(U.S. dollars in thousands
except share and per share data)
The accompanying notes are an integral part of
these unaudited condensed financial statements
The accompanying notes are an integral part of
these unaudited condensed financial statements
The accompanying notes are an integral part of
these unaudited condensed financial statements
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
(Amounts in U.S. dollar
thousands, except share and per share data)
NOTE 1 – GENERAL
|
A.
|
Samsara Luggage, Inc. (the “Company”)
|
The
Company was incorporated on May 7, 2007 under the name, “Darkstar Ventures, Inc.” under the laws of the State of
Nevada. The Company is a global smart luggage and smart travel brand. Samsara Luggage unveiled its Next Generation smart
carry-on at the 2020 Consumer Electronics Show (CES). The Next Generation is the first to market a Wi-Fi Hotspot technology for
travelers to access a secured network globally. Samsara Luggage also launched Essentials by Samsara, a safety kit providing
commuters with a new layer of safety with protective items like facemasks, hand sanitizer, disposable gloves and alcohol wipes.
These kits are sold individually and gifted to customers with purchase of the Carry-on Aluminum suitcase or Smart
Weekender bag. During the last quarter of 2020, Samsara launched Sarah & Sam Fashion and Lifestyle Collection. Sarah
& Sam is a part of Samsara Direct business model prompted by the travel limitations due to the coronavirus pandemic, leveraging
the company’s established digital assets and manufacturing and fulfillment supply chain capabilities to offer additional consumer
products that respond to the changing needs of the market.
On November 12, 2019, the Company completed
its merger with the Delaware corporation that was previously known as “Samsara Luggage, Inc.” (“Samsara Delaware”)
in accordance with the terms of the Merger Agreement and Plan of Merger, dated as of May 10, 2019, (the “Merger Agreement”)
by and among the Company, Samsara Delaware, and Avraham Bengio, pursuant to which Samsara Delaware merged with and into the Company,
with the Company being the surviving corporation (the “Merger”). Following the completion of the Merger, the business of
the Company going forward became the business of Samsara Delaware prior to the Merger, namely, designing, manufacturing, and selling
high quality luggage products to meet the evolving needs of frequent travelers and also seeking to present new technologies within the
aluminum luggage industry, including an aluminum “smart” suitcase.
The Common Stock listed on the OTC
Pink Marketplace, previously trading through the close of business on November 11, 2019 under the ticker symbol “DAVC,” commenced
trading on the OTC Pink Marketplace under the ticker symbol “SAML” on November 12, 2019. The Common Stock has a new CUSIP
number, 79589J101.
On October 5, 2020 the Board of Directors
of the Company has approved, and the holders of a majority of the outstanding shares of our common stock, par value $0.0001 per
share (the “Common Stock”), have executed a written consent in lieu of a special meeting approving to amend the Company’s
Articles of Incorporation to increase the number of authorized shares of common stock from 5,000,000,000 to 7,500,000,000 (the “Authorized
Capital Increase”).
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As of March 31, 2021, the Company had approximately $8
in cash and cash equivalents, approximately $1,084 in deficit of working capital, a stockholders’ deficiency of approximately $1,080
and an accumulated deficit of approximately $7,011. 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 UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share
and per share data)
NOTE 1 – GENERAL (CONT.)
On March 22, 2021, the Company completed
a reverse stock split of its common stock. As a result of the reverse stock split, the following changes have occurred (i) every seven
thousand shares of common stock have been combined into one share of common stock; (ii) the number of shares of common stock underlying
each common stock option or common stock warrant have been proportionately decreased on a 7,000-for-1 basis, and the exercise price of
each such outstanding stock option and common warrant has been proportionately increased on a 7,000 -for-1 basis. Accordingly, all option
numbers, share numbers, warrant numbers, share prices, warrant prices, exercise prices and losses per share have been adjusted within
these consolidated financial statements, on a retroactive basis, to reflect this 7,000 -for-1 reverse stock split.
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, 2021. However, these results are not necessarily indicative of results for any other interim period or for the year ended
December 31, 2021. 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, 2020, filed with the SEC on March 30, 2021 (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, 2020.
SAMSARA LUGGAGE, INC.
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
(Amounts in U.S. dollar
thousands, except share and per share data)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES AND BASIS OF PRESENTATION (cont.)
Use of Estimates
The preparation of unaudited condensed financial
statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, certain revenues and expenses, and disclosure of contingent assets
and liabilities as of the date of the financial statements. Actual results could differ from those estimates. Estimates are used when
accounting for Warrants and Convertible Note and Going Concern.
Derivative 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, accounts 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 measurements.
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.
SAMSARA LUGGAGE, INC.
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
(Amounts in U.S. dollar
thousands, except share and per share data)
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: (i) 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’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, 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
|
|
|
-
|
|
|
|
-
|
|
|
|
484
|
|
|
|
484
|
|
Fair value of warrants issued in convertible loan
|
|
|
-
|
|
|
|
-
|
|
|
|
32
|
|
|
|
32
|
|
Total liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
516
|
|
|
|
516
|
|
|
|
Balance
as of December 31, 2020
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
|
|
(U.S. dollars in thousands)
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
of convertible component in convertible loan, net of discounts and debt issue costs
|
|
|
-
|
|
|
|
-
|
|
|
|
493
|
|
|
|
493
|
|
Fair value of warrants issued
in convertible loan
|
|
|
-
|
|
|
|
-
|
|
|
|
20
|
|
|
|
20
|
|
Total liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
513
|
|
|
|
513
|
|
SAMSARA LUGGAGE, INC.
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
(Amounts in U.S. dollar
thousands, except share and per share data)
Recently Issued Accounting Standards
In August 2020, the FASB issued ASU No.
2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity s Own Equity
(Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity s Own Equity. ASU 2020-06 will simplify
the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible
preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host
contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded
conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that
do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums
for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception
for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 will be effective
for public companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption
is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.
The Company is currently evaluating the impact that the adoption of ASU 2020-06 will have on the Company’s consolidated financial
statement presentation or disclosures.
Other new pronouncements issued but not effective
as of March 31, 2021 are not expected to have a material impact on the Company’s consolidated financial statements.
SAMSARA LUGGAGE, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share
and per share data)
NOTE 3 – CONVERTIBLE NOTES
|
A.
|
On June 5, 2019, the Company entered
into a Securities Purchase Agreement (“SPA”) with YAII PN, Ltd. (the “Investor”),
pursuant to which the Investor agreed to provide the Company with a convertible loan in the
aggregate amount of $1,100,000 in three tranches, and the Company agreed to issue convertible
debentures and a warrant to the Investor.
|
The first tranche of the convertible
debentures in the amount of $200,000 was provided upon execution of the SPA. The second tranche in the amount of $300,000 was provided
on October 23, 2019 upon the Company filing of a Registration Statement on Form S-4 in connection with the Merger with Samsara Delaware.
The third tranche in the amount of $600,000 was provided on November 18, 2019 upon consummation of the Merger with Samsara Delaware and
the fulfillment of all conditions required for the Merger. The Company incurred issuance cost of $100,000 with connection to those convertible
debentures.
Each tranche of the loan will bear
interest at an annual rate of ten percent (10%). The principal amount together with the accrued and unpaid interest will be repayable
after two years. Each tranche of the loan together with the accrued and unpaid interest (or any portion at the discretion of the Investor)
will be convertible at any time six months following the issuance date, into shares of Company’s common stock at a conversion price
equal to the lower of $0.003 per share or 80% of the lowest volume-weighted average price (VWAP) of Company’s share during the
period of 10 days preceding the conversion date.
On December 9, 2019 and pursuant to
the SPA, YAII exercised its option to convert the first Convertible Promissory Note principal amount of $200,000 and the accrued interest
into 9,988 shares of Common Stock of the Company.
On July 24, 2020 and pursuant to the
SPA, YAII exercised its option to convert the second Convertible Promissory Note principal amount of $50,000 and the accrued interest
in the amount of $22,684 into 12,979 shares of Common Stock of the Company.
On August 5, 2020 and pursuant
to the SPA, YAII exercised its option to convert the second Convertible Promissory Note principal amount of $75,000 and the accrued interest
in the amount of $753 into 21,644 shares of Common Stock of the Company.
On August 13, 2020 and pursuant to
the SPA, YAII exercised its option to convert the second Convertible Promissory Note principal amount of $75,000 and the accrued interest
in the amount of $481 into 21,522 shares of Common Stock of the Company.
On October 12, 2020 and pursuant to
the SPA, YAII exercised its option to convert the second Convertible Promissory Note principal in the amount of $50,000 and the accrued
interest in the amount of $1,671 into 18,454 shares of Common Stock of the Company.
On November 2, 2020 and pursuant to
the SPA, YAII exercised its option to convert the second Convertible Promissory Note principal in the amount of $50,000 and the accrued
interest in the amount of $288 into 23,947 shares of Common Stock of the Company.
On November 16, 2020 and pursuant to
the SPA, YAII exercised its option to convert the second Convertible Promissory Note principal in the amount of $10,000 and the accrued
interest in the amount of $30,323 into 28,802 shares of Common Stock of the Company.
On November 19, 2020 and pursuant to
the SPA, YAII exercised its option to convert the second Convertible Promissory Note principal in the amount of $45,000 and the accrued
interest in the amount of $159 into 32,256 shares of Common Stock of the Company.
On December 17, 2020 and pursuant to
the SPA, YAII exercised its option to convert the second Convertible Promissory Note principal in the amount of $45,000 and the accrued
interest in the amount of $4,104 into 35,074 shares of Common Stock of the Company.
SAMSARA LUGGAGE, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share
and per share data)
On January 14, 2021 and pursuant to
the SPA, YAII exercised its option to convert the second Convertible Promissory Note principal in the amount of $50,000 and the accrued
interest in the amount of $3,625 into 38,303 shares of Common Stock of the Company.
On February 11, 2021 and pursuant to
the SPA, YAII exercised its option to convert the second Convertible Promissory Note principal in the amount of $55,000 and the accrued
interest in the amount of $3,496 into 16,713 shares of Common Stock of the Company.
In accordance with ASC 815-15-25 the
conversion feature was considered embedded derivative instruments, and is to be recorded at their fair value as its fair value can be
separated from the convertible loan and its conversion is independent of the underlying note value. The Company recorded finance expenses
in respect of the convertible component in the convertible loan in the excess amount of the convertible component fair value over the
face loan amount. The conversion liability is then marked to market each reporting period with the resulting gains or losses shown in
the statements of operations.
The fair value of the convertible component
was estimated by third party appraiser using the Monte Carlo Simulation Model to compute the fair value of the derivative and to mark
to market the fair value of the derivative at each balance sheet date. The following are the data and assumptions used as of the
balance sheet dates:
|
|
March 31,
2021
|
|
Common stock price
|
|
|
2.20
|
|
Expected volatility
|
|
|
349.98
|
%
|
Expected term
|
|
|
0.18
|
|
Risk free rate
|
|
|
0.01
|
%
|
|
|
|
|
|
Forfeiture rate
|
|
|
0
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
Fair Market Value of Convertible component
|
|
$
|
308
|
|
|
|
December 31,
2020
|
|
Common stock price
|
|
|
1.40
|
|
Expected volatility
|
|
|
227.88
|
%
|
Expected term
|
|
|
0.43
|
|
Risk free rate
|
|
|
0.19
|
%
|
Forfeiture rate
|
|
|
0
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
Fair Market Value of Convertible component
|
|
$
|
330
|
|
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.
SAMSARA LUGGAGE, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share
and per share data)
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,
2021
|
|
Common stock price
|
|
|
2.20
|
|
Expected volatility
|
|
|
251.36
|
%
|
Expected term
|
|
|
3.18 years
|
|
Risk free rate
|
|
|
0.4
|
%
|
|
|
|
|
|
Expected dividend yield
|
|
|
0
|
%
|
Fair Market Value of Warrants
|
|
$
|
27
|
|
|
|
December 31,
2020
|
|
Common stock price
|
|
|
1.40
|
|
Expected volatility
|
|
|
227.88
|
%
|
Expected term
|
|
|
3.43 years
|
|
Risk free rate
|
|
|
0.19
|
%
|
|
|
|
|
|
Expected dividend yield
|
|
|
0
|
%
|
Fair Market Value of Warrants
|
|
$
|
16
|
|
SAMSARA LUGGAGE, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share
and per share data)
|
B.
|
On September 3, 2020, Samsara Luggage,
Inc. (the “Company”) entered into a second Securities Purchase Agreement (“SPA”)
with the “Investor, pursuant to which the Investor will invest an aggregate amount
of $220 in two tranches, and the Company will issue convertible debentures and warrants to
the Investor. The first tranche of the convertible debentures in the amount of $150 was provided
upon execution of the SPA. The second tranche in the amount of $70 was provided on October
7, 2020. Each tranche of the loan bears interest at an annual rate of ten percent (10%).
Each tranche of the investment bears interest at an annual rate of ten percent (10%) and
will be repayable after two years. Each tranche of the investment will be convertible at
any time into shares of the Company’s Common Stock at a conversion price equal to the
lower of (a) $0.003 per share, or (b) 80% of the lowest the daily dollar volume-weighted
average price for the Company’s Common Stock during the 10 trading days immediately
preceding the conversion date. As part of the transaction, the Company will issue to the
Investor warrants to purchase an aggregate of 2,619 shares of Common Stock, at an exercise
price equal to $0.003. The term of each warrant is five years from the issue date. Each warrant
may be exercised by cash payment or through cashless exercise by the surrender of warrant
shares having a value equal to the exercise price of the portion of the warrant being exercised.
The Company has undertaken to increase its authorized shares of Common Stock to at least
7,000,000,000 within 90 days of the closing. The SPA and the convertible debentures contain
events of default, including, among other things, failure to repay the convertible debentures
by the maturity date, and bankruptcy and insolvency events, that could result in the acceleration
of the Investor’s right to convert the convertible debentures into shares of common
stock.
|
In accordance with ASC 815-15-25 the
conversion feature was considered embedded derivative instruments, and is to be recorded at their fair value as its fair value can be
separated from the convertible loan and its conversion is independent of the underlying note value. The Company recorded finance expenses
in respect of the convertible component in the convertible loan in the excess amount of the convertible component fair value over the
face loan amount. The conversion liability is then marked to market each reporting period with the resulting gains or losses shown in
the statements of operations.
The fair value of the convertible component
was estimated by third party appraiser using the Monte Carlo Simulation Model to compute the fair value of the derivative and to mark
to market the fair value of the derivative at each balance sheet dates:
The following are the data and assumptions
used as of the balance sheet date:
|
|
March 31,
2021
|
|
Common stock price
|
|
|
2.20
|
|
Expected volatility
|
|
|
251.36
|
%
|
Expected term
|
|
|
1.42
|
|
Risk free rate
|
|
|
0.12
|
%
|
Forfeiture rate
|
|
|
0
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
Fair Market Value of Convertible component
|
|
$
|
176
|
|
|
|
December 31,
2020
|
|
Common stock price
|
|
|
1.39
|
|
Expected volatility
|
|
|
227.38
|
%
|
Expected term
|
|
|
1.67
|
|
Risk free rate
|
|
|
0.12
|
%
|
Forfeiture rate
|
|
|
0
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
Fair Market Value of Convertible component
|
|
$
|
157
|
|
SAMSARA LUGGAGE, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share
and per share data)
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,
2021
|
|
Common stock price
|
|
|
2.20
|
|
Expected volatility
|
|
|
251.36
|
%
|
Expected term
|
|
|
4.43
|
|
Risk free rate
|
|
|
0.19
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
Fair Market Value of Warrants
|
|
$
|
5
|
|
|
|
December 31,
2020
|
|
Common stock price
|
|
|
1.39
|
|
Expected volatility
|
|
|
227.88
|
%
|
Expected term
|
|
|
4.68
|
|
Risk free rate
|
|
|
0.19
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
Fair Market Value of Warrants
|
|
$
|
4
|
|
|
C.
|
On June 26, 2020, the Company entered
into a Securities Purchase Agreement (“SPA”) with Power Up Lending Group Ltd.
(the “Investor”), pursuant to which the Investor agreed to provide the Company
with an initial investment in the form of a convertible loan in the principal amount of $67
(the “Initial Investment”). The SPA contemplates additional financing of up to
$925 in the aggregate, subject to the agreement of both parties. The funds are expected to
be used to finance the Company’s working capital needs.
|
The convertible loan will bear interest
at an annual rate of eight percent (8%) with a maturity date of June 25, 2021 (the “Maturity Date”). The loan will be convertible
after six months into shares of the Company’s common stock at a conversion price equal to seventy-five percent (75%) of the average
of the lowest trading price for the Company’s common stock during the twenty (20) trading day period prior to the conversion date.
The Company agreed to an original issue discount of $9 and to reimburse the Investor for its costs in the amount of $3. Accordingly,
the net proceeds to the Company from the Initial Investment amounted to $55.
The SPA and the convertible note contain
events of default, including, among other things, failure to repay the loan amount by the Maturity Date, and bankruptcy and insolvency
events, that could result in the acceleration of the Investor’s right to convert the loan amount into shares of common stock.
On December 28, 2020 and pursuant to
the SPA, Power- Up exercised its option to convert the second Convertible Promissory Note principal in the amount of $38,100 into 36,286
shares of Common Stock of the Company.
On December 31, 2020 and pursuant to
the SPA, Power- Up exercised its option to convert the second Convertible Promissory Note principal in the amount of $23,100 into 22,000
shares of Common Stock of the Company.
On January 11, 2021 and pursuant to
the SPA, Power-up exercised its option to convert the Convertible Promissory Note principal in the amount of $ 7 and the accrued interest
in the amount of $ 1 into 7,448 shares of Common Stock of the Company.
SAMSARA LUGGAGE, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share
and per share data)
The following table presents the changes
in fair value of the level 3 liabilities for the period ended March 31, 2021:
|
|
Warrants
|
|
|
Convertible component
|
|
|
|
(U.S. dollars in thousands)
|
|
Outstanding at December 31, 2020
|
|
|
20
|
|
|
|
493
|
|
Fair value converted
|
|
|
-
|
|
|
|
(272)
|
|
Fair value of issued level 3 liability
|
|
|
-
|
|
|
|
-
|
|
Changes in fair value
|
|
|
12
|
|
|
|
263
|
|
Outstanding at December 31, 2021
|
|
|
32
|
|
|
|
484
|
|
NOTE 4 – RELATED PARTY TRANSACTIONS
Related party balances at March 31, 2021 and December 31, 2020 consisted
of the following:
Related Parties Payable
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
(U.S. dollars in thousands)
|
|
Related Parties Payable due to management fee
|
|
|
151
|
|
|
|
126
|
|
General and Administrative Expenses
|
|
For the Period Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(U.S. dollars in thousands)
|
|
Management Fee
|
|
|
25
|
|
|
|
25
|
|
SAMSARA LUGGAGE, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share
and per share data)
NOTE 5 – STOCKHOLDERS’ EQUITY
Common Stock
The following summarizes the Common Stock activity
for the three months ended March 31, 2021:
Summary of common stock activity for the three
months ended March 31, 2021
|
|
Outstanding shares
|
|
Balance, December 31, 2020
|
|
|
786,700
|
|
Shares issued due to conversion of Notes.
|
|
|
62,464
|
|
Shares issued for services
|
|
|
7,383
|
|
Roundup shares due to reverse split.
|
|
|
2,848
|
|
Balance, March 31, 2021
|
|
|
859,395
|
|
On January 14, 2021 and pursuant to the SPA,
YAII exercised its option to convert the second Convertible Promissory Note principal in the amount of $50,000 and the accrued interest
in the amount of $3,625 into 38,303 shares of Common Stock of the Company. The fair market value of the shares was $64.
On January 21, 2021, the Company issued 7,383
shares of its Common Stock pursuant to a service Agreement between the Company and a service provider. The fair market value of the shares
was $20.
On February 11, 2021 and pursuant to the SPA,
YAII exercised its option to convert the second Convertible Promissory Note principal in the amount of $55,000 and the accrued interest
in the amount of $3,496 into 16,713 shares of Common Stock of the Company. The fair market value of the shares was $216.
On March 22, 2021, the Company completed a
reverse stock split of its common stock. As a result of the reverse stock split, the following changes have occurred (i) every seven
thousand shares of common stock have been combined into one share of common stock; (ii) the number of shares of common stock
underlying each common stock option or common stock warrant have been proportionately decreased on a 7,000-for-1 basis, and the
exercise price of each such outstanding stock option and common warrant has been proportionately increased on a 7,000 -for-1 basis.
Accordingly, all option numbers, share numbers, warrant numbers, share prices, warrant prices, exercise prices and losses per share
have been adjusted within these consolidated financial statements, on a retroactive basis, to reflect this 7,000 -for-1 reverse
stock split. On March 23, 2021, the Company issued 2,849 shares of its Common Stock due to a reverse split rounding up
differences.
NOTE 6 - SUBSEQUENT EVENTS
On April 6, 2021, 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 $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. 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.
On April 19, 2021 and pursuant to the SPA, YAII exercised its option to convert the second Convertible Promissory
Note principal in the amount of $40,000 and the accrued interest in the amount of $7,067 into 40,861 shares of Common Stock of the Company.
The fair market value of the shares was $62.