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 June 30, 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.
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On October 5, 2020, the Board of Directors of the Company approved, and the
holders of a majority of the outstanding shares of our common stock, par value
$0.0001 per share, (the "Common Stock"), executed a written consent in lieu of a
meeting that approved, amending the Company's Articles of Incorporation to
increase the number of authorized shares of common stock from 5,000,000,000 to
7,500,000,000 (the "Authorized Capital Increase"). On November 3, 2020, the
Company effected the Authorized Capital Increase by filing with the Secretary of
State of the State of Nevada a Certificate of Amendment amending the Company's
Articles of Incorporation to increase the number of authorized shares of common
stock from 5,000,000,000 to 7,500,000,000.
On May 12, 2022, the Company established a series of redeemable convertible
preferred stock (the "Series A Preferred Stock"), par value $0.0001 per share,
pursuant to a Certificate of Designation, Preference and Rights of Series A
Preferred Stock of the Company (the "Certificate of Designation"). Pursuant to
the Certificate of Designation, the Company authorized 1,000,000 shares of the
Series A Preferred Stock, which may be convertible into shares of common stock,
par value $0.0001 per share, of the Company (the "Common Stock") at the option
of the holders thereof at any time after the issuance of the Series A Preferred
Stock, at a conversion price equal a Variable Conversion Price (the "Conversion
Price"). The "Variable Conversion Price" means 80% multiplied by the Market
Price (representing a discount rate of 20%). The "Market Price" means the
average of the lowest two (2) Trading Prices (as defined below) for the Common
Stock during the ten (10) Trading Day period ending on the latest complete
trading day prior to the conversion date. The "Trading Price" means, for any
security as of any date, the actual closing price on the OTCQB, OTCQX, Pink
Sheets electronic quotation system or applicable trading market (the "OTC"). The
Series A Preferred Stock will, with respect to dividend rights and rights upon
liquidation, winding-up or dissolution, rank: (a) senior with respect to
dividends and right of liquidation with the Company's Common Stock and (b)
junior with respect to dividends and right of liquidation to all existing and
future indebtedness of the Company and existing and outstanding preferred stock
of the Company. The Series A Preferred Stock shall have no right to vote on any
matters requiring shareholder approval or any matters on which the shareholders
are permitted to vote. Each share of Series A Preferred Stock will carry an
annual dividend in the amount of six percent (6%) of the price per share of
Series A Preferred Stock of $1.00 (the "Divided Rate"), which shall be
cumulative, payable solely upon redemption, liquidation or conversion. Upon the
occurrence of an event of default (as further defined further in the Certificate
of Designation), the Dividend Rate shall automatically increase to fifteen
percent (15%).
On July 6, 2022, the Company filed a Certificate of Amendment to its Articles of
Incorporation with the Secretary of State of the State of Nevada, moving its
official headquarters to 135 East 57th Street, Suite 18-130 New York, NY. The
Company's telephone number remains the same, phone: (877) 421-1574.
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Recent Developments
Tag Smart Suitcases
Samsara Luggage launched its new Tag Smart line of smart suitcases that are
combined with Apple AirTag technology in April of 2022 and has since executed a
targeted online marketing campaign to grow its audience and increase sales. This
first product from the Next Gen collection offers travelers precise tracking
technology that can solve one of the most common pain points in travel - lost
luggage. Tag Smart was added to the Next Gen collection to offer travelers
user-friendly technology that could accurately locate luggage using Apple
technology. The digital assets from the new "Find My" online marketing campaign
was strategically unveiled both on the Company's website and various social
media platforms.
Samsara Luggage has focused its efforts on promoting the new Tag Smart
collection through strategic advertising placements and public relations
initiatives. The Company has actively targeted travel, technology, and lifestyle
outlets to promote the new product and continue to establish the D2C brand as
reputable. Samara also partnered with a popular tech influencer to do an
'unboxing' segment for Instagram and YouTube that included a gift with purchase
promotion. All the PR and marketing initiatives were designed to increase
traffic to the website and visibility of the brand.
The Next Gen collection was first unveiled at CES in January 2020. These models
offered a WIFI Hotspot feature, GPS tracking and a portable wireless charger.
The company is preparing to launch the WIFI Smart model of the Next Gen
collection in the coming months.
Sarah & Sam
During the fourth quarter of 2020, Samsara launched its 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.
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1800 Diagonal Lending LLC Series A Preferred Stock Issuance
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).
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.
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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.
20
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
Six months ended June 30, 2022 compared to the six months ended June 30, 2021
Revenue
The Company generates revenues through the sale and distribution of smart
luggage products and sales through the Sarah & Sam fashion brand. Revenues
during the six months ended June 30, 2022 totaled $143,000 compared to $184,000
for the six months ended June 30, 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. Sales activities were focused on brand awareness
to prepare for the launch that started in the second quarter of 2022.
Revenues for the three months ended June 30, 2022 totaled $112,000 compared to
$31,000 for the three months ended March 31, 2022. Luggage sales for the three
months ended June 30, 2022 totaled $90,000 compared to $11,000 for the three
months ended March 31, 2022 representing an increase of 718% due to the
abovementioned launch of a new product line.
Costs of Revenue
Costs of revenue consists of the purchase of raw materials and the cost of
production. Cost of revenues during the six months ended June 30, 2022 totaled
$81,000 compared to $141,000 for the six months ended June 30, 2021. The
decrease in the costs of revenue is mainly due to decrease in sales as described
above.
Costs of revenues for the three months ended June 30, 2022 totaled $61,000
compared to $20,000 for the three months ended March 31, 2022. Costs of revenue
related to luggage sales for the three months ended June 30, 2022 totaled
$52,000 compared to $8,000 for the three months ended March 31, 2022
representing an increase of 550% due to the increase in sales resulting from the
abovementioned launch of a new product line.
Gross Profit
During the six months ended June 30, 2022, Gross Profit totaled $62,000,
representing a Gross Profit margin of 43.36%. During the six months ended
June 30, 2021, Gross Profit totaled $43,000, representing a Gross Profit margin
of 23.37%.
Operating Expenses
Operating expenses totaled $905,000 during the six months ended June 30, 2022,
compared to $777,000 during the six months ended June 30, 2021, representing a
net increase of $128,000. The increase in the operating expenses is mainly due
to an increase in sales and marketing activities in preparation for the launch
of the new line in the current quarter.
Financing Income (expenses)
Financing expenses totaled $388,000 during the six months ended June 30, 2022
compared to a financing income of $1,743,000 during the six months ended
June 30, 2021 representing a net decrease of 1,355,000. The decrease in the
financing expenses is mainly due to a gain from the movement in the fair value
of the derivatives partially offset by an increase in interest expense relating
to the outstanding convertible notes.
Net Profit/Loss
We realized a net loss of $1,231,000 for the six months ended June 31, 2022, as
compared to a net loss of $2,477,000 for the six months ended June 31, 2021, for
the reasons described above.
21
Three months ended June 30, 2022 compared to the three months ended June 30,
2021
Revenue
The Company generates revenues through the sale and distribution of smart
luggage products and sales through the Sarah & Sam fashion brand. Revenues
during the three months ended June 30, 2022 totaled $112,000 compared to
$109,000 for the three months ended June 30, 2021. The increase in the total
revenue is mainly due to the launch of a new line in the current quarter.
Costs of Revenue
Costs of revenue consists of the purchase of raw materials and the cost of
production. Cost of revenues during the three months ended June 30, 2022 totaled
$61,000 compared to $104,000 for the three months ended June 30, 2021.
Gross Profit
During the three months ended June 30, 2022, Gross Profit totaled $51,000,
representing a Gross Profit margin of 45.54%. During the three months ended
June 30, 2021, Gross Profit totaled $5,000, representing a Gross Profit margin
of 4.59%.
Operating Expenses
Operating expenses totaled $451,000 during the three months ended June 30, 2022,
compared to $451,000 during the three months ended June 30, 2021. A decrease in
general and administrative expenses was offset by an increase in sales and
marketing activities in preparation for the launch of the new line in the
current quarter.
Financing Income (expenses)
Financing expenses totaled $542,000 during the three months ended June 30, 2022
compared to financing expenses of $1,396,000 during the three months ended
June 30, 2021 representing a net decrease of 854,000. The decrease in the
financing expenses is mainly due to a decrease in the movement in the fair value
of the derivatives partially offset by an increase in interest expense relating
to the outstanding convertible notes.
Net Profit/Loss
We realized a net loss of $942,000 for the three months ended June 31, 2022, as
compared to a net loss of $1,842,000 for the three months ended June 31, 2021,
for the reasons described above.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current
and future operations, satisfy its obligations, and otherwise operate on an
ongoing basis. Significant factors in the management of liquidity are funds
generated by operations, levels of accounts receivable and accounts payable and
capital expenditures.
As of June 30, 2022, the Company had $101,000 of cash, total current assets of
$457,000, and total current liabilities of 1,696,000, creating a working capital
deficit of $1,239,000. 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 decreases
of $726,000 in cash and cash equivalents and $43,000 in other current assets,
increases in convertible notes payable of $558,000 and deferred revenues of
$38,000, partially offset by increases in inventory of $252,000 and decreases of
$52,000 of accounts payable, $120,000 of other current liabilities, $36,000 of
related party payables, $347,000 in the fair value of the Conversion Option
Derivative Liability and $20,000 of the Warrant derivative liability.
Net cash used in operating activities was $855,000 for the six months ended June
30, 2022, as compared to cash used in operating activities of $285,000 for the
six months ended June 30, 2021. The Company's primary uses of cash have been for
research and development expenses, sales and marketing expenses, and working
capital purposes.
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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.
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