UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

for the quarterly period ended March 31, 2022

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

for the transition period from ___________ to ___________

 

Commission file number 000-54649

 

SAMSARA LUGGAGE, INC.

(Exact name of registrant as specified in its charter)

  

Nevada  
26-0299456
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
     

135 E. 57th Street, Suite 18-130

New York, New York

  10022
(Address of principal executive offices)   (Zip Code)

  

(855)-256-7477

(Registrant’s telephone number, including area code)

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
         

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒     No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒     No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
    Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).  Yes ☐     No ☒

 

The number of shares of the registrant’s common stock outstanding as of May 23, 2022 was 2,152,945 shares.

 

 

 

 
 

 

SAMSARA LUGGAGE, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

 

  Page No.
PART I. FINANCIAL INFORMATION
     
Item 1. Interim Financial Statements (unaudited) 1
  Condensed Balance Sheets at March 31, 2022 (unaudited) and December 31, 2021 (audited) 1
  Condensed Statements of Operations for the Three Months Ended March 31, 2022 and 2021 (unaudited) 2
  Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the three months ended March 31, 2022 and 2021 (unaudited) 3
  Condensed Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (unaudited) 4
  Notes to Condensed Financial Statements (unaudited) 5
Item 2. Management’s Discussion and Analysis 17
Item 3. Quantitative and Qualitative Disclosures about Market Risk 22
Item 4. Controls and Procedures 22
     
PART II. OTHER INFORMATION
 
Item 1. Legal Proceedings 23
Item 1A. Risk Factors 23
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 23
Item 3. Defaults upon Senior Securities 23
Item 4. Mine Safety Disclosures 23
Item 5. Other Information 23
Item 6. Exhibits 23
  Signatures 25

 

i

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

SAMSARA LUGGAGE, INC.

CONDENSED BALANCE SHEETS

(Dollars in thousands, except per-share amounts)

 

    March 31,
2022
    December 31,
2021
 
    (Unaudited)        
             
Assets            
Current assets            
Cash and cash equivalents   $ 349     $ 827  
Inventory     188       94  
Other current assets     61       53  
Total current assets     598       974  
                 
Non-current assets                
Property and equipment, net     3       3  
Total assets   $ 601     $ 977  
                 
Liabilities and Stockholders’ Deficit                
Current liabilities                
Accounts payable   $ 55     $ 74  
Other current liabilities     54       131  
Related party payable     136       147  
Deferred revenue     26       26  
Convertible notes and short-term loans     460       256  
Conversion option derivative liability     611       1,017  
Warrant derivative liability     14       24  
Total current liabilities     1,356       1,675  
                 
Total liabilities     1,356       1,675  
                 
Stockholders’ Deficit                
Common stock, $0.0001 par value; 7,500,000,000 shares authorized; 2,152,945 and 2,055,487 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively.    
-
     
-
 
Additional paid-in capital     9,908       9,852  
Services receivable     (180 )     (356 )
Accumulated deficit     (10,483 )     (10,194 )
Total stockholders’ deficit     (755 )     (698 )
                 
Total Liabilities and Stockholders’ Deficit   $ 601     $ 977  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

1

 

 

SAMSARA LUGGAGE, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per-share amounts)

(Unaudited)

 

    For the Three Months Ended
March 31,
 
    2022     2021  
             
REVENUE   $ 31       75  
                 
COST OF GOODS SOLD     20       37  
                 
GROSS PROFIT     11       38  
                 
OPERATING EXPENSES                
Research and development     40       -  
Sales and marketing     246       61  
General and administrative     168       265  
TOTAL OPERATING EXPENSES     454       326  
                 
OPERATING LOSS     (443 )     (288 )
                 
FINANCING INCOME (EXPENSES)                
Interest expense     (208 )     (72 )
Income (expenses) in respect of warrants issued and convertible component in convertible loan, net interest expenses     362       (275 )
TOTAL FINANCING INCOME (EXPENSES)     154       (347 )
                 
NET LOSS   $ (289 )   $ (635 )
                 
Per-share data                
Basic and diluted loss per share   $ (0.14 )   $ (0.76 )
                 
Weighted average number of common shares outstanding     2,089,056       841,003  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

2

 

 

SAMSARA LUGGAGE, INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

(Dollars in thousands, except per-share amounts)

(Unaudited)

 

    Common Stock     Additional
Paid-In
    Services     Accumulated     Total
Stockholders’
(Deficit)
 
    Shares     Amount     Capital     receivable     Deficit     Equity  
Balance at January 1, 2022     2,055,487     $
            -
    $ 9,852     $ (356 )   $ (10,194 )   $ (698 )
Conversion of convertible debt into common shares     97,458      
-
      56      
-
     
-
      56  
Amortization of services     -      
-
     
-
      176      
-
      176  
Net loss     -      
-
     
-
     
-
      (289 )     (289 )
Balance at March 31, 2022 (unaudited)     2,152,945     $
-
    $ 9,908     $ (180 )   $ (10,483 )   $ (755 )
                                                 
Balance at January 1, 2021     786,700     $
-
    $ 6,463     $ (999 )   $ (6,376 )   $ (912 )
Conversion of convertible debt into common shares     62,464      
-
      308      
-
     
-
      308  
Amortization of services     -      
-
     
-
      159      
-
      159  
Net loss     -      
-
     
-
     
-
      (635 )     (635 )
Balance at March 31, 2021 (unaudited)     849,164     $
-
    $ 6,771     $ (840 )   $ (7,011 )   $ (1,080 )

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

3

 

 

SAMSARA LUGGAGE, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in thousands, except per-share amounts)

(Unaudited)

 

    For the Three Months Ended March 31,  
    2022     2021  
Cash Flows From Operating Activities            
Net loss   $ (289 )   $ (635 )
Adjustments to reconcile net loss to net cash used in operating activities                
Amortization of services receivable     176       159  
Interest on convertible note and short-term loan and amortization of issuance cost     208       74  
Expenses in respect of warrants issued and convertible component in convertible loan, net interest expenses     (364     275  
Change in operating assets and liabilities                
Inventory     (94 )     18  
Other current assets     (8     -  
Accounts payable     (19)       25  
Other current liabilities     (77 )     -  
Related parties payable     (11 )     38  
Net cash provided by (used) in operating activities     (478 )     (46 )
                 
Cash Flows From Investing Activities     -       -  
                 
Cash Flows From Financing Activities     -       -  
                 
Net change in cash and cash equivalents     (478 )     (46 )
                 
Cash and cash equivalents, beginning of period     827       54  
Cash and cash equivalents, end of period   $ 349     $ 8  
                 
Supplemental disclosure of cash flow information                
Cash paid for interest   $ -     $ -  
Cash paid for income tax   $ -     $ -  
                 
Non-cash investing and financing activities                
Common stock issued for conversion of convertible note and accrued interest   $ 56     $ 288  
Common stock issued against accounts payables   $ -     $ 20  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

4

 

 

SAMSARA LUGGAGE, INC.

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.

 

B. Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As of March 31, 2022, the Company had approximately $349 in cash and cash equivalents, approximately $758 in deficit of working capital, a stockholders’ deficiency of approximately $755 and an accumulated deficit of approximately $10,483. 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.

 

5

 

 

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

 

Unaudited Interim Financial Statements

 

The accompanying unaudited financial statements include the accounts of the Company, prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the financial statements presented herein have not been audited by an independent registered public accounting firm but include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial condition, results of operations and cash flows for the for three-months ended March 31, 2022. However, these results are not necessarily indicative of results for any other interim period or for the year ended December 31, 2022. The preparation of financial statements in conformity with GAAP requires the Company to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. Actual amounts could differ from these estimates.

 

Certain information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting principles have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission (“SEC”). The accompanying unaudited condensed financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on April 11, 2022 (the “Annual Report”). For further information, reference is made to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

 

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 the convertible notes and Going Concern.

 

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.

 

6

 

 

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.

 

7

 

 

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.)

 

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 March 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    
       -
     
       -
      611       611  
Fair value of warrants issued in convertible loan    
-
     
-
      14       14  
Total liabilities    
-
     
-
      625       625  

 

    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  

 

Reclassification

 

Certain comparative figures have been reclassified to conform to current period presentation.

 

Recent accounting pronouncements

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed, the Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on the Company’s financial position or results of operations upon adoption. 

 

8

 

 

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.

 

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 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:

 

    March 31,
2022
 
Common stock price   $ 0.6  
Expected volatility     270.18 %
Expected term     2.18 years  
Risk free rate     2.31 %
Expected dividend yield     0 %
Fair Market Value of Warrants   $ 6  

 

    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  

 

9

 

 

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.

 

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 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.

 

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:

 

    March 31,
2022
 
Common stock price   $ 0.6  
Expected volatility     267.55 %
Expected term (years)     3.43  
Risk free rate     2.44 %
Expected dividend yield     0 %
Fair Market Value of Warrants   $ 1  

 

    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  

 

10

 

 

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 $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.

 

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:

 

    March 31 ,
2022
 
Common stock price   $ 0.6  
Expected volatility     162.97 %
Expected term     1.02  
Risk free rate     1.64 %
Expected dividend yield     0 %
Fair Market Value of Convertible component   $ 89  

 

    December 31 ,
2021
 
Common stock price   $ 0.9585  
Expected volatility     275.94 %
Expected term     1.27  
Risk free rate     1.07 %
Expected dividend yield     0 %
Fair Market Value of Convertible component   $ 164  

 

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.

 

    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 balance sheet dates:

 

    March 31 ,
2022
 
Common stock price   $ 0.6  
Expected volatility     267.6 %
Expected term     4.02  
Risk free rate     2.43 %
Expected dividend yield     0 %
Fair Market Value of Warrants   $ 6  

 

    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  

 

11

 

 

SAMSARA LUGGAGE, INC.
NOTES TO FINANCIAL STATEMENTS

(U.S. dollars in thousands, except per share data) 

 

NOTE 3 – CONVERTIBLE NOTES (cont.)

 

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 $1,250 in three tranches, and the Company will issue convertible debentures and warrants to the Investor, in which each tranche is convertible into shares of the Company’s common stock, par value $0.0001 (the “Common Stock”). The first tranche in the principal amount of $500 was issued on June 7, 2021. The second tranche 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 tranche in the principal amount of $250 was  issued on September 7, 2021 following the Registration Statement being declared effective by the SEC.

 

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.

 

As of December 31, 2021 the third tranche from September 7, 2021 was fully converted into shares of Common Stock.

 

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.

 

On March 1, 2022, and pursuant to the SPA, 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.

 

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”).

 

12

 

 

SAMSARA LUGGAGE, INC.
NOTES TO FINANCIAL STATEMENTS

(U.S. dollars in thousands, except per share data) 

 

NOTE 3 – CONVERTIBLE NOTES (cont.)

 

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 balance sheet dates:

 

The following are the data and assumptions used as of the balance sheet dates:

 

    March 31 ,
2022
 
Common stock price   $ 0.6  
Expected volatility     94.76 %
Expected term     0.19 – 0.27
Risk free rate      0.39 – 0.55 %
Expected dividend yield     0 %
Fair Market Value of Convertible component   $ 319  

 

    December 31,
2021
 
Common stock price   $ 0.9585  
Expected volatility     86.8 – 87.57 %
Expected term     0.43 – 0.51  
Risk free rate     0.16 – 0.19 %
Expected dividend yield     0 %
Fair Market Value of Convertible component   $ 331  

 

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 $ 500, and the Company will issue convertible debentures to the Investor.

 

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 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.

 

13

 

 

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 date:

 

    March 31,
2022
 
Common stock price   $ 0.6  
Expected volatility     82.33 %
Expected term     0.71  
Risk free rate     1.3 %
Expected dividend yield     0 %
Fair Market Value of Convertible component   $ 204  

 

    December 31,
2021
 
Common stock price   $ 0.9585  
Expected volatility     205.2 %
Expected term     0.95  
Risk free rate     0.37 %
Expected dividend yield     0 %
Fair Market Value of Convertible component   $ 522  

 

The following table presents the changes in fair value of the level 3 liabilities for the periods ended March 31, 2022 and December 31, 2021:

 

    Warrants     Convertible
component
 
    (U.S. dollars in thousands)  
Outstanding at December 31, 2021     24       1,017  
Settled upon debt conversion    
-
      (4 )
Changes in fair value     (10 )     (402 )
Outstanding at March 31, 2022     14       611  

 

    Warrants     Convertible
component
 
    (U.S. dollars in thousands)  
Outstanding at December 31, 2021     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  

 

14

 

 

SAMSARA LUGGAGE, INC.
NOTES TO FINANCIAL STATEMENTS

(U.S. dollars in thousands, except per share data) 

 

NOTE 4 – STOCKHOLDERS’ EQUITY

 

Common Stock

 

On March 1, 2022, and pursuant to the SPA, 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.

 

NOTE 5 – RELATED PARTY TRANSACTIONS

 

Related party payable

 

    March 31,
2022
    December 31,
2021
 
    (U.S. dollars in thousands)  
Related party payable due to management fee     136       147  

 

General and Administrative Expenses

 

    For the period ended
March 31,
    For the period ended
March 31,
 
    2022     2021  
    (U.S. dollars in thousands)  
Management Fee    

25

      25  

 

Research and development Expenses

 

    For the period ended
March 31,
    For the period ended
March 31,
 
    2022     2021  
    (U.S. dollars in thousands)  
Consulting Fee     32       -  

 

NOTE 6 – SUBSEQUENT EVENTS

 

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 $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”).

 

15

 

 

SAMSARA LUGGAGE, INC.
NOTES TO FINANCIAL STATEMENTS

(U.S. dollars in thousands, except per share data) 

 

NOTE 6 – SUBSEQUENT EVENTS (cont.)

 

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%).

 

Series A Preferred Stock Purchase Agreement

 

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 “Investor”) pursuant to which the Company issued and sold to the Investor 148,062 shares of Series A Preferred Stock for a purchase price of $128,750.00.

 

Pursuant to the SPA, the 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 Investor may not convert the Series A Preferred Stock to the extent that such conversion would result in beneficial ownership by the Investor and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock.

 

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 110%; if such prepayment is made between the 181st day and the 730th day after the issuance of the Series A Preferred Stock, then such redemption premium is 120%. After the 730th day following the Issuance Date, there shall be no further right of redemption.

 

In connection with the Certificate of Designation, the Company agreed to cause its transfer agent to reserve four times the number of shares of Common Stock that would be issuable upon full conversion of the Series A Preferred Stock (assuming that the 4.99% limitation set forth in herein is not in effect) (based on the respective Conversion Price of the Series A Preferred Stock in effect from time to time).

16

 

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes included elsewhere in this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2021. Some of the information contained in this discussion and analysis, particularly with respect to our plans and strategy for our business and related financing, includes forward-looking statements within the meanings of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, including statements regarding expectations, beliefs, intentions or strategies for the future. When used in this report, the terms “anticipate,” “believe,” “estimate,” “expect,” “can,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and words or phrases of similar import, as they relate to our company or our management, are intended to identify forward-looking statements. We intend that all forward-looking statements be subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are only predictions and reflect our views as of the date they are made with respect to future events and financial performance, and we undertake no obligation to update or revise, nor do we have a policy of updating or revising, any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as may be required under applicable law. Forward-looking statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements as a result of several factors including those set forth under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, and in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.

 

The Company notes that in addition to the description of historical facts contained herein, this report contains certain forward-looking statements that involve risks and uncertainties as detailed herein and from time to time in the Company’s other filings with the Securities and Exchange Commission and elsewhere. Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those, described in the forward-looking statements. These factors include, among others: (a) the Company’s fluctuations in sales and operating results; (b) risks associated with international operations; (c) regulatory, competitive and contractual risks; (d) development risks; (e) the ability to achieve strategic initiatives, including but not limited to the ability to achieve sales growth across the business segments through a combination of enhanced sales force, new products, and customer service; and (f) pending litigation.

 

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 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 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.  

 

17

 

 

Recent Developments

 

Next-Gen Suitcases

 

During the third quarter of 2021, the Company increased its R&D, manufacturing capabilities and strategic marketing activities in preparation for the launch of the first product from its Next Gen line of travel luggage and coordinating accessories. As of the fourth quarter of 2021, Samsara continued developing new digital marketing assets in preparation for the launch of its next collection of smart luggage. The company’s newest collection launched in April of 2022, which designed to adapt to the changing travel landscape despite the interruptions to the global supply chain.

 

During the first quarter of 2022, Samsara Luggage Inc. executed a new strategic marketing campaign in conjunction with the planned launch of the first model from the Next Gen line of smart luggage, the Tag Smart. The Company leveraged its supply chain and manufacturing capabilities to complete the first production of the new product that was released to the market in April of 2022. The Tag Smart Collection was added to the Next Gen line of smart luggage in response to the global supply chain disruptions and to give consumers more variety and options when selecting smart luggage. The Tag Smart collection was launched along with a line of coordinating travel accessories.

 

Samsara Luggage Inc. launched the Tag Smart collection of smart suitcases and travel accessories. The Tag Smart suitcase was introduced into the luggage market for consumers looking for precise and accurate tracking of their suitcase using technology that was familiar and user-friendly. The Tag Smart suitcase is the first of its kind and designed specifically for the Apple AirTag. The suitcase has a special compartment that secures the Apple AirTag from the interior of the suitcase. The suitcase comes with a customized AirTag with the Samsara logo on one side and Apple logo on the other. One side of the logo is visible from the exterior and protected with a transparent plastic. Consumers can track their suitcase using the Find My app that is standard on all iPhones. It is the same tracking solution that tracks all Apple devices and is streamlined for the Apple enthusiast.

 

The Tag Smart model is the first product in the Next Gen line of smart suitcases. The Next Gen collection was unveiled at CES in January 2020. This model is WiFi smart and equipped with a smart unit that has GPS tracking and WiFi Hotspot technology. The smart unit doubles as a portable wireless charger.

 

The WiFi smart model of the Next Gen collection will be the next model to launch in the coming months.

 

Sarah & Sam

 

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.

 

As of the first quarter of 2022, Sarah & Sam Fashion and Lifestyle Collection continues to add a cluster of sales for the Company and therefore will remain active and part of Samsara Luggage’s business model.

 

The online, Direct-to-consumer (D2C) fashion brand adds a consistent stream of sales and allows the company to expand its reach and online consumer data. Sarah & Sam utilizes Samsara Luggage’s digital assets and manufacturing and fulfillment supply chain capabilities to offer additional consumer products that respond to the changing needs of the market.

 

18

 

 

YAII PN Ltd. Convertible Debentures

 

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.

  

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.

 

As of the date of this filing, $210,000 of the Second Convertible Debenture and the full $250,000 of the Third Convertible Debenture were converted into shares of common stock.

 

19

 

 

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. 

 

Results of Operations

 

Three months ended March 31, 2022 compared to the three months ended March 31, 2021

 

Revenue

 

The Company generates revenues through the sale and distribution of smart luggage products. Revenues during the three months ended March 31, 2022 totaled $31,000 compared to $75,000 for the three months ended March 31, 2021. The decrease in the total revenue is mainly due to lower demand in the current period. The company was mostly engaged and invested in developing the new line of products without adding new inventory for sales of the older model. Therefore sales activities were focused on brand awareness rather than of sales, to come prepared for the launch that started in the second quarter of 2022.

 

Costs of Sales

 

Costs of sales consists of the purchase of raw materials and the cost of production. Cost of revenues during the three months ended March 31, 2022 totaled $20,000 compared to $37,000 for the three months ended March 31, 2021. The decrease in the costs of sales is mainly due to the decrease in sales.

 

Gross Profit

 

During the three months ended March 31, 2022, Gross Profit totaled $11,000, representing a Gross Profit margin of 35.48%. During the three months ended March 31, 2021, Gross Profit totaled $38,000, representing a Gross Profit margin of 50.66%.

 

Operating Expenses

 

Operating expenses totaled $454,000 during the three months ended March 31, 2022, compared to $326,000 during the three months ended March 31, 2021, representing a net increase of $128,000. The increase in operating expenses is mainly due to an increase in selling and marketing expenses resulting from increased marketing activities relating to the new line of products.

 

Net Profit/Loss 

 

We realized a net loss of $289,000 for the three months ended March 31, 2022, as compared to a net loss of $635,000 for the three months ended March 31, 2021, for the reasons described above.

 

20

 

 

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 March 31, 2022, the Company had $349,000 of cash, total current assets of $598,000, and total current liabilities of 1,356,000, creating a working capital deficit of $758,000. As of December 31, 2021, the Company had $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 increase in our working capital deficit was mainly attributable to a decrease of $478,000 in cash and cash equivalents and an increase in convertible notes payable of $204,000, partially offset by increases of $94,000 of inventory of $94,000 and $8,000 of other current assets, and decreases of $19,000 of accounts payable, $77,000 of other current liabilities, $11,000 of related party payables, $406,000 in the fair value of the Conversion Option Derivative Liability and $10,000 of the Warrant derivative liability.

 

Net cash used in operating activities was $478,000 for the three months ended March 31, 2022, as compared to cash used in operating activities of $46,000 for the three months ended March 31, 2021. The Company’s primary uses of cash have been for research and development expenses, sales and marketing expenses, and working capital purposes.

 

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.

 

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.

 

21

 

  

Item 3. - Quantitative and Qualitative Disclosures about Market Risk

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information necessary under this item.

 

Item 4. - Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. The controls evaluation was conducted under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Disclosure controls and procedures are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures are also designed to reasonably assure that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

  

Based on the controls evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the Commission, and that material information relating to our company and our consolidated subsidiary is made known to management, including the Chief Executive Officer and Chief Financial Officer, particularly during the period when our periodic reports are being prepared.

 

Inherent Limitations on Effectiveness of Controls

 

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within a company have been detected.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15f and 15d-15f under the Exchange Act) that occurred during the quarter ended March 31, 2022 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

 

22

 

 

Part II: Other Information

 

Item 1 - 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 any of our directors, officers or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interests.

 

Item 1A. Risk Factors

 

There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

   

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosure

 

Not applicable.

 

Item 5. Other Information

 

None.

  

Item 6. Exhibits

 

Exhibit No.    Description
2.1   Merger Agreement, dated May 10, 2019, among the Company, Avraham Bengio, and Samsara Luggage, Inc. (filed as Exhibit 10.1 to the Company’s Form 8-K filed on May 10, 2019 and incorporated herein by reference).
3.1   Articles of Incorporation of the Company (filed as Exhibit 3.1 to the Company’s Form S-1 (File No. 333-176969) filed on September 23, 2011 and incorporated herein by reference).
3.2   Certificate of Amendment to Articles of Incorporation (filed as Exhibit 3.1 to the Company’s current Report on Form 8-K filed on November 12, 2019 and incorporated herein by reference).
3.3   Articles of Merger (filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on November 12, 2019 and incorporated herein by reference).
3.4   Amended Bylaws (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 14, 2019 and incorporated herein by reference).
3.5   Certificate of Change to Articles of Incorporation (filed as Exhibit 3.1 to the Company’s current report on Form 8-K filed on March 22, 2021 and incorporated herein by reference).
3.6   Certificate of Change to the Articles of Incorporation Form of Convertible Debenture (incorporated by reference into the Company’s Form 8-K filed with the United States Securities and Exchange Commission on March 22, 2021).
10.1   Securities Purchase Agreement, dated June 5, 2019, between the Company and YAII PN, Ltd. (filed as Exhibit 10.1 to the Company’s Form 8-K filed on June 7, 2019 and incorporated herein by reference).
10.2   Form of Share Purchase Agreement, signed on September 26, 2019, between the Company and investors who invested $500,000 in the Company (filed as Exhibit 10.1 to the Company’s Form 8-K filed on October 2, 2019 and incorporated herein by reference).

 

23

 

 

10.3   Assignment and Assumption Agreement, dated as of November 12, 2019, between the Company and Avraham Bengio (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 12, 2019 and incorporated herein by reference).
10.4   License Agreement dated as of July 18, 2019, between the Company and Sterling/Winters Company, a California corporation, doing business as Meharey MIVI LLC (filed as Exhibit 10.4 to the Company’s Annual Report on Form 10-K filed on February 3, 2020 and incorporated herein by reference).
10.5   Securities Purchase Agreement, dated June 25, 2020, between the Company and Power Up Lending Group Ltd. (filed as Exhibit 10.1 to the Company’s Form 10-Q filed on June 29, 2020 and incorporated herein by reference).
10.6   Securities Purchase Agreement, dated September 3, 2020, between the Company and YAII PN, Ltd. (filed as Exhibit 10.1 to the Company’s Form 8-K filed on September 4, 2020 and incorporated herein by reference).
10.7   Form of Convertible Debenture between the Company and YAII PN, Ltd. (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 4, 2020 and incorporated herein by reference).
10.8   Form of Warrant to Purchase Common Stock between the Company and YAII PN, Ltd. (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on September 4, 2020 and incorporated herein by reference).
10.9   Securities Purchase Agreement, signed April 6, 2021, between Samsara Luggage, Inc. and YAII PN, Ltd. (incorporated by reference into the Company’s Form 8-K filed with the United States Securities and Exchange Commission on April 7, 2021)
10.10   Form of Convertible Debenture (incorporated by reference into the Company’s Form 8-K filed with the United States Securities and Exchange Commission on April 7, 2021)  
10.11   Form of Warrant to Purchase Common Stock (incorporated by reference into the Company’s Form 8-K filed with the United States Securities and Exchange Commission on April 7, 2021)  
10.12   Securities Purchase Agreement, dated June 7, 2021, between the Company and YA II PN Ltd. (incorporated by reference into the Company’s Form 8-K filed with the United States Securities and Exchange Commission on June 10, 2021)  
10.13   Convertible Debenture, dated June 7, 2021, between the Company and YA II PN Ltd. (incorporated by reference into the Company’s Form 8-K filed with the United States Securities and Exchange Commission on June 10, 2021)  
10.14   Registration Rights Agreement, dated June 7, 2021, between the Company and YA II PN Ltd. (incorporated by reference into the Company’s Form 8-K filed with the United States Securities and Exchange Commission on June 10, 2021)  
10.15   Securities Purchase Agreement, dated December 14, 2021, by and between the Company and YA II PN Ltd. (incorporated by reference into the Company’s Form 8-K filed with the United States Securities and Exchange Commission on December 14, 2021)
10.16   Convertible Debenture, dated December 14, 2021, by and between the Company and YA II PN Ltd. (incorporated by reference into the Company’s Form 8-K filed with the United States Securities and Exchange Commission on December 14, 2021)
14.1   Code of Ethics (filed as Exhibit 14.1 to the Company’s Annual Report on Form 10-K filed on February 3, 2020 and incorporated herein by reference).
31*   Section 302 Certification of the Sarbanes-Oxley Act of 2002 of Atara Dzikowski
32*   Section 906 Certification of the Sarbanes-Oxley Act of 2002 of Atara Dzikowski
101.INS   Inline XBRL Instance Document.
101.SCH   Inline XBRL Taxonomy Extension Schema Document.
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

* 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.

 

24

 

 

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: May 23, 2022 By: /s/ Atara Dzikowski
    Atara Dzikowski
    Chief Executive Officer
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)

 

 

25

 

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