The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
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. |
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.
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.
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.
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.
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 | |
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 | |
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 | |
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”).
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.
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 | |
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”).
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).