radio spectrum. Additionally, smart luggage products are subject to airline regulations applicable to manufacturing materials, size and weight.
Samsara believes that it is in substantial compliance with the laws and regulations which regulate its business, as detailed below:
Air Travel Regulations
The Samsara Luggage Carry-on case complies with all airline regulations applicable to manufacturing materials, size and weight. Additionally, it incorporates all the electronic parts into one removeable unit, leaving an option for the suitcase to be completely electronic free, if needed, in compliance with the airline regulations implemented by the International Air Transport Association in January 2018, requesting passengers to remove batteries from checked-in smart luggage.
Samsara carry-on locks, bearing the Travel Sentry logo, meet TSA recommendations for accepted locks which can be opened by the TSA without being broken.
Employees
Samsara maintains seven (7) employees. All of the Company’s other business activities are performed by independent contractors and third-party service providers.
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WHERE YOU CAN GET ADDITIONAL INFORMATION
We are required to file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”). You may read and copy our reports or other filings made with the SEC at the SEC’s Public Reference Room, located at 100 F Street, N.E., Washington, DC 20549. You can obtain information on the operations of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You can also access these reports and other filings electronically on the SEC’s web site, www.sec.gov.
If you would like to request documents from Samsara, please send a request in writing or by telephone to Samsara at the following address:
Samsara Luggage, Inc. 135 E. 57th Street, Suite 18-130 New York, NY 10022 Telephone: 1-877-421-1574 Attn: Atara Dzikowski |
ITEM 1A. RISK FACTORS
Samsara has a limited operating history, has incurred significant operating losses since its inception and expects to incur significant losses for the foreseeable future. Samsara may never generate significant revenue or become profitable or, if Samsara achieves profitability, it may not be able to sustain it.
Samsara has a limited operating history and has generated limited revenues to date. Samsara is dependent upon additional capital resources for the continuation of its planned principal operations, which are subject to significant risks and uncertainties, including failing to secure funding to expand commercialization of its products or failing to profitably operate the business.
Samsara has incurred significant operating losses since its inception. Samsara’s net losses were $2,239,000 and $3,817,000 for the years ended December 31, 2022, and December 31, 2021, respectively. As of December 31, 2022, Samsara had an accumulated deficit of $12,433,000. Substantially all of Samsara’s losses have resulted from expenses incurred in connection with its research and development programs and from general and administrative costs associated with Samsara’s operations. Samsara expects to continue to incur losses for the foreseeable future and anticipates these losses will increase substantially as Samsara continues to develop and commercialize its products.
To become and remain profitable, Samsara must succeed in developing and commercializing products that generate significant revenue. This will require Samsara to be successful in a range of challenging activities, including manufacturing, and marketing and selling products. Samsara may never succeed in these activities and, even if it does, may never generate revenues that are significant enough to achieve profitability. In addition, Samsara has not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields. Because of the numerous risks and uncertainties associated with smart luggage product development, Samsara is unable to accurately predict the timing or amount of increased expenses or when, or if, Samsara will be able to achieve profitability. Even if Samsara does achieve profitability, it may not be able to sustain or increase profitability on a quarterly or annual basis. Samsara’s failure to become and remain profitable would depress the value of Samsara and could impair its ability to raise capital, expand its business, maintain its research and development efforts, diversify its product candidates or even continue its operations. A decline in the value of Samsara could also cause stockholders to lose all or part of their investment.
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The report of Samsara’s independent registered public accounting firm expresses substantial doubt about the ability of Samsara to continue as a going concern.
Samsara’s independent registered public accounting firm indicated in its report on Samsara’s financial statements for the period ended December 31, 2022, that conditions exist that raise substantial doubt about Samsara’s ability to continue as a “going concern.” A going concern paragraph included in Samsara’s independent registered public accounting firm’s report on its consolidated financial statements could impair investor perceptions and Samsara’s ability to finance its operations through the sale of equity, incurring debt, or other financing alternatives. Samsara’s ability to continue as a going concern will depend upon many factors beyond Samsara’s control including the availability and terms of future funding. If Samsara is unable to achieve its goals and raise the necessary funds to finance its operations, its business would be jeopardized, and Samsara may not be able to continue.
Samsara will require substantial additional financing to achieve its goals, and a failure to obtain this necessary capital when needed and on acceptable terms, or at all, could force Samsara to delay, limit, reduce or terminate its product development programs, commercialization efforts or other operations.
Samsara expects its expenses to increase in connection with its ongoing activities. Samsara also expects to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Samsara cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of its products. Samsara will need to obtain substantial additional funding in connection with its continuing operations as a public company. If Samsara is unable to raise capital when needed or on attractive terms, Samsara could be forced to delay, reduce or eliminate its research and development programs or any future commercialization efforts.
Samsara has based its estimates on assumptions that may prove to be wrong, and Samsara could use its capital resources sooner than it currently expects. Samsara’s operating plans and other demands on its cash resources may change as a result of many factors currently unknown to Samsara, and Samsara may need to seek additional funds sooner than planned, through public or private equity or debt financings or other capital sources, including potentially government funding, collaborations, licenses and other similar arrangements. In addition, Samsara may seek additional capital due to favorable market conditions or strategic considerations even if Samsara believes it has sufficient funds for its current or future operating plans. Attempting to secure additional financing may divert Samsara’s management from its day-to-day activities, which may adversely affect Samsara’s ability to develop its product.
Samsara’s future capital requirements will depend on many factors, including:
| ● | the costs and timing of manufacturing for Samsara’s products, including commercial manufacturing of its products; |
| ● | the costs of obtaining, maintaining and enforcing Samsara’s intellectual property rights; |
| ● | Samsara’s efforts to enhance operational systems and hire additional personnel to satisfy its obligations as a public company, including enhanced internal controls over financial reporting; |
| ● | the costs associated with hiring additional personnel and consultants as Samsara’s research and development activities increase; |
| ● | the timing and amount of the milestone or other payments Samsara must make to the licensors and other third parties from whom Samsara has licensed or acquired technology; |
| ● | the costs and timing of establishing or securing sales and marketing capabilities for its products; |
| ● | Samsara’s ability to achieve market acceptance and adequate market share and revenue for its products; and |
| ● | the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements. |
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In addition, Samsara’s products may not achieve commercial success.
Accordingly, Samsara will need to continue to rely on additional financing to achieve its business objectives. Adequate additional financing may not be available to Samsara on acceptable terms, or at all. In addition, Samsara may seek additional capital due to favorable market conditions or strategic considerations, even if Samsara believes it has sufficient funds for its current or future operating plans.
Raising additional capital may cause dilution to Samsara’s stockholders, restrict Samsara’s operations or require Samsara to relinquish rights to its technologies or product candidates.
Until such time, if ever, as Samsara can generate substantial product revenues, Samsara expects to finance its cash needs through equity offerings, debt financings or other capital sources, including potentially government funding, collaborations, licenses and other similar arrangements. To the extent that Samsara raises additional capital through the sale of equity or convertible debt securities, existing stockholders’ ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect stockholders’ rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting Samsara’s ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
If Samsara raises funds through future collaborations, licenses and other similar arrangements, Samsara may have to relinquish valuable rights to its future revenue streams or products, or grant licenses on terms that may not be favorable to Samsara and/or that may reduce the value of Samsara’s common stock.
Samsara’s executives and managerial personnel are critical to our business, and they may not remain with us.
Samsara’s performance substantially depends on the performance of our management team. The loss of the services of any of Samsara’s executives or managerial personnel could cause us to incur increased operating expenses and divert senior management resources in searching for replacements. We do not have a dedicated Chief Financial Officer, and our other executives have taken on substantially more responsibility for the management of our business and of our financial reporting. These changes in our organization may have a disruptive impact on our ability to implement our strategy and could have a material adverse effect on our business, internal controls, financial condition and results of operations. Management transition inherently causes some loss of institutional knowledge, which can negatively affect strategy and execution. Until we find a Chief Financial Officer, or if we have additional changes to our executives or highly skilled technical and managerial personnel, we may be unable to successfully manage and grow our business, and our results of operations, internal controls and financial condition could suffer as a result. The loss of the services of our executives or other personnel also could harm our reputation.
Risks Relating to Samsara’s Strategy and Industry
Samsara’s success depends on independent contractors to manufacture and supply Samsara with its smart luggage products, and to label, package, and ship these products.
Samsara has retained third party manufacturers to manufacture and supply Samsara with its smart luggage products. Samsara relies on independent contractors for the supply of its smart luggage products and for the labeling, packaging, and shipping of these products. Samsara may not be successful in developing relationships with these independent contractors. In addition, these third party contractors may not dedicate sufficient resources or give sufficient priority to satisfying Samsara’s requirements or needs. There is limited history upon which to base any assumption as to the likelihood that Samsara will prove successful in selecting qualified third party independent contractors or in negotiating any agreements with them. If Samsara is unsuccessful in addressing these risks, its results of operations could be adversely affected.
Samsara does not have long term commitments from suppliers and other independent contractors.
Samsara may experience shortages of supplies and inventory because Samsara orders goods and services via purchase orders and has not signed long-term contracts with its suppliers. Samsara currently utilizes the services of two manufacturers in China, one for the manufacture of the suitcase and the other for the manufacture of the smart unit. In addition, Samsara utilizes the services of two contractors, one in China and one in the United States, for the provision of order fulfillment services. Samsara’s success is dependent on Samsara’s ability to timely provide its customers with Samsara’s smart luggage products. Although Samsara directly markets these products, Samsara is dependent on its suppliers and other independent contractors for the manufacture and supply of Samsara’s smart luggage products and for the labeling, packaging, and shipment of these products. No assurance can be given that Samsara will enter into agreements with other suppliers for the supply of its smart luggage products at acceptable levels of quality and price, or with other independent contractors who will provide Samsara with order fulfillment services at acceptable levels of quality and price. While Samsara currently has and anticipates continuing to have good relationships with its suppliers and other independent contractors, if Samsara is unable to secure additional sources of supply or order fulfillment services from one or more independent contractors on a timely basis and on acceptable terms, Samsara’s results of operations could be adversely affected.
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The selling of smart luggage products is subject to current governmental regulations.
Several aspects of Samsara’s smart luggage products, including its battery, locks and LED lights, are subject to the requirements of federal laws relating to aviation and homeland security, as well as international regulation of electronic devices. Part 15 of the FCC Rules requires operation of electronic equipment not to cause harmful interference and to accept any interference received, including interference that may cause undesired operation. The Transportation Security Administration (TSA) recommends that only TSA approved locks be used on luggage, to avoid risk of TSA agents breaking the lock for inspection. The European Union requires all electronic devices to comply with the Restriction of Hazardous Substances (ROHS) regulations which restricts the use of specific hazardous materials found in electrical and electronic products. BS EN 62471 gives universal best-practice recommendations for the photobiological safety of electric lamps and lighting systems, including LED lights. This standard specifies exposure limits, measurement techniques and classification systems to control photobiological and light hazards. The EU radio equipment directive establishes a regulatory framework for placing radio equipment on the market, setting requirements for safety and health, electromagnetic compatibility, and the efficient use of the radio spectrum.
Additionally, smart luggage products are subject to airline regulations applicable to manufacturing materials, size and weight. While Samsara believes that it is and will be in substantial compliance with the laws and regulations which regulate its business, the failure to comply with any of these laws or regulations, or the imposition of new laws or regulations could negatively impact Samsara’s proposed business.
Samsara faces intense competition and many of its competitors have substantially greater resources than Samsara has.
Samsara operates in a highly competitive environment. In addition, the competition in the market for smart luggage products may intensify. There are numerous well-established companies based in the United States with longer operating histories, significantly greater resources and name recognition, and a larger base of distributors and retailers. In addition, there are smaller entrepreneurial companies who are developing products that will compete with the smart luggage products that Samsara currently sells. As a result, these competitors may have greater credibility with Samsara’s potential customers. They also may be able to adopt more aggressive pricing policies and devote greater resources to the development, promotion, and sale of their products. These competitors may make it difficult for Samsara to market and sell its products and compete in the smart luggage market, which could harm Samsara’s business.
Samsara depends on market acceptance of its smart luggage products. If these products do not gain market acceptance, Samsara’s ability to compete will be adversely affected.
Samsara’s success depends in large part on Samsara’s ability to successfully market its smart luggage products. No assurances can be given that Samsara will be able to successfully market its smart luggage products or achieve consumer acceptance. Moreover, failure to successfully commercialize its smart luggage products on a timely and cost-effective basis will have a material adverse effect on Samsara’s ability to compete in its targeted market.
Failure to meet customers’ expectations or deliver expected performance could result in losses and negative publicity, which would harm Samsara’s business.
If the smart luggage products which Samsara sells fail to perform in the manner expected by its customers, then Samsara’s revenues may be delayed or lost due to adverse customer reaction. In addition, negative publicity about Samsara and its products could adversely affect Samsara’s ability to attract or retain customers. Furthermore, disappointed customers may initiate claims for damages against Samsara, regardless of Samsara’s responsibility for their disappointment.
Samsara needs to retain key personnel to support its services and ongoing operations.
The marketing and sale of Samsara’s smart luggage products will continue to place a significant strain on Samsara’s limited personnel, management, and other resources. Samsara’s future success depends upon the continued services of its executive officers and the hiring of key employees and contractors who have critical industry experience and relationships that Samara will need to rely on to implement its business plan. The loss of the services of any of Samsara’s officers or the lack of availability of other skilled personnel would negatively impact Samsara’s ability to market and sell its smart luggage products, which could adversely affect Samsara’s financial results and impair Samsara’s growth.
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If Samsara cannot build and maintain strong brand loyalty to its products, its business may suffer.
Samsara believes that the importance of brand recognition will increase as more companies produce smart luggage products. Development and awareness of Samsara’s brand will depend largely on Samsara’s ability to successfully advertise and market its products. If Samsara is unsuccessful, its products may not be able to gain widespread acceptance among consumers. A failure to develop Samsara’s smart luggage products sufficiently could have a material adverse effect on Samsara’s business, results of operations and financial condition.
Samsara may be unable to protect its brand name.
Brand recognition is critical in attracting consumers to Samsara’s products. Samsara has researched the availability of the trademark “Samsara” and have not found any inherent obstacle to registering the trademark with the US patent and trademark office. Nevertheless, if Samsara is unable to trademark its brand name or to adequately protect its trade name against infringement or misappropriation, Samsara’s competitive position in the smart luggage market may be undermined, which could lead to a significant decrease in the volume of products that we sell. Such a result would materially and adversely affect Samsara’s results of operations.
Samsara may incur losses as a result of claims that may be brought against Samsara due to defective products or as a result of product recalls.
While Samsara is not aware of any claims having been brought in connection with Samsara’s smart luggage products, Samsara may be liable if the use of Samsara’s products causes injury, illness, or death. Samsara also may be required to withdraw or recall some of its products if they are damaged or defective. A significant product liability judgment against Samsara or a widespread product withdrawal or recall could have a material adverse effect on Samsara’s business and financial condition.
If a third party asserts that Samsara’s infringes upon its proprietary rights, Samsara could be required to redesign its products, change suppliers, pay significant royalties, or enter into license agreements.
Although presently Samsara is not aware of any such claims, a third party may assert that Samsara’s smart luggage products violate its intellectual property rights. As the number of smart luggage products increases, infringement claims may become more common. Any claims against Samsara, regardless of their merit, could:
| ● | Be expensive and time-consuming to defend; |
| ● | Result in negative publicity; |
| ● | Force Samsara to stop selling its products; |
| ● | Divert management’s attention and Samsara’s other resources; and |
| ● | Require Samsara to enter into royalty or licensing agreements in order to obtain the right to sell its products, which right may not be available on terms acceptable to Samsara, if at all. |
In addition, Samsara’s believes that any successful challenge to its use of a trademark or domain name could substantially diminish Samsara’s ability to conduct business in a particular market or jurisdiction and thus could decrease Samsara’s revenues and/or result in losses to Samsara’s business.
Samsara’s lack of business diversification could result in the loss of your investment if revenues from Samsara’s primary products decrease.
Currently, Samsara’s business is focused on the marketing and sale of smart luggage products. Samsara does not have any other lines of business or other sources of revenue if Samsara is unable to successfully implement its business plan. Samsara’s lack of business diversification could cause you to lose all or some of your investment if Samsara is unable to generate significant revenues by the sale of smart luggage products since Samsara does not have any other lines of business or alternative revenue sources.
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Samsara relies on third parties to conduct many of its activities. Any failure by a third-party to conduct these activities and other requirements and in a timely manner may delay or prevent Samsara’s ability to commercialize its products.
Samsara is dependent on third parties to perform certain activities. Specifically, Samsara has used and relied on, and intends to continue to use and rely on, GDF / Ming Hing Industries Development Ltd. and ABO Electronics (Shenzhen) Co., Ltd. for the manufacture of its luggage products, and on FBA Sourcing China (DAPIGOO CO LTD) and Preferred Depot for order fulfillment services. While Samsara has signed purchase orders governing the activities of its third-party contractors, Samsara has limited influence over their actual performance. There is no guarantee that any such third parties will devote adequate time and resources to such activities or perform as contractually required. If any of these third parties fail to meet expected deadlines, adhere to Samsara’s requirements, or otherwise performs in a substandard manner, Samsara’s ability to fulfill customer orders for products may be undermined. In addition, many of the third parties with whom Samsara contracts may also have relationships with other commercial entities, including Samsara’s competitors, for whom they may also be conducting development activities that could harm Samsara’s competitive position.
If any of Samsara’s relationships with these third parties terminate, Samsara may not be able to enter into arrangements with alternative third parties or do so on commercially reasonable terms.
In addition, Samsara may be unable to establish any agreements with third-party manufacturers or to do so on acceptable terms. Even if Samsara is able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:
| ● | failure of third-party manufacturers to comply with regulatory requirements and maintain quality assurance; |
| ● | breach of the manufacturing agreement by the third-party; |
| ● | failure to manufacture Samsara’s product according to Samsara’s specifications; |
| ● | failure to manufacture Samsara’s product according to Samsara’s schedule, or at all; |
| ● | misappropriation of Samsara’s proprietary information, including Samsara’s trade secrets and know-how; and |
| ● | termination or nonrenewal of the agreement by the third-party at a time that is costly or inconvenient for Samsara. |
Any performance failure on the part of Samsara’s existing or future manufacturers could delay product development, and any related remedial measures may be costly or time consuming to implement. Samsara does not currently have arrangements in place for redundant supply or a second source for all required raw materials used in the manufacture of Samsara’s products. If Samsara’s current third-party manufacturers cannot perform as agreed, Samsara may be required to replace such manufacturers and Samsara may be unable to replace them on a timely basis or at all. Samsara’s current and anticipated future dependence upon others for the manufacture of Samsara’s products may adversely affect Samsara’s future profit margins and Samsara’s ability to commercialize any products on a timely and competitive basis.
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Samsara’s reliance on third parties requires Samsara to share its trade secrets, which increases the possibility that Samsara’s trade secrets will be misappropriated or disclosed.
Because Samsara currently relies on third parties to manufacture its products, Samsara must, at times, share its proprietary technology and confidential information, including trade secrets, with them. Samsara seeks to protect its proprietary technology, in part, by entering into confidentiality agreements, consulting agreements or other similar agreements with its advisors, employees, consultants and contractors prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose Samsara’s confidential information. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets may become known by Samsara’s competitors, are intentionally or inadvertently incorporated into the technology of others or are disclosed or used in violation of these agreements. Given that Samsara’s proprietary position is based, in part, on Samsara’s know-how and trade secrets, and despite Samsara’s efforts to protect its trade secrets, a competitor’s discovery of Samsara’s proprietary technology and confidential information or other unauthorized use or disclosure would impair Samsara’s competitive position and may have a material adverse effect on Samsara’s business, financial condition, results of operations and prospects.
Samsara may seek to enter into collaborations, licenses and other similar arrangements and may not be successful in doing so, and even if Samsara is, it may not realize the benefits of such relationships.
Samsara may seek to enter into collaborations, joint ventures, licenses and other similar arrangements for the development or commercialization of Samsara’s products, due to capital costs required to develop or commercialize the products or manufacturing constraints. Samsara may not be successful in its efforts to establish such collaborations for Samsara’s products. In addition, Samsara faces significant competition in seeking appropriate strategic partners, and the negotiation process can be time consuming and complex. Further, any future collaboration agreements may restrict Samsara from entering into additional agreements with potential collaborators. Samsara cannot be certain that, following a strategic transaction or license, Samsara will achieve an economic benefit that justifies such transaction.
Even if Samsara is successful in its efforts to establish such collaborations, the terms that Samsara agrees upon may not be favorable to Samsara, and Samsara may not be able to maintain such collaborations.
In addition, any potential future collaborations may be terminable by Samsara’s strategic partners, and Samsara may not be able to adequately protect its rights under these agreements. Furthermore, strategic partners may negotiate for certain rights to control decisions regarding the development and commercialization of Samsara’s products, if approved, and may not conduct those activities in the same manner as Samsara would. Any termination of collaborations Samsara enters into in the future, or any delay in entering into collaborations related to Samsara’s products, could delay the development and commercialization of Samsara’s products and reduce their competitiveness if they reach the market, which could have a material adverse effect on Samsara’s business, financial condition and results of operations.
Samsara currently has a limited marketing and sales organization and has limited experience as a company in commercializing products, and Samsara may have to invest significant resources to develop these capabilities. If Samsara is unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell its products, Samsara may not be able to generate product revenue.
Samsara has limited internal sales, marketing and distribution capabilities. Samsara has limited experience as a company in the marketing, sale and distribution of smart luggage products and there are significant risks involved in building and managing a sales organization, including Samsara’s ability to hire, retain and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of Samsara’s internal sales, marketing and distribution capabilities would adversely impact the commercialization of these products. Samsara may not be able to enter into collaborations or hire consultants or external service providers to assist Samsara in sales, marketing and distribution functions on acceptable financial terms, or at all. In addition, Samsara’s product revenues and its profitability, if any, may be lower if Samsara relies on third parties for these functions than if Samsara were to market, sell and distribute any products that Samsara develops itself. Samsara likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market Samsara’s products effectively. If Samsara is not successful in commercializing its products, either on its own or through arrangements with one or more third parties, Samsara may not be able to generate any future product revenue and Samsara would incur significant additional losses.
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Business disruptions could seriously harm Samsara’s future revenue and financial condition and increase its costs and expenses.
Samsara’s operations could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or manmade disasters or business interruptions, for which Samsara is predominantly self-insured. Samsara relies on third- party manufacturers to produce Samsara’s products whose operations may be disrupted by a man-made or natural disaster or other business interruption. The occurrence of any of these business disruptions could seriously harm Samsara’s operations and financial condition and increase its costs and expenses.
Samsara is subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws and anti-money laundering laws and regulations. Compliance with these legal standards could impair Samsara’s ability to compete in domestic and international markets. Samsara could face criminal liability and other serious consequences for violations, which could harm its business.
Samsara is subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls, and anti-corruption and anti-money laundering laws and regulations, including the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and other state and national anti-bribery and anti-money laundering laws in the countries in which Samsara conducts activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, clinical research organizations, contractors and other collaborators and partners from authorizing, promising, offering, providing, soliciting or receiving, directly or indirectly, improper payments or anything else of value to recipients in the public or private sector. Samsara can be held liable for the corrupt or other illegal activities of its employees, agents, contractors and other collaborators and partners, even if Samsara does not explicitly authorize or have actual knowledge of such activities. Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences.
Samsara may engage in strategic transactions that could impact its liquidity, increase its expenses and present significant distractions to Samsara’s management.
From time to time, Samsara may consider strategic transactions, such as acquisitions of companies, asset purchases and licensing arrangements. Any future transactions could increase Samsara’s near- and long-term expenditures, result in potentially dilutive issuances of Samsara’s equity securities, including its common stock, or the incurrence of debt, contingent liabilities, amortization expenses or acquired in-process research and development expenses, any of which could affect Samsara’s financial condition, liquidity and results of operations. Additional potential transactions that Samsara may consider in the future include a variety of business arrangements, including spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and investments. Future acquisitions may also require Samsara to obtain additional financing, which may not be available on favorable terms or at all. These transactions may never be successful and may require significant time and attention of management. In addition, the integration of any business that Samsara may acquire in the future may disrupt Samsara’s existing business and may be a complex, risky and costly endeavor for which Samsara may never realize the full benefits of the acquisition. Accordingly, although there can be no assurance that Samsara will undertake or successfully complete any additional transactions of the nature described above, any additional transactions that Samsara does complete could have a material adverse effect on Samsara’s business, results of operations, financial condition and prospects.
If Samsara fails to comply with its obligations in the agreements under which it licenses intellectual property rights from third parties, or otherwise experiences disruptions in its business relationships with its licensors, Samsara could lose license rights that are important to its business.
Samsara is a party to several license agreements under which it is granted rights to intellectual property that are important to its business and Samsara may enter into additional license agreements in the future. These license agreements impose, and Samsara expects that any future license agreements where Samsara licenses intellectual property will impose, on Samsara, various development, regulatory and/or commercial diligence obligations, payment of milestones and/or royalties and other obligations. If Samsara fails to comply with its obligations under these agreements, or Samsara is subject to bankruptcy-related proceedings, the licensor may have the right to terminate the license, in which event Samsara would not be able to market products covered by the license.
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Samsara may need to obtain licenses from third parties to advance its research or allow commercialization of its products, and Samsara cannot provide any assurances that third-party patents do not exist which might be enforced against Samsara’s products in the absence of such a license. Samsara may fail to obtain any of these licenses on commercially reasonable terms, if at all. Even if Samsara is able to obtain a license, it may be non-exclusive, thereby giving Samsara’s competitors access to the same technologies licensed to Samsara. In that event, Samsara may be required to expend significant time and resources to develop or license replacement technology. If Samsara is unable to do so, Samsara may be unable to develop or commercialize the affected products, which could materially harm Samsara’s business and the third parties owning such intellectual property rights could seek either an injunction prohibiting Samsara’s sales, or, with respect to Samsara’s sales, an obligation on Samsara’s part to pay royalties and/or other forms of compensation. Licensing of intellectual property is of critical importance to Samsara’s business and involves complex legal, business and scientific issues. Disputes may arise between Samsara and its licensors regarding intellectual property subject to a license agreement, including:
| ● | the scope of rights granted under the license agreement and other interpretation-related issues; |
| ● | whether and the extent to which Samsara’s technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; |
| ● | Samsara’s right to sublicense patents and other rights to third parties; |
| ● | Samsara’s diligence obligations with respect to the use of the licensed technology in relation to its development and commercialization of Samsara’s products, and what activities satisfy those diligence obligations; |
| ● | Samsara’s right to transfer or assign the license; and |
| ● | the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by Samsara’s licensors and Samsara and its partners. |
If disputes over intellectual property that Samsara has licensed prevent or impair Samsara’s ability to maintain its current licensing arrangements on acceptable terms, Samsara may not be able to successfully develop and commercialize the affected product candidates, which would have a material adverse effect on Samsara’s business.
Samsara’s commercial success depends significantly on its ability to operate without infringing the patents and other proprietary rights of third parties. Claims by third parties that Samsara infringes their proprietary rights may result in liability for damages or prevent or delay Samsara’s developmental and commercialization efforts.
Samsara’s commercial success depends in part on avoiding infringement of the patents and proprietary rights of third parties. However, Samsara’s or its licensee’s research, development and commercialization activities may be subject to claims that Samsara or its licensee infringes or otherwise violates patents or other intellectual property rights owned or controlled by third parties. Other entities may have or obtain patents or proprietary rights that could limit Samsara’s or its licensee’s ability to make, use, sell, offer for sale or import Samsara’s products, or impair Samsara’s competitive position. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights. Numerous third-party U.S. and foreign issued patents and pending patent applications exist in the fields in which Samsara is developing products.
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Because patent applications are maintained as confidential for a certain period of time, until the relevant application is published Samsara may be unaware of third-party patents that may be infringed by commercialization of any of Samsara’s products, and Samsara cannot be certain that Samsara was the first to file a patent application related to a product candidate or technology. Moreover, because patent applications can take many years to issue, there may be currently-pending patent applications that may later result in issued patents that Samsara’s products may infringe. In addition, identification of third-party patent rights that may be relevant to Samsara’s technology is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. In addition, third parties may obtain patents in the future and claim that use of Samsara’s technologies infringes upon these patents. Any claims of patent infringement asserted by third parties would be time consuming and could:
| ● | result in costly litigation that may cause negative publicity; |
| ● | divert the time and attention of Samsara’s technical personnel and management; |
| ● | cause development delays; |
| ● | subject Samsara to an injunction preventing Samsara from making, using, selling, offering for sale, or importing Samsara products; |
| ● | prevent Samsara from commercializing any of its products until the asserted patent expires or is held finally invalid or not infringed in a court of law; |
| ● | require Samsara to develop non-infringing technology, which may not be possible on a cost-effective basis; |
| ● | subject Samsara to significant liability to third parties; or |
| ● | require Samsara to enter into royalty or licensing agreements, which may not be available on commercially reasonable terms, or at all, or which might be non-exclusive, which could result in Samsara’s competitors gaining access to the same technology. |
Although no third-party has asserted a claim of patent infringement against Samsara as of the date of this Annual Report, others may hold proprietary rights that could prevent Samsara’s products from being marketed. Any patent-related legal action against Samsara claiming damages and seeking to enjoin activities relating to Samsara’s products could subject Samsara to potential liability for damages, including treble damages if Samsara were determined to have willfully infringed, and require Samsara to obtain a license to manufacture or develop its products. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from Samsara’s business. Samsara cannot predict whether it would prevail in any such actions or that any license required under any of these patents would be made available on commercially reasonable terms, if at all. Moreover, even if Samsara or its future strategic partners were able to obtain a license, the rights may be nonexclusive, which could result in Samsara’s competitors gaining access to the same intellectual property. In addition, Samsara cannot be certain that it could redesign its products to avoid infringement, if necessary. Accordingly, an adverse determination in a judicial or administrative proceeding, or the failure to obtain necessary licenses, could prevent Samsara from developing and commercializing its products, which could harm Samsara’s business, financial condition and operating results.
Parties making claims against Samsara may be able to sustain the costs of complex patent litigation more effectively than Samsara can because they have substantially greater resources. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or administrative proceedings, there is a risk that some of Samsara’s confidential information could be compromised by disclosure. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on Samsara’s ability to raise additional funds or otherwise have a material adverse effect on Samsara’s business, results of operations, financial condition and prospects.
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If Samsara is unable to protect the confidentiality of its trade secrets, its business and competitive position would be harmed.
In addition, Samsara relies on the protection of its trade secrets, including unpatented know-how, technology and other proprietary information to maintain Samsara’s competitive position. Although Samsara has taken steps to protect its trade secrets and unpatented know-how, including entering into confidentiality agreements with third parties, and confidential information and inventions agreements with employees, consultants and advisors, Samsara cannot provide any assurances that all such agreements have been duly executed, and any of these parties may breach the agreements and disclose Samsara’s proprietary information, including its trade secrets, and Samsara may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets.
Moreover, third parties may still obtain this information or may come upon this or similar information independently, and Samsara would have no right to prevent them from using that technology or information to compete with Samsara. If any of these events occurs or if Samsara otherwise loses protection for its trade secrets, the value of this information may be greatly reduced and Samsara’s competitive position would be harmed. If Samsara does not apply for patent protection prior to such publication or if Samsara cannot otherwise maintain the confidentiality of its proprietary technology and other confidential information, then Samsara’s ability to obtain patent protection or to protect its trade secret information may be jeopardized.
Risks Related to the Company’s Common Stock
An active, liquid and orderly market for the Company’s common stock may not develop, and you may not be able to resell your common stock at or above the purchase price.
Samsara’s common stock is quoted on the OTCQB. An active trading market for the Company’s common stock has not developed and may never develop or be sustained. The lack of an active market may impair an investor’s ability to sell its shares at the time it wishes to sell them or at a price that it considers reasonable. An inactive market may also impair the Company’s ability to raise capital by selling shares and may impair the Company’s ability to acquire other businesses or technologies using the Company’s shares as consideration, which, in turn, could materially adversely affect the Company’s business.
The trading price of the shares of the Company’s common stock could be highly volatile, and purchasers of the Company’s common stock could incur substantial losses.
The Company’s stock price is likely to be volatile. The stock market in general has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their common stock at or above their purchase price. The market price for the Company’s common stock may be influenced by those factors discussed in this “Risk Factors” section and many others, including:
| ● | the success or failure of the Company’s efforts to acquire, license or develop additional products; |
| ● | innovations or new products developed by the Company or its competitors; |
| ● | announcements by the Company or its competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; |
| ● | manufacturing, supply or distribution delays or shortages; |
| ● | any changes to the Company’s relationship with any manufacturers, suppliers, licensors, future collaborators or other strategic partners; |
| ● | achievement of expected product sales and profitability; |
| ● | variations in the Company’s financial results or those of companies that are perceived to be similar to the Company; |
| ● | trading volume of the Company’s common stock; |
| ● | an inability to obtain additional funding; |
| ● | sales of the Company’s stock by insiders and stockholders; |
| ● | general economic, industry and market conditions other events or factors, many of which are beyond the Company’s control; |
| ● | additions or departures of key personnel; and |
| ● | intellectual property, product liability or other litigation against the Company. |
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Samsara’s executive officers and directors control or significantly influence all matters submitted to stockholders for approval.
The Company’s executive officers, directors and greater than 5% stockholders, in the aggregate, own in excess of 80% of the Company’s outstanding common stock. Furthermore, the two directors of Samsara have the ability to control or significantly influence all matters submitted to the Company’s board of directors or stockholders for approval, including the appointment of the Company’s management, the election and removal of directors and approval of any significant transaction, as well as the Company’s management and business affairs. This concentration of ownership may have the effect of delaying, deferring or preventing a change in control, impeding a merger, consolidation, takeover or other business combination involving the Company, or discouraging a potential acquiror from making a tender offer or otherwise attempting to obtain control of the Company’s business, even if such a transaction would benefit other stockholders.
Samsara does not currently intend to pay dividends on its common stock, and, consequently, investors’ ability to achieve a return on your investment will depend on appreciation, if any, in the price of the Company’s common stock.
Samsara has never declared or paid any cash dividend on its common stock. Samsara currently anticipates that it will retain future earnings for the development, operation and expansion of the Company’s business and does not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the appreciation of their stock. There is no guarantee that shares of the Company’s common stock will appreciate in value or even maintain the price at which stockholders have purchased their shares.
Sales of a substantial number of shares of the Company’s common stock by the Company’s stockholders in the public market could cause the Company’s stock price to fall.
Sales of a substantial number of shares of the Company’s common stock in the public market or the perception that these sales might occur could significantly reduce the market price of the Company’s common stock and impair the Company’s ability to raise adequate capital through the sale of additional equity securities.
Samsara must incur significant increased costs as a result of operating as a public company, and its management will be required to devote substantial time to new compliance initiatives compared to that which they devoted as the management of a private company.
As a public company, Samsara must incur significant legal, accounting and other expenses. Samsara is subject to the reporting requirements of the Exchange Act, which will require, among other things, that Samsara file with the U.S. Securities and Exchange Commission, or SEC, annual, quarterly and current reports with respect to its business and financial condition. In addition, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), as well as rules subsequently adopted by the SEC to implement provisions of Sarbanes-Oxley, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Further, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC has adopted additional rules and regulations in these areas, such as mandatory “say on pay” voting requirements that now apply to Samsara. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which Samsara operates its business in ways Samsara cannot currently anticipate.
Samsara expects the rules and regulations applicable to public companies to substantially increase Samsara’s legal and financial compliance costs compared to those of the Target prior to the Merger, and to make some activities more time consuming and costly. If these requirements divert the attention of Samsara’s management and personnel from other business concerns, they could have a material adverse effect on Samsara’s business, financial condition and results of operations. The increased costs may increase Samsara’s net loss, and may require Samsara to reduce costs in other areas of its business or increase the prices of its products or services. For example, Samsara expects these rules and regulations to make it more difficult and more expensive for Samsara to obtain director and officer liability insurance, and Samsara may be required to incur substantial costs to maintain the same or similar coverage. Samsara cannot predict or estimate the amount or timing of additional costs Samsara may incur to respond to these requirements. The impact of these requirements could also make it more difficult for Samsara to attract and retain qualified persons to serve on its board of directors, its board committees or as executive officers.
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If securities or industry analysts do not publish research or reports or publish unfavorable research or reports about the Company’s business, the Company’s stock price and trading volume could decline.
The trading market for the Company’s common stock will depend in part on the research and reports that securities or industry analysts publish about the Company, its business, its market or its competitors. Samsara does not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of the Company, the trading price for the Company’s stock would be negatively impacted. In the event the Company obtains securities or industry analyst coverage, if one or more of the analysts who covers the Company downgrades its stock, the Company’s stock price would likely decline. If one or more of these analysts ceases to cover the Company or fails to regularly publish reports on the Company, interest in the Company’s stock could decrease, which could cause the Company’s stock price or trading volume to decline.
If the Company fails to maintain proper and effective internal control over financial reporting, the Company’s ability to produce accurate and timely financial statements could be impaired, investors may lose confidence in the Company’s financial reporting and the trading price of the Company’s common stock may decline.
Pursuant to Section 404 of Sarbanes-Oxley, the Company’s management is required to report upon the effectiveness of the Company’s internal control over financial reporting. Additionally, if the Company reaches an accelerated filer threshold, the Company’s independent registered public accounting firm will be required to attest to the effectiveness of the Company’s internal control over financial reporting. The rules governing the standards that must be met for management to assess the Company’s internal control over financial reporting are complex and require significant documentation, testing and possible remediation. To comply with the requirements of being a reporting company under the Exchange Act, the Company will need to upgrade its information technology systems; implement additional financial and management controls, reporting systems and procedures; and hire additional accounting and finance staff. If the Company or, if required, its auditors are unable to conclude that the Company’s internal control over financial reporting is effective, investors may lose confidence in the Company’s financial reporting and the trading price of the Company’s common stock may decline.
The Company cannot assure its investors that there will not be material weaknesses or significant deficiencies in the Company’s internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit the Company’s ability to accurately report its financial condition, results of operations or cash flows. If the Company is unable to conclude that its internal control over financial reporting is effective, or if the Company’s independent registered public accounting firm determines the Company has a material weakness or significant deficiency in the Company’s internal control over financial reporting once that firm begin its Section 404 reviews, investors may lose confidence in the accuracy and completeness of the Company’s financial reports, the market price of the Company’s common stock could decline, and the Company could be subject to sanctions or investigations by the SEC or other regulatory authorities. Failure to remedy any material weakness in the Company’s internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict the Company’s future access to the capital markets.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our office and mailing address is 135 E. 57th Street, Suite 18-130, New York, New York 10022. The lease period for our New York office commenced in October 2021 and expires on May 2022. We pay a fixed monthly rent of $5,000 per month for our main office in New York and two additional international offices. The leases for our two international offices have been renewed in August 2022. We believe that our leased property is satisfactory, suitable, and adequate for our current needs.
ITEM 3. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interests.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market for our Common Stock
Our common stock is quoted on the OTCQB market system. The Common Stock, which had previously traded through the close of business on November 11, 2019 under the ticker symbol “DAVC,” commenced trading on the OTC Pink under the ticker symbol “SAML” on November 12, 2019. Following the Company’s reverse stock split, the Common Stock received a new CUSIP number, 79589J200, and now is currently quoted on the OTCQB.
On December 31, 2022, the last trading day before the date of this Annual Report, the closing sale price of the Common Stock on OTCQB was $0.0902 per share.
While our Common Stock is quoted on the OTCQB market system, there is a limited public market for the shares of our common stock, and little to no trades of our common stock to date have taken place. Any quotations reflect interdealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
The table below sets forth the range of high and low bid information for our common shares as quoted on the OTC Pink or OTCQB, as applicable, for each of the quarters during the fiscal year ended December 31, 2022 and December 31, 2021:
| For the Fiscal Year Ended December 31, 2022 | ||||||||
| For the Quarter ended | High | Low | ||||||
| March 31 | 0.96 | 0.41 | ||||||
| June 30 | 0.61 | 0.13 | ||||||
| September 30 | 0.29 | 0.11 | ||||||
| December 31 | 0.21 | 0.09 | ||||||
| For the Fiscal Year Ended December 31, 2021 | ||||||||
| For the Quarter ended | High | Low | ||||||
| March 31 | 15.00 | 1.68 | ||||||
| June 30 | 6.33 | 1.43 | ||||||
| September 30 | 4.10 | 2.16 | ||||||
| December 31 | 2.10 | 0.95 | ||||||
Shareholders of Record
As of April 3, 2023, there were 166 stockholders of record holding 5,888,152 shares of common stock.
Recent Sales of Unregistered Securities
During the fiscal year ended December 31, 2022, all sales of equity securities not registered under the Securities Act were included in our Quarterly Reports on Form 10-Q and in our Current Reports on Form 8-K.
Repurchase of Equity Securities
We have no plans, programs or other arrangements in regard to repurchases of our common stock.
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Dividends
We have never declared or paid any cash dividends on our common stock and currently do not anticipate paying such cash dividends. We currently anticipate that we will retain all of our future earnings for use in the development and expansion of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our Board of Directors (the “Board”) and will depend upon our results of operations, financial condition, tax laws and other factors as the Board, in its discretion, deems relevant.
Securities Authorized for Issuance under Equity Compensation Plans
None.
Use of Proceeds from the Sale of Registered Securities
None.
ITEM 6. RESERVED
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand 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 the accompanying notes to consolidated financial statements, and contains forward-looking statements that involve risks and uncertainties. See section entitled “Forward-Looking Statements” above.
Overview and Outlook
The Company was incorporated on May 7, 2007 under the name, “Darkstar Ventures, Inc.” under the laws of the State of Nevada. Currently, the Company develops and sell smart luggage products.
Results of Operations
Year ended December 31, 2022 compared to the year ended December 31, 2021
Revenue
The Company generates revenues through the sale and distribution of smart luggage products. Revenues during the year ended December 31, 2022 totaled $1,171,000, compared to $345,000 for the year ended December 31, 2021, an increase of 239%. The increase in the total revenue is mainly due to the increased demand for the new product which was launched in the second quarter of 2022. The Company was mostly engaged and invested in developing the new line of products without adding new inventory for sales of the older model. Sales activities were focused on brand awareness to prepare for the launch that started in the second quarter of 2022.
Costs of Revenue
Costs of revenue consists of the purchase of raw materials and the cost of production. Cost of revenues during the year ended December 31, 2022 totaled $822,000, compared to $293,000 for the year ended December 31, 2021, an increase of 181%. The increase in the costs of revenue is mainly due to the increase in sales as described above.
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Gross Profit
During the year ended December 31, 2022, Gross Profit totaled $349,000, representing a Gross Profit margin of 30%. During the year ended December 31, 2021, Gross Profit totaled $52,000 representing Gross Profit margin of 15%. The Gross Profit margin increased in 2022 by 571%.
Operating Expenses
Operating expenses totaled $1,722,000 during the year ended December 31, 2022, compared to $2,013,000 during the year ended December 31, 2021, representing a net decrease of $291,000, or 14%. The decrease is due primarily to decreases in Research and Development of $154,000 and General and Administrative of $411,000 partially offset by an increase in Sales and Marketing of $274,000. The decrease in Research and Development and the increase in Sales and Marketing are due primarily to the shift to sales and marketing activities relating to the launch of the new products in 2022. The decrease in General and Administrative is due primarily to decreases in share-based compensation and professional fees.
Financing Income (expenses)
Financing expenses totaled $1,033,000 during the year ended December 31, 2022 compared to a financing expense of $1,856,000 during the year ended December 31, 2021. The decrease in the financing expenses is mainly due to the gains from the changes in the derivative liabilities.
Net Loss
We incurred a net loss of $2,406,000 for the year ended December 31, 2022, as compared to a net loss of $3,817,000 for the year ended December 31, 2021 for the reasons described above.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.
As of December 31, 2022, the Company has $168,000 of cash, total current assets of $345,000, and total current liabilities of $2,320,000, creating a working capital deficit of $1,975,000. As of December 31, 2021, the Company has $827,000 of cash, total current assets of $974,000, and total current liabilities of $1,675,000, creating a working capital deficit of $701,000.
The decrease in our working capital deficit was mainly attributable to the increase of $911,000 in fair value of the convertible component in a convertible loan and a decrease of $659,000 in cash and cash equivalents.
Net cash used in operating activities was $904,000 for the year ended December 31, 2022, as compared to cash used in operating activities of $849,000 for the year ended December 31, 2021. The Company’s primary uses of cash have been for professional support, research and development expenses, sales and marketing expenses, and working capital purposes.
Net cash used in investing activities was $0 for the year ended December 31, 2022, as compared to net cash used in investing activities of $0 for the year ended December 31, 2021.
Net cash provided by financing activities was approximately $245,000 for the year ended December 31, 2022, as compared to approximately $1,622,000 for the year ended December 31, 2021. We have principally financed our operations through the sale of our common stock and the issuance of debt. Due to our operational losses, we relied to a large extent on financing our cash flow requirements through issuance of common stock and debt. There can be no assurance we will be successful in raising the necessary funds to execute our business plan.
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Necessity of Additional Financing
Securing additional financing is critical to implementation of our business plan. If and when we obtain the required additional financing, we should be able to fully implement our business plan. In the event we are unable to raise any additional funds we will not be able to pursue our business plan, and we may fail entirely. We currently have no committed sources of financing.
Going Concern Consideration
The above conditions raise substantial doubt about our ability to continue as a going concern. Our independent auditors 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 note disclosures describing the circumstances that lead to this disclosure by our independent auditors. Although we anticipate that our current operations will provide us with cash resources, we believe existing cash will not be sufficient to fund planned operations and projects through the next 12 months. Therefore, we believe we will need to increase our sales, attain profitability, and raise additional funds to finance our future operations. Any meaningful equity or debt financing will likely result in significant dilution to our existing stockholders. There is 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, implement and successfully execute our business and marketing strategy surrounding our products, continually develop and upgrade our website, respond to competitive developments, lower our financing costs, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations
Seasonality
We do not expect our sales to be impacted by seasonal demands for our products.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company and are not required to provide the information under this item.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SAMSARA LUGGAGE, INC.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2022
TABLE OF CONTENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
SAMSARA LUGGAGE, INC.
To the Board of Directors and Stockholders of Samsara luggage Inc.
Opinion on the Financial Statements
We have audited the accompanying the balance sheets of Samsara luggage Inc. (“the Company”) as of December 31, 2022 and the related statements of operations, changes in stockholders’ deficit and cash flows, for the year then ended, and the related notes and schedules (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with generally accepted accounting principles in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Going Concern
The accompanying financial statements have been prepared to assume that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, as of December 31, 2022, The Company suffered losses from operations in all years since inception, has a negative working capital and further losses are anticipated in the development of its business. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan regarding these matters is also described in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. This matter is also described in the “Critical Audit Matters” section of our report.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
F-2
Going concern- refer to note 1 of the financial statements
Critical audit matter description
The Company raised substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time. The financial statements for the years under audit have been prepared to assume that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. See the explanatory paragraph of the opinion paragraph.
How the Critical Audit Matter was addressed in our Audit
The primary procedures we performed to address this critical audit matter included the following: (i) We evaluate whether there is substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time. (ii) We obtained information about management's plans that are intended to mitigate the effect of such conditions or events and assess the likelihood that such plans can be effectively implemented. (iii) We added an explanatory paragraph to the audit report.
Evaluation of convertible debt with an embedded derivative liability and detachable warrants
Critical audit matter description
As discussed in Notes 2 and 3 to the financial statements, upon initial recognition of Convertible loans, Convertible Notes, similar instruments issued with or without detachable warrants, the Company considers whether the embedded feature within the convertible instruments should be separated from the host instrument and the manner of its presentation and future measurement and weather warrants granted by the Company to lenders through convertible bridge loans and stock warrants transactions should be classified as a component of permanent equity or as derivative liabilities. The Company utilized a Monte Carlo model to value the derivative bifurcated liabilities, which estimates the fair value of the liabilities based upon certain assumptions utilizing a probability-weighted analysis of certain future events. Other inputs into the model include volatility, closing stock prices at various valuation points, and conversion prices as determined by the applicable agreements.
We identified the fair value of the derivative liability as a critical audit matter, as (i) the assumptions utilized in the model to value the derivative liability required judgment, and the model is inherently complex. (ii) the accounting for derivative liabilities is complex (iii) the magnitude of the liabilities and losses recognized in the estimation process.
How the Critical Audit Matter was addressed in our Audit
The primary procedures we performed to address this critical audit matter involved the assistance of our valuation specialist and included the following: (i) we reviewed the qualifications of the valuation specialist utilized by the Company (ii) we audited the underlying inputs utilized by the valuation specialist in the model (iii) we evaluated the reasonableness of management’s assumptions included in the model (iv) we reviewed the underlying source documents to determine the proper accounting of the transactions (v) we tested the accuracy of those underlying calculations.
/s/
PCAOB number
We have served as the Company’s auditor since 2023.
April 3, 2023
F-3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
SAMSARA LUGGAGE, INC.
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Samsara Luggage Inc. (the “Company”) as of December 31, 2021, the related statements of operations and comprehensive loss, changes in stockholders’ deficit and cash flows for the year in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1E to the financial statements, the Company has not yet generated material revenues from its operations to fund its activities and is therefore dependent upon external sources for financing its operations. As of December 31, 2021, the Company has incurred accumulated deficit of $10,193 thousands and negative operating cash flows. These factor among others, as discussed in Note 1E to the financial statements raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1E to the financial statements. The financial statements do not include any adjustments that might result from the outcome of’ these uncertainties. This matter is also described in the “Critical Audit Matters” section of our report.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical audit matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
F-4
Evaluation of convertible debt with an embedded derivative liability and detachable warrants
Description of the Matter
As discussed in Notes 2 and 3 to the financial statements, upon initial recognition of Convertible loans, Convertible Notes and similar instruments issued with or without detachable warrants, the Company considers whether the embedded feature within the convertible instruments should be separated from the host instrument and the manner of its presentation and future measurement and weather warrants granted by the Company to lenders through convertible bridge loans and stock warrants transactions should be classified as a component of permanent equity or as derivative liabilities. The Company utilized a Monte Carlo model to value the derivative bifurcated liabilities, which estimates the fair value of the liabilities based upon certain assumptions utilizing a probability weighted analysis of certain future events. Other inputs into the model include, volatility, closing stock prices at various valuation points, and conversion prices as determined by the applicable agreements.
We identified the fair value of the derivative liability as a critical audit matter, as (i) the assumptions utilized in the model to value the derivative liability required judgement, and the model is inherently complex. (ii) the accounting for derivative liabilities is complex (iii) the magnitude of the liabilities and losses recognized in the estimation process.
How We Addressed the Matter in Our Audit
The primary procedures we performed to address this critical audit matter involved the assistance of our valuation specialist and included the following: (i) we reviewed the qualifications of the valuation specialist utilized by the Company (ii) we audited the underlying inputs utilized by the valuation specialist in the model (iii) we evaluated the reasonableness of management’s assumptions included in the model (iv) we reviewed the underlying source documents to determine the proper accounting of the transactions (v) we tested the accuracy of those underlying calculations.
/s/
Certified Public Accountants (Isr.)
PCAOB number
March 31, 2022
We have served as the Company’s auditor from 2019 until 2023
F-5
SAMSARA LUGGAGE, INC.
BALANCE SHEETS
| December 31, 2022 | December 31, 2021 | |||||||
| (U.S. dollars in thousands, except per share data) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | ||||||||
| Accounts Receivables | ||||||||
| Inventory | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property and Equipment, net | ||||||||
| Total assets | ||||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | ||||||||
| Other current liabilities | ||||||||
| Related party payables | ||||||||
| Deferred revenue | ||||||||
| Convertible notes and short-term loans (Note 3) | ||||||||
| Fair Value of convertible component in convertible loan, net of discounts and debt issue costs (Note 3) | ||||||||
| Note payable, net | ||||||||
| Fair value of warrants issued in convertible loan (Note 3) | ||||||||
| Total current liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| Mezzanine equity: | ||||||||
| Convertible and redeemable preferred shares, $ | ||||||||
| STOCKHOLDERS’ DEFICIT (Note 4) | ||||||||
| Common stock subscribed | ||||||||
| Common stock, authorized | ||||||||
| Additional paid in capital | ||||||||
| Services receivable | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | ||||||||
The accompanying notes are an integral part of these financial statements
F-6
SAMSARA LUGGAGE, INC.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
| Year Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| (U.S. dollars in thousands, except per share data) | ||||||||
| Revenues from sales | ||||||||
| Cost of sales | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES | ||||||||
| Research and development expenses | ||||||||
| Selling and marketing expenses | ||||||||
| General and administrative (Note 5) | ||||||||
| TOTAL OPERATING EXPENSES | ||||||||
| OPERATING LOSS | ( | ) | ( | ) | ||||
| FINANCING INCOME (EXPENSES) | ||||||||
| Interest on convertible loan and convertible note | ( | ) | ( | ) | ||||
| Income (expenses) in respect of warrants issued and convertible component in convertible loan (Note 3) | ( | ) | ||||||
| TOTAL FINANCING INCOME (EXPENSE) | ( | ) | ( | ) | ||||
| NET LOSS | ( | ) | ( | ) | ||||
| ( | ) | ( | ) | |||||
The accompanying notes are an integral part of these financial statements
F-7
SAMSARA LUGGAGE, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(U.S. dollars in thousands, except share and per share data)
| Common Stock | Additional Paid-in | Service | Accumulated | Stockholders’ | ||||||||||||||||||||
| Shares (*) | Amount | Capital | Receivables | Deficit | Deficit | |||||||||||||||||||
| Balance December 31, 2020 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Shares issued due to conversion of Convertible Note | ||||||||||||||||||||||||
| Issuance of shares due to conversion of Notes | ||||||||||||||||||||||||
| Roundup Differences due to Reverse Split | ||||||||||||||||||||||||
| Amortization of services | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance December 31, 2021 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Shares issued due to conversion of Convertible Note | ||||||||||||||||||||||||
| - | ||||||||||||||||||||||||
| Issuance of shares to service provider | ||||||||||||||||||||||||
| - | ||||||||||||||||||||||||
| Conversion of Preferred A Shares into common shares | ||||||||||||||||||||||||
| - | ||||||||||||||||||||||||
| Amortization of services | - | |||||||||||||||||||||||
| - | ||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance December 31, 2022 | $ | $ | ( | ) | ( | ) | ||||||||||||||||||
The accompanying notes are an integral part of these financial statements
F-8
SAMSARA LUGGAGE, INC.
STATEMENTS OF CASH FLOWS
| For the Year Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| (In thousands) | ||||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Shares issued for services | ||||||||
| Amortization of services receivable | ||||||||
| Interest on convertible note and short-term loan | ||||||||
| Expenses in respect of warrants issued and convertible component in convertible loan, net interest expenses | ( | ) | ||||||
| Depreciation | ||||||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Inventory | ( | ) | ||||||
| Accounts Receivables | ( | ) | ||||||
| Other current assets | ( | ) | ||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Related party payable | ( | ) | ||||||
| Other current liabilities | ||||||||
| Deferred revenue | ( | ) | ||||||
| Net Cash Used by Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from Convertible notes, net of issuance cost | ||||||||
| Proceeds from loan received | ||||||||
| Proceeds from note payable | ||||||||
| Repayments of long-term loans | ( | ) | ||||||
| Net Cash Provided by Financing Activities | ||||||||
| Net Increase (Decrease) in Cash | ( | ) | ||||||
| Cash at Beginning of Period | ||||||||
| Cash at End of Period | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Supplemental disclosure of non-cash financing activities | ||||||||
| Common stock issued for conversion of convertible note | $ | $ | ||||||
| Conversion of Preferred A Shares to Common Stock | $ | $ | ||||||
| Issuance of Common stock against Accounts Payables | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements
F-9
SAMSARA LUGGAGE, INC.
NOTES TO FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share data)
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
| A. | Samsara Luggage is a global smart luggage and lifestyle brand that incorporates innovative design and functional technology into its smart travel products. The Company launched the first product from the Tag Smart collection of smart suitcases in April 2022, as travel resumed to pre-COVID levels. This collection is equipped with Apple AirTag technology, allowing travelers to track their suitcase using the iPhone’s Find My app. Lost luggage became a prominent issue for global travelers during the Summer 2022 travel season. The Tag Smart suitcase offered travelers precise tracking of their suitcase along with immediate information regarding their luggage’s whereabouts. The Tag Smart collection is currently available in two different sizes to accommodate both international and US domestic travel. The newest collection comes in three colors in durable polycarbonate and two colors in a lightweight, aviation-grade aluminum material.
The Company launched Street Smart in February 2023. Street Smart is a curated collection of travel and lifestyle accessories that builds on the fashion element of travel. Included in the collection are a selection of sunglasses, tote bag, stylish ballcaps and a stand-alone portable battery for electronic devices. Street Smart compliments Samsara Luggage’s aesthetic and allows the brand to offer more travel-ready products at varying price points.
During the last quarter of 2020, Samsara launched Sarah & Sam Fashion and Lifestyle Collection. Sarah & Sam is a part of Samsara Direct business model prompted by the travel limitations due to the coronavirus pandemic, leveraging the company’s established digital assets and manufacturing and fulfillment supply chain capabilities to offer additional consumer products that respond to the changing needs of the market.
On November 12, 2019, the Company completed its merger with the Delaware corporation that was previously known as “Samsara Luggage, Inc.” (“Samsara Delaware”) in accordance with the terms of the Merger Agreement and Plan of Merger, dated as of May 10, 2019, (the “Merger Agreement”) by and among the Company, Samsara Delaware, and Avraham Bengio, pursuant to which Samsara Delaware merged with and into the Company, with the Company being the surviving corporation (the “Merger”). Following the completion of the Merger, the business of the Company going forward became the business of Samsara Delaware prior to the Merger, namely, designing, manufacturing, and selling high quality luggage products to meet the evolving needs of frequent travelers and also seeking to present new technologies within the aluminum luggage industry, including an aluminum “smart” suitcase.
The Common Stock listed on the OTC Pink Marketplace, previously trading through the close of business on November 11, 2019 under the ticker symbol “DAVC,” commenced trading on the OTC Pink Marketplace under the ticker symbol “SAML” on November 12, 2019. The Common Stock has a new CUSIP number, 79589J101. |
| B. | Reverse Stock Split |
On March 23, 2021, the Company completed a reverse stock split of its outstanding common stock. As a result of the reverse stock split, the following changes have occurred (i) every seven thousand shares of common stock have been combined into one share of common stock; (ii) the number of shares of common stock underlying each common stock option or common stock warrant have been proportionately decreased on a 7,000-for-1 basis, and the exercise price of each such outstanding stock option and common warrant has been proportionately increased on a 7,000 -for-1 basis. Accordingly, all option numbers, share numbers, warrant numbers, share prices, warrant prices, exercise prices and losses per share have been adjusted within these consolidated financial statements, on a retroactive basis, to reflect this 7,000 -for-1 reverse stock split.
| C. | On October 5, 2020 the Board of Directors of the Company has approved, and the holders of a majority of the outstanding shares of our common stock, par value $ |
| D. | GOING CONCERN |
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As of December 31, 2022, the Company had approximately
$
F-10
SAMSARA LUGGAGE, INC.
NOTES TO FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share data)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
The financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“‘US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. As applicable to the financial statements, the most significant estimates and assumptions relate to the measurement of convertible notes, derivative liabilities and going concern.
Functional currency
The functional currency of the Company is the US dollar (“US$”), which is the currency of the primary economic environment in which the operations of the Company are conducted.
Cash and cash equivalents
Cash equivalents are short-term highly liquid investments which include short term bank deposits (up to three months from date of deposit), that are not restricted as to withdrawals or use that are readily convertible to cash with maturities of three months or less as of the date acquired.
Inventory
Inventories are valued at the lower of cost or net realizable value. Cost of raw and packaging materials, purchased products, manufactured finished products and products in process are determined on the average cost basis. The Company regularly reviews its inventories for impairment and reserves are established when necessary.
Property and Equipment
Property and equipment are stated at cost less
accumulated depreciation and amortization. The Company provides for depreciation and amortization using the straight-line method over
the estimated useful lives of the related assets, which range from
Derivative Liabilities and Fair Value of Financial Instruments
Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments and measurement of their fair value for accounting purposes. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt under ASC 470, the Company will continue its evaluation process of these instruments as derivative financial instruments under ASC 815.
Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.
Fair value of certain of the Company’s financial instruments including cash, accounts receivable, account payable, accrued expenses, notes payables, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with ASC 820, “Fair Value Measurements and Disclosure” defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value investments.
F-11
SAMSARA LUGGAGE, INC.
NOTES TO FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share data)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (cont.)
Fair value, as defined in ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, the Company’s credit risk.
Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.
Fair value measurements are required to be disclosed by the Level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in Level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings, and a description of where those gains or losses included in earning are reported in the statement of income.
The Company records a debt discount related to the issuance of convertible debts that have conversion features at adjustable rates. The debt discount for the convertible instruments is recognized and measured by allocating a portion of the proceeds as an increase in additional paid-in capital and as a reduction to the carrying amount of the convertible instrument equal to the fair value of the conversion features. The debt discount will be accreted by recording additional non-cash gains and losses related to the change in fair values of derivative liabilities over the life of the convertible notes.
The Company’s financial assets and liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows:
| Balance as of December 31, 2022 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| (U.S. dollars in thousands) | ||||||||||||||||
| Liabilities: | ||||||||||||||||
| Fair Value of convertible component in convertible loan, net of discounts and debt issue costs | ||||||||||||||||
| Fair value of warrants issued in convertible loan | ||||||||||||||||
| Total liabilities | ||||||||||||||||
| Balance as of December 31, 2021 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| (U.S. dollars in thousands) | ||||||||||||||||
| Liabilities: | ||||||||||||||||
| Fair Value of convertible component in convertible loan, net of discounts and debt issue costs | ||||||||||||||||
| Fair value of warrants issued in convertible loan | ||||||||||||||||
| Total liabilities | ||||||||||||||||
F-12
SAMSARA LUGGAGE, INC.
NOTES TO FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share data)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (cont.)
Revenue recognition
Revenues are recognized when delivery has occurred and there is persuasive evidence of an agreement, the fee is fixed or determinable and collection of the related receivables is reasonably assured, and no further obligations exist. Revenues from sales of products are recognized when title and risk and rewards for the products are transferred to the customer.
Research and development expenses
Research and development expenses are charged to operations as incurred.
Income Taxes
Income taxes are accounted for under the assets and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Use of net operating loss carry forwards for income tax purposes may be limited by Internal Revenue Code section 382 if a change of ownership occurs.
Net Loss Per Basic and Diluted Common Share
Stock-Based Compensation
Share-based payments awarded to consultants (non-employees) are accounted for in accordance with ASC Topic 505-50, “Equity-Based Payments to Non-Employees”. However, when the Company grants to non-employees a fully vested, nonforfeitable equity instrument, such grants are measured based on the fair value of the award at the date of grant. When the fully vested, nonforfeitable equity instruments are granted for services to be received in future periods, the measured cost is recognized as an increase to stockholders’ equity at the measurement date with an offsetting amount as a deduction from stockholders’ equity within the caption “Services receivable”. Such amount is subsequently amortized to the statement of operations over the term of the services as an operating expense, as if the Company has paid periodic payments of cash for the services received from such service provider.
Recent accounting pronouncements:
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 replaces the current incurred loss model guidance with a new method that reflects expected credit losses. Under this guidance, an entity would recognize an allowance for credit losses equal to its estimate of expected credit losses on financial assets measured at amortized cost. In November 2019, the FASB extended the effective date of ASU 2016-13 for smaller reporting companies. As a result, ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2022, with early adoption permitted. The standard is not expected to have a significant impact on the Company’s financial statements.
In August 2020, the FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for convertible instruments by removing certain separation models in Accounting Standards Codification (“ASC”) 470-20, “Debt—Debt with Conversion and Other Options,” (“ASC 470-20”) for convertible instruments. Under ASU 2020-06, the embedded conversion features no longer are separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under ASC 815, “Derivatives and Hedging,” or that do not result in substantial premiums accounted for as paid-in capital. For smaller reporting companies, ASU 2020-06 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2023, with early adoption permitted for fiscal years beginning after December 15, 2020. The Company is currently assessing the impact of this update on the Company’s financial statements.
In May 2021, the Financial Accountings Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-04, “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815- 40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” (“ASU 2021-04”). The guidance is effective for the Company on January 1, 2022. The Company has evaluated the impact of adopting this standard and concluded there is no impact on the Company’s financial statements.
Other new pronouncements issued but not effective as of December 31, 2022 are not expected to have a material impact on the Company’s consolidated financial statements.
F-13
SAMSARA LUGGAGE, INC.
NOTES TO FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share data)
NOTE 3 – CONVERTIBLE NOTES
| A. | On June 5, 2019, the Company entered into a Securities Purchase Agreement (“SPA”) with YAII PN, Ltd. (the “Investor”), pursuant to which the Investor agreed to provide the Company with a convertible loan in the aggregate amount of $ |
The first tranche of the convertible debentures in the amount of $200,000 was provided upon execution of the SPA. The second tranche in the amount of $300,000 was provided on October 23, 2019 upon the Company filing of a Registration Statement on Form S-4 in connection with the Merger with Samsara Delaware. The third tranche in the amount of $600,000 was provided on November 18, 2019 upon consummation of the Merger with Samsara Delaware and the fulfillment of all conditions required for the Merger. The Company incurred issuance cost of $100,000 with connection to those convertible debentures.
In the period from loan inception through December 31, 2021, the full amount of outstanding principal and accrued interest was converted into shares of common stock.
In addition, the Company issued to
the Investor a warrant to purchase
The Company considered the provisions of ASC 815-40, “Derivatives and Hedging: Contracts in Entity’s Own Equity”, with respect to the detachable Warrants that were issued to the Convertible loan, and determined that as a result of the “cashless exercise” and variable exercise price that would adjust the number of Warrants and the exercise price of the Warrants based on the price at which the Company subsequently issues shares or other equity-linked financial instruments, such Warrants cannot be considered as indexed to the Company’s own stock. Accordingly, the Warrants were recognized as derivative liability at their fair value on initial recognition. In subsequent periods, the Warrants were marked to market with the changes in fair value recognized as financing expense or income in the consolidated statement of operations.
The warrants were estimated by third party appraiser using the Black-Scholes option-pricing model to compute the fair value of the derivative and to mark to market the fair value of the derivative at each balance sheet date. The following are the data and assumptions used as of the balance sheet dates:
| December 31, 2022 | ||||
| Common stock price | $ | |||
| Expected volatility | % | |||
| Expected term | ||||
| Risk free rate | % | |||
| Expected dividend yield | % | |||
| Fair Market Value of Warrants | $ | * | ||
| * |
| December 31, 2021 | ||||
| Common stock price | ||||
| Expected volatility | % | |||
| Expected term | ||||
| Risk free rate | % | |||
| Expected dividend yield | % | |||
| Fair Market Value of Warrants | $ | |||
F-14
SAMSARA LUGGAGE, INC.
NOTES TO FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share data)
NOTE 3 – CONVERTIBLE NOTES (cont.)
| B. | On September 3, 2020, Samsara Luggage, Inc. (the “Company”) entered into a second Securities Purchase Agreement (“SPA”) with
In the period from loan inception through December 31, 2021, the full amount of outstanding principal and accrued interest was converted into shares of common stock. |
In addition, the Company issued to
the Investor a warrant to purchase
The Company considered the provisions of ASC 815-40, “Derivatives and Hedging: Contracts in Entity’s Own Equity”, with respect to the detachable Warrants that were issued to the Convertible loan, and determined that as a result of the “cashless exercise” and variable exercise price that would adjust the number of Warrants and the exercise price of the Warrants based on the price at which the Company subsequently issues shares or other equity-linked financial instruments, such Warrants cannot be considered as indexed to the Company’s own stock. Accordingly, the Warrants were recognized as derivative liability at their fair value on initial recognition. In subsequent periods, the Warrants were marked to market with the changes in fair value recognized as financing expense or income in the consolidated statement of operations.
The warrants were estimated by third party appraiser using the Black-Scholes option-pricing model to compute the fair value of the derivative and to mark to market the fair value of the derivative at each balance sheet dates:
The following are the data and assumptions used as of the balance sheet dates:
| December 31, 2022 | ||||
| Common stock price | $ | |||
| Expected volatility | % | |||
| Expected term (years) | ||||
| Risk free rate | % | |||
| Expected dividend yield | % | |||
| Fair Market Value of Warrants | $ | * | ||
| * | represents an amount less than $1 thousand |
| December 31, 2021 | ||||
| Common stock price | ||||
| Expected volatility | % | |||
| Expected term (years) | ||||
| Risk free rate | % | |||
| Expected dividend yield | % | |||
| Fair Market Value of Warrants | $ | |||
F-15
SAMSARA LUGGAGE, INC.
NOTES TO FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share data)
NOTE 3 – CONVERTIBLE NOTES (cont.)
| C. | On April 6, 2021, the Company entered into a third Securities Purchase Agreement (“SPA”) with YAII PN, Ltd. (the “Investor”), pursuant to which the Investor agreed to provide the Company with a convertible loan in the aggregate amount of $ |
In accordance with ASC 815-15-25 the conversion feature was considered embedded derivative instrument and is to be recorded at its fair value as its fair value can be separated from the convertible loan and its conversion is independent of the underlying note value. The Company recorded finance expenses in respect of the convertible component in the convertible loan in the excess amount of the convertible component fair value over the face loan amount. The conversion feature derivative liability is then marked to market each reporting period with the resulting gains or losses shown in the statements of operations.
The fair value of the convertible component was estimated by third party appraiser using the Monte Carlo Simulation Model to compute the fair value of the derivative and to mark to market the fair value of the derivative at each of the issuance and balance sheet dates.
The following are the data and assumptions used as of the balance sheet dates:
| December 31, 2022 |
||||
| Common stock price | $ | |||
| Expected volatility | % | |||
| Expected term | ||||
| Risk free rate | % | |||
| Expected dividend yield | % | |||
| Fair Market Value of Convertible component | $ | |||
| December 31, 2021 |
||||
| Common stock price | $ | |||
| Expected volatility | % | |||
| Expected term | ||||
| Risk free rate | % | |||
| Expected dividend yield | % | |||
| Fair Market Value of Convertible component | $ | |||
As part of the transaction, the Company
issued to the Investor warrants to purchase an aggregate of
The warrants were estimated by third party appraiser using the Black-Scholes option-pricing model to compute the fair value of the derivative and to mark to market the fair value of the derivative at each of the issuance and balance sheet dates.
F-16
SAMSARA LUGGAGE, INC.
NOTES TO FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share data)
NOTE 3 – CONVERTIBLE NOTES (cont.)
The following are the data and assumptions used as of the balance sheet dates:
| December 31, 2022 | ||||
| Common stock price | $ | |||
| Expected volatility | % | |||
| Expected term | ||||
| Risk free rate | % | |||
| Expected dividend yield | % | |||
| Fair Market Value of Warrants | $ | |||
| December 31, 2021 | ||||
| Common stock price | $ | |||
| Expected volatility | % | |||
| Expected term | ||||
| Risk free rate | % | |||
| Expected dividend yield | % | |||
| Fair Market Value of Warrants | $ | |||
| D. | On June 7, 2021, Samsara Luggage, Inc. (the “Company”) entered into a fourth Securities Purchase Agreement (“SPA”) with the Investor, pursuant to which the Investor will invest an aggregate amount of $ |
The Convertible Debentures bear interest
at a rate of
F-17
SAMSARA LUGGAGE, INC.
NOTES TO FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share data)
NOTE 3 – CONVERTIBLE NOTES (cont.)
On December 28, 2022, the Company signed a forbearance agreement with the Investor extending the maturity date for all outstanding principal and interest under this loan to June 30, 2023.
As of December 31, 2022, the full amount
of the first tranche principal in the amount of $
In the period from inception through
December 31, 2021, $
In accordance with ASC 815-15-25 the conversion feature was considered embedded derivative instruments, and is to be recorded at their fair value as its fair value can be separated from the convertible loan and its conversion is independent of the underlying note value. The Company recorded finance expenses in respect of the convertible component in the convertible loan in the excess amount of the convertible component fair value over the face loan amount. The conversion liability is then marked to market each reporting period with the resulting gains or losses shown in the statements of operations.
The fair value of the convertible components at December 31, 2022 and 2021 was estimated by third party appraiser using the Monte Carlo Simulation Model to compute the fair value of the derivative and to mark to market the fair value of the derivative.
The following are the data and assumptions used as of the balance sheet dates:
| December 31, 2022 | December 31, 2021 | |||||||
| Common stock price | $ | $ | ||||||
| Expected volatility | % | % | ||||||
| Expected term | ||||||||
| Risk free rate | % | % | ||||||
| Expected dividend yield | % | % | ||||||
| Fair Market Value of Convertible component – Tranche 1 | $ | $ | ||||||
| December 31, 2022 | December 31, 2021 | |||||||
| Common stock price | $ | $ | ||||||
| Expected volatility | % | % | ||||||
| Expected term | ||||||||
| Risk free rate | % | % | ||||||
| Expected dividend yield | % | % | ||||||
| Fair Market Value of Convertible component – Tranche 2 | $ | $ | ||||||
F-18
SAMSARA LUGGAGE, INC.
NOTES TO FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share data)
NOTE 3 – CONVERTIBLE NOTES (cont.)
| E. | On December 14, 2021, Samsara Luggage, Inc. (the “Company”) entered into a fifth Securities Purchase Agreement (“SPA”) with the Investor, pursuant to which the Investor will invest an aggregate amount of $ |
The Convertible Debenture bears interest
at a rate of
On December 28, 2022, the Company signed a forbearance agreement with the Investor extending the maturity date for all outstanding principal and interest under this loan to June 30, 2023.
In accordance with ASC 815-15-25 the conversion feature was considered an embedded derivative instrument, and is to be recorded at its fair value as its fair value can be separated from the convertible loan and its conversion is independent of the underlying note value. The Company recorded finance expenses in respect of the convertible component in the convertible loan in the excess amount of the convertible component fair value over the face loan amount. The conversion liability is then marked to market each reporting period with the resulting gains or losses shown in the statements of operations.
The following are the data and assumptions used as of the balance sheet dates:
| December 31, 2022 | December 31, 2021 | |||||||
| Common stock price | $ | $ | ||||||
| Expected volatility | % | % | ||||||
| Expected term | ||||||||
| Risk free rate | % | % | ||||||
| Expected dividend yield | % | % | ||||||
| Fair Market Value of Convertible component | $ | $ | ||||||
The following table presents the changes in fair value of the level 3 liabilities for the year ended December 31, 2022 and 2021:
| Warrants | Convertible component | |||||||
| (U.S. dollars in thousands) | ||||||||
| Outstanding at December 31, 2021 | ||||||||
| Settlement of derivative liabilities | ( | ) | ||||||
| Changes in fair value | ( | ) | ( | ) | ||||
| Outstanding at December 31, 2022 | ||||||||
F-19
SAMSARA LUGGAGE, INC.
NOTES TO FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share data)
NOTE 4 – STOCKHOLDERS’ EQUITY
Common Stock
Common Stock Activity During the Year Ended December 31, 2022
On March 1, 2022, and pursuant to the SPA, YAII
exercised its option to convert the Convertible Promissory Note principal in the amount of $
On April 11, 2022, the Company issued
On April 25, 2022, and pursuant to the SPA, YAII
exercised its option to convert the Convertible Promissory Note principal in the amount of $
On May 11, 2022, and pursuant to the SPA, YAII
exercised its option to convert the Convertible Promissory Note principal in the amount of $
On June 7, 2022, and pursuant to the SPA, YAII
exercised its option to convert the Convertible Promissory Note principal in the amount of $
On June 28, 2022, and pursuant to the SPA, YAII
exercised its option to convert the Convertible Promissory Note principal in the amount of $
On July 26, 2022, and pursuant to the SPA, YAII
exercised its option to convert the Convertible Promissory Note principal in the amount of $
On July 27, 2022, and pursuant to the SPA, YAII
exercised its option to convert the Convertible Promissory Note principal in the amount of $
On August 3, 2022, and pursuant to the SPA, YAII
exercised its option to convert the Convertible Promissory Note principal in the amount of $
On October 7, 2022, and pursuant to the SPA,
YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $
On November 23, 2022, and pursuant to the SPA,
YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $
On November 23, 2022, and pursuant to the SPA,
the Preferred A Investor exercised its option to convert
On November 23, 2022, and pursuant to the SPA,
the Preferred A Investor exercised its option to convert
F-20
SAMSARA LUGGAGE, INC.
NOTES TO FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share data)
NOTE 4 – STOCKHOLDERS’ EQUITY (cont.)
The following summarizes the Common Stock activity for the year ended December 31, 2022:
| Summary of common stock activity for the year ended December 31, 2022 | Outstanding shares | |||
| Balance, December 31, 2021 | ||||
| Shares issued due to conversion of Notes | ||||
| Shares issued for services | ||||
| Conversion of Preferred A Shares into common shares | ||||
| Balance, December 31, 2022 | ||||
Series A Preferred Stock
On May 12, 2022, the Company established a series
of redeemable convertible preferred stock (the “Series A Preferred Stock”), par value $
On May 17, 2022, the Company entered into a Series
A Preferred Stock Purchase Agreement (the “SPA”) with 1800 Diagonal Lending LLC f/k/a Sixth Street Lending LLC, a Virginia
limited liability company (the “Preferred A Investor”) pursuant to which the Company issued and sold to the Preferred A Investor
On August 10, 2022, the Company entered into
an additional Series A Preferred Stock Purchase Agreement (the “SPA”) with the Preferred A Investor pursuant to which the
Company issued and sold to the Preferred A Investor
Pursuant to the SPA, the Preferred A Investor
may convert all or a portion of the outstanding Series A Preferred Stock into shares of the Company’s Common Stock beginning on
the date which is 180 days after the issuance date of the Series A Preferred Stock (the “Issuance Date”) into Common Stock;
provided, however, that the Preferred A Investor may not convert the Series A Preferred Stock to the extent that such conversion would
result in beneficial ownership by the Preferred A Investor and its affiliates of more than
The Company will have the right, at the Company’s
sole option, provided that an event of default has not occurred, to redeem all or any portion of the shares of Series A Preferred Stock,
exercisable on not more than 3 Trading Days prior written notice to the holders of the Series A Preferred Stock, in full. If the Company
redeems the shares of Series A Preferred Stock within 180 days of its issuance, the Company must pay all of the principal at a cash redemption
premium of
The Series A Preferred Stock will, with respect to dividend rights and rights upon liquidation, winding-up or dissolution, rank: (a) senior with respect to dividends and right of liquidation with the Company’s Common Stock and (b) junior with respect to dividends and right of liquidation to all existing and future indebtedness of the Company and existing and outstanding preferred stock of the Company.
The Series A Preferred Stock shall have no right to vote on any matters requiring shareholder approval or any matters on which the shareholders are permitted to vote.
Each share of Series A Preferred Stock will carry
an annual dividend in the amount of
F-21
SAMSARA LUGGAGE, INC.
NOTES TO FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share data)
NOTE 5 – GENERAL AND ADMINISTRATIVE EXPENSES
| Year ended December 31 | Year ended December 31 | |||||||
| 2022 | 2021 | |||||||
| (U.S. dollars in thousands) | ||||||||
| Professional fees | ||||||||
| Share based compensation | ||||||||
| Management fees | ||||||||
| Other expenses | ||||||||
| $ | $ | |||||||
NOTE 6 – INCOME TAXES
On December 22, 2017, the U.S. enacted new tax
reform legislation which reduced the corporate tax rate to
IRC Section 382 potentially limits the utilization
of NOLs and tax credits when there is a greater than
We recognized income tax benefits of $
The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements for the years ended December 2021 or 2020 applicable under FASB ASC 740. We did not recognize any adjustment to the liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of accumulated deficit on the balance sheet. All tax returns for the Company remain open.
Reconciliation between the theoretical tax expense, assuming all income is taxed at the statutory tax rate applicable to income of the Company and the actual tax expense as reported in the Statement of Operations, is as follows:
| Year ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| (U.S. dollars in thousands) | ||||||||
| Loss before taxes, as reported in the statements of operations | $ | $ | ||||||
| Federal and State statutory rate | % | % | ||||||
| Theoretical tax benefit on the above amount at federal statutory tax rate | ||||||||
| Share-based compensation | ( | ) | ( | ) | ||||
| Income (expenses) in respect of warrants issued and convertible component in convertible loan, net interest expenses (Note 3) | ( | ) | ||||||
| Interest expense (Note 3) | ||||||||
| Losses and other items for which a valuation allowance Was provided or benefit from loss carry forward | ( | ) | ( | ) | ||||
| Actual tax income (expense) | ||||||||
| 2022 | 2021 | |||||||
| U.S. dollars in thousands | ||||||||
| Deferred tax assets: | ||||||||
| Net operating loss carry-forward | $ | $ | ||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| $ | $ | - | ||||||
F-22
SAMSARA LUGGAGE, INC.
NOTES TO FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share data)
NOTE 6 – INCOME TAXES (cont.)
A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. Management has determined, based on its recurring net losses, lack of a commercially viable product and limitations under current tax rules, that a full valuation allowance is appropriate.
| U.S. dollars in thousands | ||||
| Valuation allowance, December 31, 2021 | $ | |||
| Increase | ||||
| Valuation allowance, December 31, 2022 | $ | |||
The net federal operating loss carry forward will begin expire in 2039. This carry forward may be limited upon the consummation of a business combination under IRC Section 382.
NOTE 7 – RELATED PARTY TRANSACTIONS
Related Parties Payable
| December 31, 2022 | December 31, 2021 | |||||||
| (U.S. dollars in thousands) | ||||||||
| Related Parties Payable due to management fee | $ | | $ | | ||||
| Related Parties Payable due to research and development | ||||||||
| Total | $ | $ | ||||||
General and Administrative Expenses
| For the Year Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| (U.S. dollars in thousands) | ||||||||
| Management Fee | (*) | |||||||
| (*) |
Research and development Expenses
| For the Year Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| (U.S. dollars in thousands) | ||||||||
| Consulting Fee | ||||||||
NOTE 8 – SUBSEQUENT EVENTS
In accordance with ASC 855 “Subsequent Events,” Company management reviewed all material events through the date this report was issued and the following subsequent events took place.
On January 19, 2023, and pursuant to the SPA, the Preferred A Investor
exercised its option to convert
On February 2, 2023, and pursuant to the SPA,
the Preferred A Investor exercised its option to convert
On February 17, 2023, and pursuant to the SPA,
the Preferred A Investor exercised its option to convert
On March 2, 2023, and pursuant to the SPA, the
Preferred A Investor exercised its option to convert
On March 13, 2023, and pursuant to the SPA, the
Preferred A Investor exercised its option to convert
On March 28, 2023, and pursuant to the SPA, the
Preferred A Investor exercised its option to convert
F-23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
We have had no disagreements with accountants on accounting and financial disclosure.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act, such as this Annual Report, is recorded, processed, summarized and reported within the time periods specified by SEC rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including the Chief Executive Officer (“CEO”) to allow timely decisions regarding required disclosure.
Our management, with the participation of our then CEO, as in place as of December 31, 2022, evaluated, the effectiveness of our disclosure controls and procedures as of December 31, 2022, pursuant to paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act. This evaluation included a review of the controls’ objectives and design, the operation of the controls, and the effect of the controls on the information presented in this Annual Report. Our management, including the then CEO, do not expect that disclosure controls can or will prevent or detect all errors and all fraud, if any. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Our disclosure controls and procedures are designed to provide such reasonable assurance of achieving their objectives. Also, the projection of any evaluation of the disclosure controls and procedures to future periods is subject to the risk that the disclosure controls and procedures may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Based on their review and evaluation, and subject to the inherent limitations described above, our then CEO concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of December 31, 2022, at the above-described reasonable assurance level.
During the year ended December 31, 2022, management identified the following weaknesses, which were deemed to be material weaknesses in internal controls:
| 1. | Due to the size of the Company and available resources, there are limited personnel to assist with the accounting and financial reporting function, which results in a lack of segregation of duties. |
| 2. | The Company does not have Chief Financial Officer that can oversee day to day operations and the financial reporting function. |
| 3. | The Company does not have an Independent Audit Committee that can provide management oversight. |
Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even internal controls determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. The effectiveness of our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the possibility of human error, and the risk of fraud. The projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies may deteriorate. Because of these limitations, there can be no assurance that any system of internal control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.
This Annual Report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to rules of the Commission that exempt from this requirement issuers that are neither accelerated filers nor large accelerated filers.
28
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended December 31, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Under the supervision and with the participation of the Company’s management, including our principal executive officer and principal financial officer, we assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on this assessment, management, as in place as of December 31, 2022, determined that the Company’s internal control over financial reporting as of December 31, 2022, was not effective.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The material weaknesses identified are described below.
Procedures for Control Evaluation. Management has not established with appropriate rigor the procedures for evaluating internal controls over financial reporting. Due to limited resources and lack of segregation of duties, documentation of the limited control structure has not been accomplished.
Lack of Audit Committee. To date, the Company has not established an Audit Committee. It is management’s view that such a committee, including a financial expert, is an utmost important entity level control over the financial reporting process.
Insufficient Documentation of Review Procedures We employ policies and procedures for reconciliation of the financial statements and note disclosures.
Insufficient Information Technology Procedures. Management has not established methodical and consistent data back-up procedures to ensure loss of data will not occur.
As a result of the management evaluation of company internal control over financial reporting described above, the Company’s management has concluded that, as of December 31, 2022, the Company’s internal control over financial reporting was not based on the criteria in Internal Control – Integrated Framework issued by COSO.
This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
29
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table lists the names, ages and positions of the individuals who serve as executive officers and directors of Samsara:
| Name | Age | Position(s) | ||||
| Atara Dzikowski | 48 | Chief Executive Officer and Director | ||||
| David Dahan | 49 | Chief Technical Officer and Director | ||||
Atara Dzikowski
Atara Dzikowski served as Director and CEO of the Delaware company, Samsara Luggage, Inc., from its inception in 2017 until the Merger, and following the Merger has served as Director and CEO of Samsara. She has served as Chairperson and CEO of Design Boxes Ltd. from 2013 to date. From 2009 to 2013, Ms. Dzikowski was Director of Development and Public Affairs of Shenkar College of Engineering, Design and Art. She holds a Master’s in Public Administration from Clark University and a BA degree in Communication and Management from The College of Management in Tel Aviv. Since the Merger, Atara has been employed full time by Samsara as its Chief Executive Officer.
David Dahan
David Dahan served as Director and CTO of the Delaware company, Samsara Luggage, Inc., from its inception in 2017 until the Merger, and following the Merger has served as Director and CTO of Samsara. From 2015 to date, Mr. Dahan is also employed at Nova-Sight Ltd., a medical device company developing products for diagnostics and therapy in the field of ophthalmology, as its Software Department Manager. In 2009, Mr. Dahan co-founded Serve Africa Ltd., a holding company that provides Satellite IP connectivity communication services throughout the continent of Africa, and from 2013 to 2017 he served as its CEO. In 2008, Mr. Dahan founded Viramedics Ltd., a Bio-Tech firm dealing with Skin Cancer detection, working with leading medical institutes worldwide towards clinical studies and implementation, and served as its CTO through 2009. He also serves as a consultant to companies, mainly in the software algorithm field. Mr. Dahan holds a B.sc degree in Physics and Computer Science from Ben Gurion University. Since the Merger, David has been employed part-time by Samsara as its Chief Technical Officer.
Committees of the Board of Directors
Samsara does not have a separately constituted audit committee, compensation committee, nominating committee, executive committee or any other committee of the Board of Directors. As such, the entire Board of Directors acts as Samsara’s audit committee.
Audit Committee Financial Expert
Samsara does not have any member who qualifies as an audit committee financial expert. Samsara believes that the cost of retaining such a financial expert at this time is prohibitive. Further, because the Company is still in an early development stage, Samsara believes the services of an audit committee financial expert are not necessary at this time.
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Term of Office
Each director is elected by the Board and serves until his or her successor is elected and qualified, unless he or she resigns or is removed earlier. Each of our officers is elected by the Board to a term of one (1) year and serves until his or her successor is duly elected and qualified, or until he or she is earlier removed from office or resigns.
Family Relationships
There are no family relationships between or among any of our directors, executive officers and incoming directors or executive officers.
Involvement in Legal Proceedings
None of Samsara’s Directors or officers has appeared as a party during the past ten years in any legal proceedings that may bear on his or her ability or integrity to serve as a Director or officer of the Company.
Board Leadership Structure
The Company has chosen to combine the principal executive officer and Board chairman positions. Samsara believes that this Board leadership structure is the most appropriate for the Company. The Company is still in an early stage where it would be more efficient to have the leadership of the Board in the same hands as the principal executive officer of the Company. The challenges faced by the Company at this stage, including obtaining financing and implementing a commercialization plan, are most efficiently dealt with by having one person intimately familiar with both the operational aspects as well as the strategic aspects of the Company’s business.
Code of Ethics
We have adopted a Code of Ethics applicable to the Company’s principal executive, financial and accounting officers. A written copy of the Code is available upon written request to the Company and may be found at the Company’s website at www.samsaraluggage.com.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires our executive officers and directors, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings.
Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that our officers, directors and greater than 10% percent beneficial owners have complied with all applicable filing requirements.
Potential Conflict of Interest
Since Samsara does not have an audit or compensation committee comprised of independent Directors, the functions that would have been performed by such committees are performed by the Board of Directors. Thus, there is a potential conflict of interest in that Samsara’s Directors have the authority to determine issues concerning management compensation, in essence their own, and audit issues that may affect management decisions.
Board’s Role in Risk Oversight
The Board assesses on an ongoing basis the risks faced by the Company. These risks include financial, technological, competitive, and operational risks. The Board dedicates time at each of its meetings to review and consider the relevant risks faced by the Company at that time. In addition, since the Company does not have an Audit Committee, the Board is also responsible for the assessment and oversight of the Company’s financial risk exposures.
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Nominations to the Board of Directors
Our directors take a critical role in guiding our strategic direction and oversee the management of the Company. Board candidates are considered based upon various criteria, such as their broad-based business and professional skills and experiences, a global business and social perspective, concern for the long-term interests of the stockholders, diversity, and personal integrity and judgment.
In addition, directors must have time available to devote to Board activities and to enhance their knowledge in the growing business. Accordingly, we seek to attract and retain highly qualified directors who have sufficient time to attend to their substantial duties and responsibilities to the Company.
As of December 31, 2022, we did not make any material changes to the procedures by which our shareholders may recommend nominees to our Board.
Employment Arrangements
None of our officers, directors, or employees are party to employment agreements with the Company. The Company has no pension, health, annuity, bonus, insurance profit sharing or similar benefit plans; however, the Company may adopt such plans in the future. There are no personal benefits available for directors, officers or employees of the Company.
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation
The following table shows, for the twelve months ended December 31, 2022 and December 31, 2021, compensation awarded or paid to, or earned by, our Chief Executive Officer, our Chief Technical Officer, and our Chief Financial Officer:
| SUMMARY COMPENSATION TABLE | ||||||||||||||||||||||||||||||||||||
| Name | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||||||
| Atara Dzikowski | 2022 | 100,000 | 0 | 0 | 0 | 0 | 0 | 0 | 100,00 | |||||||||||||||||||||||||||
| (CEO) | 2021 | 100,000 | 0 | 147,500 | 0 | 0 | 0 | 0 | 247,500 | |||||||||||||||||||||||||||
| David Dahan | 2022 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
| (CTO) | 2021 | 0 | 0 | 147,500 | 0 | 0 | 0 | 0 | 147,500 | |||||||||||||||||||||||||||
Employment Contracts
We currently do not have any employment contracts with any of our executive officers.
Option/SAR Grants
Samsara does not currently have a stock option plan. No individual grants of stock options, whether or not in tandem with stock appreciation rights known as SARs or freestanding SARs have been made to any executive officer or any Director since inception; accordingly, no stock options have been granted or exercised by any of the officers or Directors since Samsara was founded.
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Long-Term Incentive Plans and Awards
Samsara does not have any long-term incentive plans that provide compensation intended to serve as incentive for performance. No individual grants or agreements regarding future payouts under non-stock price-based plans have been made to any executive officer or any Director or any employee or consultant since Samsara’s inception; accordingly, no future payouts under non-stock price-based plans or agreements have been granted or entered into or exercised by any of the officers or Directors or employees or consultants since Samsara was founded.
Potential Payments upon Termination or Change-in-Control
We currently have no plans or arrangements in respect of payments to our executive officers in the event of termination of employment (as a result of resignation, retirement, or change of control) or a change of responsibilities following a change of control.
Retirement Benefits
There are currently no arrangements or plans in which we provide pension, retirement or similar benefits for our Directors and officers.
Compensation of Directors
We have no arrangement to compensate directors for their services in their capacity as directors. Directors are not paid for meetings attended. However, we intend to review and consider future proposals regarding board compensation. All travel and lodging expenses associated with corporate matters are reimbursed by us, if and when incurred.
Compensation Committee
We do not have a separate compensation committee. Instead, our Board reviews and approves executive compensation policies and practices, reviews salaries and bonuses for other officers, administers our stock option plans and other benefit plans, if any, and considers other matters that may be brought forth to it.
Risk Management Considerations
We believe that our compensation policies and practices for our employees, including our executive officers, do not create risks that are reasonably likely to have a material adverse effect on our Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
As of March __, 2023, we had [_______]shares of common stock outstanding. The following table sets forth, as of March __, 2023, certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5% of our common stock, as well as by each of our current Directors and executive officers, and by all of the Company’s Directors and executive officers as a group.
Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.
| Name of Beneficial Owner | Number of Shares Owned | Percent | ||||||
| Atara Dzikowski (Director and CEO) | 260,909 | 12.12 | % | |||||
| David Dahan (Director and CTO) | 260,909 | 12.12 | % | |||||
| Directors and officers as a group (2 persons) | 521,818 | 24.24 | % | |||||
Change in Control
We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change of control of our Company.
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Securities Authorized for Issuance under Equity Compensation Plans
None.
Long-Term Incentive Plans and Awards
We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance. No individual grants or agreements regarding future payouts under non-stock price-based plans have been made to any executive officer or any director or any employee or consultant since our inception; accordingly, no future payouts under non-stock price-based plans or agreement s have been granted or entered into or exercised by our officer or director or employees or consultants since we were founded.
Grants of Plan-Based Awards Table
None of our named executive officers received any grants of stock, option awards or other plan-based awards during the fiscal period ended December 31, 2022. The Company has no activity with respect to these awards.
Options Exercised and Stock Vested Table
None of our named executive officers exercised any stock options, and no restricted stock units if any, held by our named executive officers vested during the fiscal period ended December 31, 2022. The Company has no activity with respect to these awards.
Outstanding Equity Awards at Fiscal Year-End Table
Except as set forth below, none of our named executive officers had any outstanding stock or option awards as of December 31, 2022. The Company has not issued any awards to its named executive officers. The Company and its board may grant awards as it sees fit to its employees as well as key consultants and other outside professionals.
On December 10, 2021, the Board of Directors of the Company awarded David Dahan, Chief Technical Officer, and Atara Dzikowski, Chief Executive Officer, each 130,000 shares (the “Shares”) of the Company’s common stock, $0.0001 par value per share (the “Common Stock”) for the fiscal year ended December 31, 2022, in consideration for deferred and accrued salary payments. David Dahan and Atara Dzikowski thereafter each owned 260,909 shares of Common Stock. The Shares were issued on December 10, 2021. The Shares were issued in a private placement that will rely upon an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Regulation D promulgated thereunder.
Non-Cumulative Voting
The holders of our shares of common stock do not have cumulative voting rights, which means that the holders of more than 50% of such outstanding shares, voting for the election of Directors, can elect all of the Directors to be elected, if they so choose. In such event, the holders of the remaining shares will not be able to elect any of our Directors.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Described below are any transactions occurring during the fiscal year ending December 31, 2022 and any currently proposed transactions to which Samsara was a party and in which a director, executive officer, holder of more than 5% of the outstanding capital stock of Samsara, or any member of such person’s immediate family had or will have a direct or indirect material interest:
During the year ended December 31, 2022, the Company received management fee services and research and development services from an entity owned by an executive officer, in the amounts of $100 and $90, respectively.
Review, Approval or Ratification of Transactions with Related Persons
Although we adopted a Code of Ethics, we still rely on our Board to review related party transactions on an ongoing basis to prevent conflicts of interest. Our Board reviews a transaction in light of the affiliations of the director, officer or employee and the affiliations of such person’s immediate family. Transactions are presented to our Board for approval before they are entered into or, if this is not possible, for ratification after the transaction has occurred. If our Board finds that a conflict of interest exists, then it will determine the appropriate remedial action, if any. Our Board approves or ratifies a transaction if it determines that the transaction is consistent with the best interests of the Company.
Director Independence
Samsara is not subject to listing requirements of any national securities exchange or national securities association and, as a result, Samsara is not at this time required to have a board comprised of a majority of “independent Directors.” Samsara does not believe that any of the directors of the Company meet the definition of “independent” as promulgated by the rules and regulations of NASDAQ.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The aggregate fees billed or billable for each of the last two fiscal years for professional services rendered by the principal account for the audit of our financial statements and review of financial statements included in our Quarterly Reports on Form 10-Q and for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
| Fees | December 31, 2022 | December 31, 2021 | ||||||
| Audit Fees | $ | 22,500 | $ | 22,500 | ||||
| Audit Related Fees | $ | 0 | $ | 0 | ||||
| Tax Fees | $ | 0 | $ | 0 | ||||
| All Other Fees | $ | 0 | $ | 0 | ||||
In each of the last two fiscal years ended December 31, 2022 and 2021, there were no fees billed for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of our financial statements and are not reported under Item 9(e)(1) of Schedule 14A, for professional services rendered by the principal account for tax compliance, tax advice, and tax planning, for products and services provided by the principal accountant, other than the services reported in Item 9(e)(1) through 9(d)(3) of Schedule 14A.
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
Given the small size of our Board as well as the limited activities of our Company, our Board of Directors acts as our Audit Committee. Our Board pre-approves all audit and permissible non-audit services. These services may include audit services, audit-related services, tax services, and other services. Our Board approves these services on a case-by-case basis.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
| (a) | Financial Statements and financial statement schedules |
(1) and (2) The financial statements and financial statement schedules required to be filed as part of this report are set forth in Item 8 of Part II of this report.
(3) Exhibits. See Item 15(b) below.
| (b) | Exhibits required by Item 601 of Regulation S-K |
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| * | Filed herewith |
| # | The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document. |
ITEM 16. FORM 10-K SUMMARY
The Company has elected not to provide summary information.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SAMSARA LUGGAGE, INC. | ||
| (Registrant) | ||
| Date: April 3, 2023 | By: | /s/ Atara Dzikowski |
| Atara Dzikowski | ||
| Chief Executive Officer (Principal Executive Officer, and Principal Financial and Accounting Officer) | ||
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