NOTES
TO FINANCIAL STATEMENTS
(U.S.
dollars in thousands, except per share data)
NOTE
1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
|
A. |
The
Company was incorporated on May 7, 2007 under the name, “Darkstar Ventures, Inc.” under the laws of the State of Nevada.
The Company is a global smart luggage and smart travel brand. Samsara Luggage unveiled its Next Generation smart carry-on
at the 2020 Consumer Electronics Show (CES). The Next Generation is the first to market a Wi-Fi Hotspot technology for travelers
to access a secured network globally. Samsara Luggage also launched Essentials by Samsara, a safety kit providing commuters
with a new layer of safety with protective items like facemasks, hand sanitizer, disposable gloves and alcohol wipes. These kits
are sold individually and gifted to customers with purchase of the Carry-on Aluminum suitcase or Smart Weekender bag.
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.
|
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 $0.0001 per share (the “Common Stock”), have executed a written consent in lieu of a special meeting approving to amend 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”). |
SAMSARA
LUGGAGE, INC.
NOTES
TO FINANCIAL STATEMENTS
(U.S.
dollars in thousands, except per share data)
NOTE
1 – ORGANIZATION AND DESCRIPTION OF BUSINESS (cont.)
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As of December 31, 2021,
the Company had approximately $827 in cash and cash equivalents, approximately $700 in deficit of working capital, a stockholders’
deficiency of approximately $698 and an accumulated deficit of approximately $ 10,193. These conditions raise substantial doubt about
the Company’s ability to continue as a going concern. Company’s ability to continue as a going concern is dependent upon
raising capital from financing transactions and revenue from operations. Management anticipates their business will require substantial
additional investments that have not yet been secured. Management is continuing in the process of fund raising in the private equity
and capital markets as the Company will need to finance future activities. These financial statements do not include any adjustments
that may be necessary should the Company be unable to continue as a going concern.
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 Note 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.
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.)
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 three to five years. Maintenance
and repair costs are expensed as they are incurred while renewals and improvements which extend the useful life of an asset are capitalized.
At the time of retirement or disposal of property and equipment, the cost and related accumulated depreciation and amortization are removed
from the accounts and any resulting gain or loss is reflected in the consolidated results of operations.
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.
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.
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 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, 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 | |
| - | | |
| - | | |
| 1,017 | | |
| 1,017 | |
Fair value of warrants issued in convertible loan | |
| - | | |
| - | | |
| 24 | | |
| 24 | |
Total liabilities | |
| - | | |
| - | | |
| 1,041 | | |
| 1,041 | |
| |
Balance as of December 31, 2020 | |
| |
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 | |
| - | | |
| - | | |
| 493 | | |
| 493 | |
Fair value of warrants issued in convertible loan | |
| - | | |
| - | | |
| 20 | | |
| 20 | |
Total liabilities | |
| - | | |
| - | | |
| 513 | | |
| 513 | |
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.
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.)
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
Basic
loss per ordinary share is computed by dividing the loss for the period applicable to ordinary shareholders, by the weighted average
number of shares of common stock outstanding during the period. Securities that may participate in dividends with the shares of common
stock (such as the convertible preferred) are considered in the computation of basic loss per share under the two-class method. However,
in periods of net loss, only the convertible preferred shares are considered, since such shares have a contractual obligation to share
in the losses of the Company. In computing diluted loss per share, basic loss per share is adjusted to reflect the potential dilution
that could occur upon the exercise of potential shares. Accordingly, in periods of net loss, no potential shares are considered
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.
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.)
| | New Accounting Pronouncements |
Accounting
Pronouncements Not Yet Adopted
In
December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in
this ASU simplify the accounting for income taxes, eliminates certain exceptions to the general principles in Topic 740 and clarifies
certain aspects of the current guidance to improve consistent application among reporting entities. ASU 2019-12 is effective for fiscal
years beginning after December 15, 2021 and interim periods within annual periods beginning after December 15, 2022, though early adoption
is permitted, including adoption in any interim period for which financial statements have not yet been issued. The Company is currently
evaluating the effect the adoption of ASU 2019-12 will have on its consolidated financial statements.
In
August 2020, the FASB issued ASU No. 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 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments
and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized
from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1)
those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a
derivative, and that do not qualify for a scope exception from derivative accounting and(2) convertible debt instruments issued with
substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives
scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06
will be effective for public companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal
years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within
those fiscal years. The Company is currently evaluating the impact that the adoption of ASU 2020-06 will have on the Company’s
consolidated financial statement presentation or disclosures.
Other
new pronouncements issued but not effective as of December 31, 2021 are not expected to have a material impact on the Company’s
consolidated financial statements.
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 $1,100,000 in three tranches, and the Company agreed to issue convertible debentures and a warrant to the Investor. |
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.
Each
tranche of the loan will bear interest at an annual rate of ten percent (10%). The principal amount together with the accrued and unpaid
interest will be repayable after two years. Each tranche of the loan together with the accrued and unpaid interest (or any portion at
the discretion of the Investor) will be convertible at any time six months following the issuance date, into shares of Company’s
common stock at a conversion price equal to the lower of $0.003 per share or 80% of the lowest volume-weighted average price (VWAP) of
Company’s share during the period of 10 days preceding the conversion date.
On
January 14, 2021 and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount
of $50 and the accrued interest in the amount of $4 into 38,303 shares of Common Stock of the Company. The fair market value of the shares
was $54.
On
February 11, 2021 and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount
of $55and the accrued interest in the amount of $3into 16,713 shares of Common Stock of the Company. The fair market value of the shares
was $221.
On
April 19, 2021 and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount
of $40 and the accrued interest in the amount of $7into 40,861 shares of Common Stock of the Company. The fair market value of the shares
was $62.
On
May 12, 2021 and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of
$60 and the accrued interest in the amount of $2 into 44,202 shares of Common Stock of the Company. The fair market value of the shares
was $103.
On
May 17, 2021 and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of
$65 into 48,316 shares of Common Stock of the Company. The fair market value of the shares was $85.
On
May 20, 2021 and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of
$65 into 50,611 shares of Common Stock of the Company. The fair market value of the shares was $171.
On
May 21, 2021 and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of
$70 into 54,386 shares of Common Stock of the Company. The fair market value of the shares was $280.
On
May 24, 2021, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of
$70 into 54,407 shares of Common Stock of the Company. The fair market value of the shares was $322.
SAMSARA
LUGGAGE, INC.
NOTES
TO FINANCIAL STATEMENTS
(U.S.
dollars in thousands, except per share data)
NOTE
3 – CONVERTIBLE NOTES (cont.)
On
May 24, 2021, and pursuant to the SPA, YAII exercised its option to convert the remainder of the Convertible Promissory Note principal
in the amount of $15 into 11,647 shares of Common Stock of the Company. The fair market value of the shares was $69.
As
of December 31, 2021 this loan was paid in full
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.
In
addition, the Company issued to the Investor a warrant to purchase 13,095 shares of common stock, at an exercise price equal to $21.00.
The warrants may be exercised within 5 years from the issuance date by cash payment or through cashless exercise by the surrender of
warrants shares having a value equal to the exercise price of the portion of the warrant being exercised.
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, 2021 | |
Common stock price | |
$ | 0.9585 | |
Expected volatility | |
| 275.94 | % |
Expected term | |
| 2.43 years | |
Risk free rate | |
| 0.83 | % |
Expected dividend yield | |
| 0 | % |
Fair Market Value of Warrants | |
$ | 10 | |
| |
December 31, 2020 | |
Common stock price | |
| 1.40 | |
Expected volatility | |
| 227.88 | % |
Expected term | |
| 3.43 years | |
Risk free rate | |
| 0.19 | % |
Expected dividend yield | |
| 0 | % |
Fair Market Value of Warrants | |
$ | 16 | |
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 the Investor, pursuant to which the Investor will invest an aggregate amount of $220 in two tranches, and the Company will issue convertible debentures and warrants to the Investor. The first tranche of the convertible debentures in the amount of $150 was provided upon execution of the SPA. The second tranche in the amount of $70 was provided on October 7, 2020. Each tranche of the loan bears interest at an annual rate of ten percent (10%). Each tranche of the investment bears interest at an annual rate of ten percent (10%) and will be repayable after two years. Each tranche of 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) $0.003 per share, 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 will issue to the Investor warrants to purchase an aggregate of 2,619 shares of Common Stock, at an exercise price equal to $0.003. 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. The Company has undertaken to increase its authorized shares of Common Stock to at least 7,000,000,000 within 90 days of the closing. The SPA and the convertible debentures contain events of default, including, among other things, failure to repay the convertible debentures by the maturity date, and bankruptcy and insolvency events, that could result in the acceleration of the Investor’s right to convert the convertible debentures into shares of common stock. On May 24, 2021, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $50 and the accrued interest in the amount of $11 into 47,247 shares of Common Stock of the Company. The fair market value of the shares was $281. On May 25, 2021, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $80 into 62,138 shares of Common Stock of the Company. The fair market value of the shares was $249. On May 28, 2021, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $70 and the accrued interest in the amount of $4 into 57,837 shares of Common Stock of the Company. The fair market value of the shares was $164. On June 1, 2021, and pursuant to the SPA, YAII exercised its option to convert the remainder of the Convertible Promissory Note principal in the amount of $20 into 15,559 shares of Common Stock of the Company. The fair market value of the shares was $39. As of December 31, 2021 this loan was paid in full |
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.
In
addition, the Company issued to the Investor a warrant to purchase 2,619 shares of common stock, at an exercise price equal to $21.00.
The warrants may be exercised within 5 years from the issuance date by cash payment or through cashless exercise by the surrender of
warrants shares having a value equal to the exercise price of the portion of the warrant being exercised.
SAMSARA
LUGGAGE, INC.
NOTES
TO FINANCIAL STATEMENTS
(U.S.
dollars in thousands, except per share data)
NOTE
3 – CONVERTIBLE NOTES (cont.)
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, 2021 | |
Common stock price | |
$ | 0.9585 | |
Expected volatility | |
| 275.94 | % |
Expected term (years) | |
| 3.68 | |
Risk free rate | |
| 1.07 | % |
Expected dividend yield | |
| 0 | % |
Fair Market Value of Warrants | |
$ | 2 | |
| |
December 31, 2020 | |
Common stock price | |
| 1.39 | |
Expected volatility | |
| 227.88 | % |
Expected term (years) | |
| 4.68 | |
Risk free rate | |
| 0.19 | % |
Expected dividend yield | |
| 0 | % |
Fair Market Value of Warrants | |
$ | 4 | |
| C. | On June 26, 2020, the Company entered into a Securities Purchase Agreement (“SPA”) with Power Up Lending Group Ltd. (the “Investor”), pursuant to which the Investor agreed to provide the Company with an initial investment in the form of a convertible loan in the principal amount of $67 (the “Initial Investment”). The SPA contemplates additional financing of up to $925 in the aggregate, subject to the agreement of both parties. The funds are expected to be used to finance the Company’s working capital needs. |
The
convertible loan will bear interest at an annual rate of eight percent (8%) with a maturity date of June 25, 2021 (the “Maturity
Date”). The loan will be convertible after six months into shares of the Company’s common stock at a conversion price equal
to seventy-five percent (75%) of the average of the lowest trading price for the Company’s common stock during the twenty (20)
trading day period prior to the conversion date. The Company agreed to an original issue discount of $9 and to reimburse the Investor
for its costs in the amount of $3. Accordingly, the net proceeds to the Company from the Initial Investment amounted to $55.
SAMSARA
LUGGAGE, INC.
NOTES
TO FINANCIAL STATEMENTS
(U.S.
dollars in thousands, except per share data)
NOTE
3 – CONVERTIBLE NOTES (cont.)
The
SPA and the convertible note contain events of default, including, among other things, failure to repay the loan amount by the Maturity
Date, and bankruptcy and insolvency events, that could result in the acceleration of the Investor’s right to convert the loan amount
into shares of common stock.
On
January 11, 2021 and pursuant to the SPA, Power-up exercised its option to convert the Convertible Promissory Note principal in the amount
of $ 7 into 7,448 shares of Common Stock of the Company. The fair market value of the shares was $16.
As
of December 31, 2021 this loan was paid in full
| D. | 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 $150 and the Company agreed to issue convertible debentures and a warrant to the Investor. The loan will bear 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. On September 20, 2021, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $100 into 47,887 shares of Common Stock of the Company. The fair market value of the shares was $130. On October 14, 2021, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $150 and accrued interest of $1 into 109,018 shares of Common Stock of the Company. The fair market value of the shares was $211. |
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 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 issuance date:
| |
April 6, 2021 | |
Common stock price | |
$ | 1.97 | |
Expected volatility | |
| 321.6 | % |
Expected term (years) | |
| 2.00 | |
Risk free rate | |
| 0.16 | % |
Forfeiture rate | |
| 0 | % |
Expected dividend yield | |
| 0 | % |
Fair Market Value of Convertible component | |
$ | 156 | |
As
of December 31, 2021 this loan was paid in full
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.
SAMSARA
LUGGAGE, INC.
NOTES
TO FINANCIAL STATEMENTS
(U.S.
dollars in thousands, except per share data)
NOTE
3 – CONVERTIBLE NOTES (cont.)
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:
The
following are the data and assumptions used as of the issuance date:
|
|
April 6
2021 |
|
Common stock price |
|
$ |
1.97 |
|
Expected volatility |
|
|
321.6 |
% |
Expected term |
|
|
5.00 |
|
Risk free rate |
|
|
0.88 |
% |
Expected dividend yield |
|
|
0 |
% |
Fair Market Value of Warrants |
|
$ |
21 |
|
The
following are the data and assumptions used as of the balance sheet dates:
|
|
December
31,
2021 |
|
Common stock price |
|
$ |
0.9585 |
|
Expected volatility |
|
|
275.94 |
% |
Expected term |
|
|
4.27 |
|
Risk free rate |
|
|
1.07 |
% |
Expected dividend yield |
|
|
0 |
% |
Fair Market Value of Warrants |
|
$ |
12 |
|
| E. | 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 $1,250 in three tranches, and the Company will issue convertible debentures and warrants to the Investor, in which each trench is convertible into shares of the Company’s common stock, par value $0.0001 (the “Common Stock”). The first trench in the principal amount of $500 was issued on June 7, 2021. The second trench in the principal amount of $500 was issued on July 6, 2021 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”). The third trench in the principal amount of $250 was issued on September 7,2021 following the Registration Statement was 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 is required to file the Registration Statement with the SEC for the resale of the Conversion
Shares. Pursuant to the Registration Rights Agreement, the Company is required to meet certain obligations with respect to, among other
things, the timeliness of the filing and effectiveness of the Registration Statement. The Company is obligated to file the Registration
Statement no later than 45 days after the First Closing Date and to have it declared effective by the SEC no later than 105 days after
filing (the “Registration Obligations”).
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.
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 issuance dates:
| |
December 31, 2021 | | |
June 7, 2021 | |
Common stock price | |
$ | 0.9585 | | |
$ | 6.33 | |
Expected volatility | |
| 87.57 | % | |
| 359 | % |
Expected term | |
| 0.43 | | |
| 1.00 | |
Risk free rate | |
| 0.16 | % | |
| 0.05 | % |
Forfeiture rate | |
| 0 | % | |
| 0 | % |
Expected dividend yield | |
| 0 | % | |
| 0 | % |
Fair Market Value of Convertible component | |
$ | 201 | | |
$ | 453 | |
| |
December 31, 2021 | | |
July 6, 2021 | |
Common stock price | |
$ | 0.9585 | | |
$ | 3.71 | |
Expected volatility | |
| 86.8 | % | |
| 349 | % |
Expected term | |
| 0.51 | | |
| 1.00 | |
Risk free rate | |
| 0.19 | % | |
| 0.07 | % |
Forfeiture rate | |
| 0 | % | |
| 0 | % |
Expected dividend yield | |
| 0 | % | |
| 0 | % |
Fair Market Value of Convertible component | |
| 130 | | |
$ | 565 | |
| |
September 7, 2021 | |
Common stock price | |
$ | 2.95 | |
Expected volatility | |
| 328.53 | % |
Expected term | |
| 1.00 | |
Risk free rate | |
| 0.08 | % |
Forfeiture rate | |
| 0 | % |
Expected dividend yield | |
| 0 | % |
Fair Market Value of Convertible component | |
$ | 254 | |
On
November 3, 2021, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount
of $100 and accrued interest of $16 into 92,089 shares of Common Stock of the Company. The fair market value of the shares was $161.
On
December 20, 2021, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount
of $75 and accrued interest of $5 into 98,538 shares of Common Stock of the Company. The fair market value of the shares was $123.
As
of December 31, 2021 the loan from September 7, 2021 was paid in full.
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 balance sheet dates:
F. | 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 $ 500, and the Company will issue convertible debentures to the Investor. |
SAMSARA
LUGGAGE, INC.
NOTES
TO FINANCIAL STATEMENTS
(U.S.
dollars in thousands, except per share data)
NOTE
3 – CONVERTIBLE NOTES (cont.)
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; 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.
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
following are the data and assumptions used as of the issuance date:
| |
December 14, 2021 | |
Common stock price | |
$ | 1.02 | |
Expected volatility | |
| 294.24 | % |
Expected term (years) | |
| 1.00 | |
Risk free rate | |
| 0.26 | % |
Forfeiture rate | |
| 0 | % |
Expected dividend yield | |
| 0 | % |
Fair Market Value of Convertible component | |
$ | 667 | |
The
following are the data and assumptions used as of the balance sheet date:
| |
December 31, 2021 | |
Common stock price | |
$ | 0.9585 | |
Expected volatility | |
| 205.2 | % |
Expected term | |
| 0.95 | |
Risk free rate | |
| 0.37 | % |
Forfeiture rate | |
| 0 | % |
Expected dividend yield | |
| 0 | % |
Fair Market Value of Convertible component | |
$ | 522 | |
SAMSARA
LUGGAGE, INC.
NOTES
TO FINANCIAL STATEMENTS
(U.S.
dollars in thousands, except per share data)
NOTE
3 – CONVERTIBLE NOTES (cont.)
The
following table presents the changes in fair value of the level 3 liabilities for the year ended December 31, 2021 and 2020:
| |
Warrants | | |
Convertible component | |
| |
(U.S. dollars in thousands) | |
Outstanding at December 31, 2020 | |
| 20 | | |
| 493 | |
Fair value of issued level 3 liability | |
| 21 | | |
| 2,064 | |
Changes in fair value | |
| (17 | ) | |
| (1,540 | ) |
Outstanding at December 31, 2021 | |
| 24 | | |
| 1,017 | |
NOTE
4 – STOCKHOLDERS’ EQUITY
Common
Stock
On
November 12, 2019, the Company completed its merger with the Samsara Delaware in accordance with the terms of the Merger Agreement and
Plan of Merger, dated as of May 10, 2019 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 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 to “Samsara Luggage, Inc.” effective as of November 12,
2019; 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
effective as of November 12, 2019.
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 $0.0001 per share (the “Common Stock”), have executed a written consent in lieu of a special meeting approving
to amend 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”).
SAMSARA
LUGGAGE, INC.
NOTES
TO FINANCIAL STATEMENTS
(U.S.
dollars in thousands, except per share data)
NOTE
4 – STOCKHOLDERS’ EQUITY (cont.)
Common
Stock Activity During the Year Ended December 31, 2021
The
following summarizes the Common Stock activity for the year ended December 31, 2021:
Summary of common stock activity for the year ended December 31, 2021 | |
Outstanding shares | |
Balance, December 31, 2020 | |
| 786,700 | |
Shares issued due to conversion of Notes. | |
| 984,281 | |
Shares issued for services | |
| 281,658 | |
Roundup shares due to reverse split. | |
| 2,848 | |
Balance, December 31, 2021 | |
| 2,055,487 | |
On
January 11, 2021 and pursuant to the SPA, Power-up exercised its option to convert the Convertible Promissory Note principal in the amount
of $7 into 7,448 shares of Common Stock of the Company.
On
January 14, 2021 and pursuant to the SPA, YAII exercised its option to convert the second Convertible Promissory Note principal in the
amount of $50 and the accrued interest in the amount of $4 into 38,303 shares of Common Stock of the Company. The fair market value of
the shares was $54.
On
January 21, 2021, the Company issued 7,383 shares of its Common Stock pursuant to a service Agreement between the Company and a service
provider. The fair market value of the shares was $20.
On
February 11, 2021 and pursuant to the SPA, YAII exercised its option to convert the second Convertible Promissory Note principal in the
amount of $55 and the accrued interest in the amount of $4 into 16,713 shares of Common Stock of the Company. The fair market value of
the shares was $221.
On
March 22, 2021, the Company completed a reverse stock split of its 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.
On
March 23, 2021, the Company issued 2,848 shares of its Common Stock due to a reverse split rounding up differences.
On
April 19, 2021 and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount
of $40 and the accrued interest in the amount of $7into 40,861 shares of Common Stock of the Company. The fair market value of the shares
was $62.
On
May 12, 2021 and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of
$60 and the accrued interest in the amount of $2 into 44,202 shares of Common Stock of the Company. The fair market value of the shares
was $103.
On
May 17, 2021 and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of
$65 into 48,316 shares of Common Stock of the Company. The fair market value of the shares was $85.
SAMSARA
LUGGAGE, INC.
NOTES
TO FINANCIAL STATEMENTS
(U.S.
dollars in thousands, except per share data)
NOTE
4 – STOCKHOLDERS’ EQUITY (cont.)
On
May 20, 2021 and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of
$65 into 50,611 shares of Common Stock of the Company. The fair market value of the shares was $171.
On
May 21, 2021 and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of
$70 into 54,386 shares of Common Stock of the Company. The fair market value of the shares was $280.
On
May 24, 2021, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of
$70 into 54,407 shares of Common Stock of the Company. The fair market value of the shares was $322.
On
May 24, 2021, and pursuant to the SPA, YAII exercised its option to convert the remainder of the Convertible Promissory Note principal
in the amount of $15 into 11,647 shares of Common Stock of the Company. The fair market value of the shares was $69.
On
May 24, 2021, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of
$50 into 47,247 shares of Common Stock of the Company. The fair market value of the shares was $281.
On
May 25, 2021, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of
$80 into 62,138 shares of Common Stock of the Company. The fair market value of the shares was $249.
On
May 28, 2021, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of
$70 and accrued interest of $4 into 57,837 shares of Common Stock of the Company. The fair market value of the shares was $164.
On
June 1, 2021, and pursuant to the SPA, YAII exercised its option to convert the remainder of the Convertible Promissory Note principal
in the amount of $20 into 15,559 shares of Common Stock of the Company. The fair market value of the shares was $39.
On
June 14, 2021, the Company issued 14,275 shares of its Common Stock pursuant to a service Agreement between the Company and a service
provider. The fair market value of the shares was $70.
On
July 26, 2021, Moshe Zuk exercised his Convertible Note principal in the amount of $50 and into 87,074 shares of Common Stock of the
Company. The fair market value of the shares was $274.
On
September 20, 2021, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount
of $100 into 47,887 shares of Common Stock of the Company. The fair market value of the shares was $130.
On
October 14, 2021, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount
of $150 and accrued interest of $1 into 109,018 shares of Common Stock of the Company. The fair market value of the shares was $211.
On
November 3, 2021, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount
of $100 and accrued interest of $16 into 92,089 shares of Common Stock of the Company. The fair market value of the shares was $161.
SAMSARA
LUGGAGE, INC.
NOTES
TO FINANCIAL STATEMENTS
(U.S.
dollars in thousands, except per share data)
NOTE
4 – STOCKHOLDERS’ EQUITY (cont.)
On
December 10, 2021, the Company awarded David Dahan, Chief Technical Officer, and Atara Dzikowski, Chief Executive Officer, each 130,000
shares of the Company’s common stock, $0.0001 par value per share for the fiscal year ended December 31, 2021, in consideration
for deferred and accrued salary payments. The fair market value of the shares was $295.
On
December 20, 2021, and pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount
of $75 and accrued interest of $5 into 98,538 shares of Common Stock of the Company. The fair market value of the shares was $123.
NOTE
5 – GENERAL AND ADMINISTRATIVE EXPENSES
| |
Year ended December 31 | | |
Year ended December 31 | |
| |
2021 | | |
2020 | |
| |
(U.S. dollars in thousands) | |
Professional fees | |
| 297 | | |
| 193 | |
Share based compensation | |
| 881 | | |
| 687 | |
Management fees | |
| 100 | | |
| 100 | |
Other expenses | |
| 26 | | |
| 106 | |
| |
| 1,304 | | |
| 1,086 | |
NOTE
6 – INCOME TAXES
On
December 22, 2017, the U.S. enacted new tax reform legislation which reduced the corporate tax rate to 21% effective for tax year beginning
January 1, 2018. Under ASC 740, the effects of new tax legislation are recognized in the period which includes the enactment date. As
a result, the deferred tax assets and liabilities existing on the enactment date must be revalued to reflect the rate at which these
deferred balances will reverse. The corresponding adjustment would generally affect the Income Tax Expense (Benefit) shown on the financial
statements. However, since the company has a full valuation allowance applied against all of its deferred tax asset, there is no impact
to the Income Tax Expense for the year ending December 31, 2021.
IRC
Section 382 potentially limits the utilization of NOLs and tax credits when there is a greater than 50% change of ownership. The Company
has not performed an analysis under IRC 382 related to changes in ownership, which could place certain limits on the company’s
ability to fully utilize its NOLs and tax credits. The Company’s has added a note to its financial statements to disclose that
there may be some limitations and that an analysis has not been performed. In the interim, the Company has placed a full valuation allowance
on its NOLs and other deferred tax items.
We
recognized income tax benefits of $0 during the years ended December 31, 2021 and 2020. When it is more likely than not that a tax asset
will not be realized through future income the Company must allow for this future tax benefit. We provided a full valuation allowance
on the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely
than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward period. Effective December
22, 2017 a new tax bill was signed into law that reduced the federal income tax rate for corporations from 35% to 21%.
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.
SAMSARA
LUGGAGE, INC.
NOTES
TO FINANCIAL STATEMENTS
(U.S.
dollars in thousands, except per share data)
NOTE
6 – INCOME TAXES (cont.)
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, | |
| |
2021 | | |
2020 | |
| |
(U.S. dollars in thousands) | |
Loss before taxes, as reported in the statements of operations | |
$ | 3,817 | | |
$ | 1,140 | |
Federal and State statutory rate | |
| 21 | % | |
| 21 | % |
Theoretical tax benefit on the above amount at federal statutory tax rate | |
| 802 | | |
| 239 | |
Share-based compensation | |
| (215 | ) | |
| (144 | ) |
Income (expenses) in respect of warrants issued and convertible component in convertible loan, net interest expenses (Note 3) | |
| (367 | ) | |
| 172 | |
Losses and other items for which a valuation allowance Was provided or benefit from loss carry forward | |
| (220 | ) | |
| (267 | ) |
Actual tax income (expense) | |
| - | | |
| - | |
| |
2021 | | |
2020 | |
| |
U.S. dollars in thousands | |
Deferred tax assets: | |
| | |
| |
Net operating loss carry-forward | |
$ | 871 | | |
$ | 651 | |
Valuation allowance | |
| (871 | ) | |
| (651 | ) |
| |
$ | - | | |
$ | - | |
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, 2020 | |
$ | 651 | |
Increase | |
| 220 | |
Valuation allowance, December 31, 2021 | |
$ | 871 | |
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.
SAMSARA
LUGGAGE, INC.
NOTES
TO FINANCIAL STATEMENTS
(U.S.
dollars in thousands, except per share data)
NOTE
7 – RELATED PARTY TRANSACTIONS
Related
Parties Payable
| |
December 31, 2021 | | |
December 31, 2020 | |
| |
(U.S. dollars in thousands) | |
Related Parties Payable due to management fee | |
| 147 | | |
| 126 | |
| |
| | | |
| | |
General
and Administrative Expenses
| |
For the Year Ended December 31, | |
| |
2021 | | |
2020 | |
| |
(U.S. dollars in thousands) | |
Management Fee | |
| ( | *)247 | |
| 100 | |
| |
| | | |
| | |
| (*) | Include
share based compensation $147 (see Note 4) |
Research
and development Expenses
| |
For the Year Ended December 31, | |
| |
2021 | | |
2020 | |
| |
(U.S. dollars in thousands) | |
Consulting Fee | |
| 267 | | |
| 149 | |
| |
| | | |
| | |
| (*) | Include
share based compensation $147 (see Note 4) |