ITEM 1. BUSINESS
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 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 March 17, 2021, the Company
filed a Certificate of Change with the Secretary of State of the State of Nevada (the “Certificate of Change”) to effect
a reverse split of Company’s Common Stock at a ratio of 1-for-7,000 (the “Reverse Stock Split”). The Reverse Stock
Split took effect at the open of business on Tuesday, March 23, 2021. As a result of the Reverse Stock Split, each seven thousand (7,000)
pre-split shares of Common Stock outstanding automatically combined into one (1) new share of Common Stock without any action on the
part of the holders, and the number of outstanding shares Common Stock were reduced from 5,995,825,131 shares to 8,565,465 shares (subject
to rounding of fractional shares). No fractional shares were issued in connection with the Reverse Stock Split. The Company issued one
whole share of the post-Reverse Stock Split Common Stock to any stockholder who otherwise would have received a fractional share as a
result of the Reverse Stock Split.
On 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%).
Organization and Description of Business
Samsara Luggage is a global
smart luggage and lifestyle brand that incorporates innovative design and functional technology into its smart travel products. The Company
launched the first product from the Tag Smart collection of smart suitcases in April 2022, as travel resumed to pre-COVID levels. This
collection is equipped with Apple AirTag technology, allowing travelers to track their suitcase using the iPhone’s Find My app.
Lost luggage became a prominent issue for global travelers during the Summer 2022 travel season. The Tag Smart suitcase offered travelers
precise tracking of their suitcase along with immediate information regarding their luggage’s whereabouts. The Tag Smart collection
is currently available in two different sizes to accommodate both international and US domestic travel. The newest collection comes in
three colors in durable polycarbonate and two colors in a lightweight, aviation-grade aluminum material.
The Company launched Street
Smart in February 2023. Street Smart is a curated collection of travel and lifestyle accessories that builds on the fashion element of
travel. Included in the collection are a selection of sunglasses, tote bag, stylish ballcaps and a stand-alone portable battery for electronic
devices. Street Smart compliments Samsara Luggage’s aesthetic and allows the brand to offer more travel-ready products at varying
price points.
Merger Transaction
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 November 6, 2019, the
Company filed (1) Articles of Merger with the Secretary of State of the State of Nevada in which the Company amended its Articles of
Incorporation to change the Company’s name from “Darkstar Ventures, Inc.” to “Samsara Luggage, Inc.” (the
“Name Change”); and (2) a Certificate of Amendment with the Secretary of State of the State of Nevada in which the Company
increased the number of authorized shares of Common Stock of the Company from 2,000,000,000 shares of Common Stock to 5,000,000,000 shares
of Common Stock and subsequently became effective on November 12, 2019.
In connection with the Merger,
the Company and Avraham Bengio entered into an Assignment and Assumption Agreement pursuant to which the Company sold 100% of the issued
and outstanding shares of the Company’s wholly-owned Israeli subsidiary, Bengio Urban Renewal and all of the Company’s interest
in Bengio Urban Renewal (including all debts and liabilities owed by the Company to Bengio Urban Renewal and the debts of Bengio Urban
Renewal to the Company) to Avraham Bengio, the former CEO and principal shareholder of the Company (prior to the Merger).
At the effective time of
the Merger, each share of common stock of Samsara, $0.0001 par value, was converted into the right to receive 0.0654 shares of the Company’s
common stock, such that the shareholders of Samsara Delaware were issued new shares of the Company representing approximately 80% of
the issued and outstanding shares of the Company’s common stock following the completion of the Merger. The exchange rate was determined
through arms’-length negotiations between the Company and Samsara Delaware.
On November 13, 2019, the
Board of Directors of the Company (the “Board”) amended Section 3 of Article VII of the bylaws of the Company to change the
fiscal year end-date of the Company from July 31 to December 31.
On October 5, 2020, the Company’s
stockholders 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,
Address and Market for Securities
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. Our website is www.samsaraluggage.com.
Our common shares are quoted
on the OTCQB under the symbol “SAML.” On April 2, 2023, the closing price for shares of our common shares as reported on the
OTCQB was $0.0326 per share.
Bankruptcy, Receivership or Similar Proceeding
We have never declared bankruptcy,
have never been in receivership, and have never been involved in any legal actions or proceedings.
Recent Developments
Samsara Luggage entered into
strategic partnerships with wireless network operator T-Mobile and luxury lifestyle clothing brand Tommy Bahama after the launch of its
Tag Smart collection of smart luggage. The Company began its collaboration with T-Mobile in July of 2022. The two companies conceptualized
a new co-branded carry-on suitcase that would merge the Samsara Luggage and T-Mobile aesthetic. Samsara Luggage began the process of
designing and manufacturing the Un-carrier On suitcase, a magenta colored carry-on that offered the same tracking technology as the Tag
Smart suitcase and a power bank with wireless and USB-C charging capabilities. The Un-carrier On was launched in late November 2022 and
garnered significant press.
During this time, Samsara
Luggage also made its retail debut in Tommy Bahama stores. Select travel related items including Samsara’s Tag Smart carry-on became
available in select Tommy Bahama stores in Florida and New York. Tommy Bahama also added the products to its online e-commerce store.
The men’s and women’s clothing brand included the new Samsara Luggage products in its marketing assets for the Tommy Bahama
website and social media channels. Samsara Luggage remains in Tommy Bahama stores and on its eponymous website.
Notable Accolades & Press Mentions
The Tag Smart Carry-on won
Special Mention in TIME’s list of Best Inventions 2022. The prestigious list was published in early November, just before the launch
of the Un-carrier On co-branded suitcase. Conde Nast Traveler included the Tag Smart Carry-on in its print edition, giving the smart
suitcase an entire page in its October issue. Along with this special award, the Tag Smart Carry-on was included in several back-to-back
“best of” roundups in noteworthy press outlets including Travel + Leisure, Tom’s Guide, Forbes, CBS News and Buy Side
from WSJ. With the Tag Smart collection being designed for the AirTag, Apple-focused publications like iMore published stories around
the new collection.
Transactions during 2022 (dollars shown below
in thousands)
On March 1, 2022, and pursuant
to the SPA, YAII PN, Ltd. (“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.
On April 25, 2022, and pursuant
to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $30 and accrued interest
of $4 into 103,963 shares of Common Stock of the Company. The fair market value of the shares was $45.
On May 11, 2022, and pursuant
to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $23 and accrued interest
of $1 into 113,109 shares of Common Stock of the Company. The fair market value of the shares was $29.
On May 17, 2022, the Company entered into a Series
A Preferred Stock Purchase Agreement with 1800 Diagonal Lending LLC f/k/a Sixth Street Lending LLC, a Virginia limited liability company
pursuant to which the Company issued and sold 148,062 shares of Series A Preferred Stock for a purchase price of $129, of which the Company
received proceeds of $125, net of issuance costs. The Company has accounted for the Series A Preferred Stock as mezzanine equity.
On June 7, 2022, and pursuant
to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $13 and accrued interest
of $2 into 117,244 shares of Common Stock of the Company. The fair market value of the shares was $36.
On June 28, 2022, and pursuant
to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $18 and accrued interest
of $1 into 123,288 shares of Common Stock of the Company. The fair market value of the shares was $31.
On July 26, 2022, and pursuant
to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $13 and accrued interest
of $2 into 130,250 shares of Common Stock of the Company. The fair market value of the shares was $38.
On July 27, 2022, and pursuant
to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $29 and accrued interest
of $0 into 259,404 shares of Common Stock of the Company. The fair market value of the shares was $44.
On August 3, 2022, and pursuant
to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $28 and accrued interest
of $0 into 295,579 shares of Common Stock of the Company. The fair market value of the shares was $35.
On August 10, 2022, the Company
entered into a Series A Preferred Stock Purchase Agreement with 1800 Diagonal Lending LLC f/k/a Sixth Street Lending LLC, a Virginia
limited liability company pursuant to which the Company issued and sold 73,312 shares of Series A Preferred Stock for a purchase price
of $63, of which the Company received proceeds of $60, net of issuance costs. The Company has accounted for the Series A Preferred Stock
as mezzanine equity.
On October 7, 2022, and pursuant
to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $32 and accrued interest
of $2 into 329,252 shares of Common Stock of the Company. The fair market value of the shares was $43.
On November 23, 2022, and
pursuant to the SPA, YAII exercised its option to convert the Convertible Promissory Note principal in the amount of $29 and accrued
interest of $1 into 363,498 shares of Common Stock of the Company. The fair market value of the shares was $39.
On November 23, 2022, and
pursuant to the SPA, the Preferred A Investor exercised its option to convert 14,466 shares of Series A Preferred Stock into 181,442
shares of Common Stock of the Company.
On November 23, 2022, and
pursuant to the SPA, the Preferred A Investor exercised its option to convert 13,500 shares of Series A Preferred Stock into 209,035
shares of Common Stock of the Company.
Transactions during 2021
December 2021 Convertible
Loan Agreement (YAII PN, Ltd.)
On December 14, 2021, Samsara
Luggage, Inc. (the “Company”) entered into a securities purchase agreement (the “Securities Purchase Agreement”)
with YA II PN Ltd., a Cayman Islands exempt company (the “Investor”), pursuant to which the Company sold and issued a convertible
debenture in the amount of $500,000 (the “Convertible Debenture”), which is convertible into shares of the Company’s
common stock, par value $0.0001 (the “Common Stock”) (as converted, the “Conversion Shares”).
The Convertible Debenture
bears interest at a rate of 10% per annum (15% on default) and has a maturity date of one (1) year. The Convertible Debenture provides
a conversion right, in which any portion of the principal amount of the Convertible Debenture, together with any accrued but unpaid interest,
may be converted into the Company’s Common Stock at a conversion price equal to 80% of the lowest volume weighted average price
of the Company’s Common Stock during the ten (10) trading days immediately preceding the date of conversion, subject to adjustment.
The Convertible Debenture may not be converted into common stock to the extent such conversion would result in the Investor beneficially
owning more than 4.99% of the Company’s outstanding Common Stock (the “Beneficial Ownership Limitation”); provided,
however, that the Beneficial Ownership Limitation may be waived by the Investor upon not less than 65 days’ prior notice to the
Company. The Convertible Debenture provides the Company with a redemption right, pursuant to which the Company, upon fifteen (15) business
days’ prior notice to the Investor, may redeem, in whole or in part, outstanding principal and interest under the Convertible Debenture
at a redemption price equal to the principal amount being redeemed plus a redemption premium equal to 5% of the outstanding principal
amount being redeemed plus outstanding and accrued interest; however, the Investor shall have fifteen (15) business days after receipt
of the Company’s redemption notice to elect to convert all or any portion of the Convertible Debenture, subject to the Beneficial
Ownership Limitation.
June 2021
Convertible Loan Agreement (YAII PN, Ltd.)
On June 7, 2021, the Company
entered into a securities purchase agreement (the “Securities Purchase Agreement”) with the Investor, pursuant to which the
Company sold and issued convertible debentures (individually a “Convertible Debenture” and collectively, the “Convertible
Debentures”) in the aggregate amount of up to $1,250,000 (the “Purchase Price”), which are convertible into shares
of the Company’s common stock, par value $0.0001 (the “Common Stock”) (as converted, the “Conversion Shares”),
of which:
| (i) | a
Convertible Debenture (the “First Convertible Debenture”) in the principal amount
of $500,000 (the “First Convertible Debenture Purchase Price”) was issued upon
execution of the Securities Purchase Agreement (the “First Closing Date”); |
| (ii) | a
Convertible Debenture (the “Second Convertible Debenture”) in the principal amount
of $500,000 shall be issued within one (1) business day following the filing of a registration
statement on Form S-1 (the “Registration Statement”) under the Securities Act
of 1933, as amended, registering the Conversion Shares issuable upon conversion of the Convertible
Debentures with the Securities and Exchange Commission (the “SEC”); and |
| (iii) | a
Convertible Debenture (the “Third Convertible Debenture”) in the principal amount
of $250,000 (the “Third Convertible Debenture Purchase Price”) shall be issued
within one (1) business day following the Registration Statement having been declared effective
by the SEC. |
The Convertible Debentures
bear interest at a rate of 10% per annum (15% on default) and have a maturity date of one (1) year. The Convertible Debentures provide
a conversion right, in which any portion of the principal amount of the Convertible Debentures, together with any accrued but unpaid
interest, may be converted into the Company’s Common Stock at a conversion price equal to 80% of the lowest volume weighted average
price of the Company’s Common Stock during the ten (10) trading days immediately preceding the date of conversion, subject to adjustment.
The Convertible Debentures may not be converted into common stock to the extent such conversion would result in the Investor beneficially
owning more than 9.99% of the Company’s outstanding Common Stock (the “Beneficial Ownership Limitation”); provided,
however, that the Beneficial Ownership Limitation may be waived by the Investor upon not less than 65 days’ prior notice to the
Company. The Convertible Debentures provide the Company with a redemption right, pursuant to which the Company, upon fifteen (15) business
days’ prior notice to the Investor, may redeem, in whole or in part, outstanding principal and interest at a redemption price equal
to the principal amount being redeemed plus a redemption premium equal to 5% of the outstanding principal amount being redeemed plus
outstanding and accrued interest; however, the Investor shall have fifteen (15) business days after receipt of the Company’s redemption
notice to elect to convert all or any portion of the Convertible Debentures, subject to the Beneficial Ownership Limitation.
In connection with the Securities
Purchase Agreement, the Company executed a registration rights agreement (the “Registration Rights Agreement”) pursuant to
which it was required to file the Registration Statement with the SEC for the resale of the Conversion Shares, which went effective on
or about August 31, 2021.
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.
Business Strategy
Samsara designs, manufacturers,
and sells high quality luggage products to meet the evolving needs of frequent travelers. The Company also seeks to present new technologies
within the aluminum luggage industry, including an aluminum “smart” suitcase.
Samsara believes that aluminum
is an untapped segment within the premium luggage market, with only few manufacturers currently in the industry. Samsara’s aluminum
suitcase contains a 6061 aluminum alloy that combines titanium, magnesium and zinc to create a lightweight and durable natural material.
The structure of the suitcase is designed to provide both convenience and ample storage space. The suitcase contains an ergonomic design
with a flat top that can be used as a desk allowing the user to work on the go. The suitcase also contains a variety of storage options,
including an opening log and a wheel design that creates additional packing space. The suitcase’s interior includes packing bags,
toiletry bag, garment bag, and gym bag, all illuminated by an interior LED light. The suitcase comes in two colors, black and gray.
Furthermore, the suitcase
contains an anodized coating, which is obtained through an electrolytic process that increases the natural oxide layer of the suitcase.
The coated surface provides extra protection and a long-lasting appearance. It provides strength without adding weight and protects the
suitcase from scratches, corrosion and weather damage. The anodized coating also gives the suitcase its color.
The “smart” components
of the suitcase include a LED light control inside the suitcase and an alert system that informs the owner of the suitcase’s location
if the suitcase is opened. Samsara’s proprietary mobile application connects to sensors in the suitcase for 24/7 connectivity.
The suitcase’s battery status and LED interior light can be remotely monitored via the mobile application. The suitcase also contains
a battery and charging port for charging laptops and mobile phones that is USB-C compatible.
In 2020, Samsara implemented
a new marketing strategy and online infrastructure, based on its digital assets and a direct-to consumer (D2C) approach. Most of the
Company’s marketing is currently directed to the end consumer and Samsara’s promotional efforts are aimed at the digital
world and online sales.
In addition, during the fourth
quarter of 2020, Samsara launched Sarah & Sam Fashion and Lifestyle Collection. Sarah & Sam is a part of Samsara’s direct
business model prompted by the travel limitations due to the COVID-19 pandemic, leveraging the Company’s established digital assets
and manufacturing and fulfillment supply chain capabilities to offer additional consumer products that respond to the changing needs
of the market.
Due to COVID-19, Samsara
postponed the launch of its Next-Gen line of suitcases that were presented in January 2020 at the Consumer Electronics Show (CES) exhibition.
The Company decided to make changes to its business plan and developed alternative product lines to create a new revenue stream during
the Corona virus pandemic. These new products are all sold online by Samsara’s digital unit utilizing the Company’s digital
assets.
| ● | In
March 2020, Samsara launched sales of the “Essentials Kit”, offering protective
essentials for travel. |
| ● | In
July 2020, Samsara launched the “Nano Weekender Bag”, an overnight travel bag
treated with a layer of bacteriostatic Nano protection that prevents colonies of bacteria
from developing on fabric. |
| ● | In
the fourth quarter of 2020, Samsara expanded its D2C activities with the launch of its “Sarah
& Sam” Fashion and Lifestyle Collection on a new dedicated website: www.sarah-sam.com. |
In 2021 Samsara prepared
for an expansive launch. The Company focused on strengthening its strategic branding and marketing as well as developing its R&D
to expand its product offerings based on the changing needs of the market. Samsara was working closely with the production assembly line
to create a more reliable supply chain despite the global disruptions due to the COVID-19 pandemic. The Company was also working on quality
assurance to ensure that the products meet the high-standards core to the company’s principles.
On the branding and marketing
fronts, Samsara began building a library of digital assets that align with the ideal target audience for the upcoming collection. Samsara
improved its branding to become more distinctive in the marketplace and mature as a brand with a unique voice. The branding and marketing
efforts combined are designed to strategically grow the Samsara community and expand its online reach.
Samsara continued developing
new digital marketing assets for the anticipated launch of its next collection of smart luggage, which has evolved to adapt to the changing
travel landscape despite the interruptions to the global supply chain.
During the first quarter
of 2022, Samsara debuted its first NFT (non-fungible token) on Desperate ApeWives, a leading NFT community. The new NFT named “Sam”
is inspired by the sleek, modern style and passion for adventure that the brand embodies. Sam is the company’s first NFT Brand
Ambassador and will included in the marketing campaign for Samsara’s newest collection anticipated
(“Sam”)
In May of 2022, Samsara partnered
with YouTube Tech and Lifestyle Creator Justine Ezarik (aka iJustine) as part of its new marketing strategy for its newly launched
Tag Smart collection of smart luggage. The collaboration aims to help Samsara reach the millions of gadget lovers that follow iJustine’s
many social media platforms such as YouTube and Instagram. The unboxing video was unveiled on YouTube and features iJustine highlighting
the detail of the new Tag Smart suitcase which incorporates the Apple AirTag so travelers can track their luggage using the Find My app
on their iPhone.
In August of 2022, Samsara
announced a partnership with iconic island lifestyle brand, Tommy Bahama (NYSE: OXM) to offer select products from its newly
launched Tag Smart Collection both in-store and online. Tommy Bahama will add Samsara’s Tag Smart Carry-on to its website in September
and in select stores later in Fall 2022. The Tag Smart Carry-on is combined with the Apple AirTag, allowing travelers to easily track
their suitcase using the Find My app on their iPhone. In addition, Samsara’s Weekender Bag will also be added to the Tommy Bahama site
as a travel accessory that coordinates with the Tag Smart Carry-on
In November of 2022, T-Mobile
(NASDAQ: TMUS) unveiled the Un-carrier On — a new smart, very-magenta suitcase in collaboration with Samsara, with the aim
of helping people explore the world. The limited-edition Un-carrier On was made available for pre-order starting in November of 2022
at TravelMagenta.com. Samsara received significant press spotlight in connection with the Un-carrier On with T-Mobile. A few of
the many notable outlets include Forbes, Fox News and 9to5google.com, who shared outstanding reviews of Samsara’s
latest smart suitcase equipped with standout tech features including Tag Smart luggage tracker, wireless charging, and USB-C port for
corded charging.
Later that month TIME awarded
Samsara’s Tag Smart carry-on with Special Mention in its Best Inventions of 2022 list.
Research and Development
Samsara performs research
and development in the fields of materials, design, and technology to develop new features and functionality, such as Wi-Fi hotspots,
SIM cards, GPS, Bluetooth, RFID, built-in batteries, digital scaling, tracking systems, and automated locking.
Samsara’s R&D team
is also exploring ways to add new Internet of Things (IoT) components to its existing smart luggage product such as a Samsara online
community platform and integration with airline and airport systems. Additionally, Samsara’s R&D team is exploring new composite
materials to use in Samsara’s luggage products.
Samsara works with three
designers on an ongoing basis, and with NOA Labs Ltd., a Hong Kong company. Samsara’s R&D activities are overseen by David
Dahan via Design Boxes Ltd.
Manufacturing
Samsara utilizes two manufacturers
in China to manufacture its smart luggage products, GDF / Ming Hing Industries Development Ltd., which manufactures the suitcase, and
ABO Electronics (Shenzhen) Co., Ltd., which manufactures the smart unit. In addition, Samsara utilizes to contractors to provide order
fulfilment services, FBA Sourcing China (DAPIGOO CO LTD), located in China, and Preferred Depot, located in the United States.
Marketing and Sales
Samsara is selling its smart
luggage products direct-to-consumer (D2C) via its own website. Samsara has been building a library of digital assets with the ideal target
audience for current sales, and upcoming collections. As a D2C company, Samsara leverages from the company’s established digital
assets, manufacturing and fulfillment supply chain capabilities to continue and respond to the changing needs of the market.
Samsara is focusing efforts
in improving its branding to become more distinctive in the marketplace and mature as a brand with a unique voice. The branding and marketing
efforts combined are designed to strategically grow the Samsara community and expand its online reach.
Competition
Samsara’s primary competitors
offering aluminum suitcases in the carry-on luggage market include Away, Rimowa, Samsonite (Tumi), and Zero Halliburton.
Competitor |
|
Product |
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Price |
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Features |
Away |
|
Aleon 21” Carry-On Aluminum Hardside Luggage |
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$ |
549 |
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● |
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Dimensions: 20.9 x 15.7 x 9.0 inches, Weight: 10.6 lbs, Volume: 2098 cubic inches |
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Lightweight and extremely durable Aircraft Grade Aluminum Frame and Body with two TSA-Approved Resettable Combination Locks |
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Interior Compression Packing System will keep items from shifting to the bottom, and prevent wrinkles |
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A telescoping handle, 360-degree spinner wheels, double reinforced square corners for extra space, a fitted rubber seal makes the case water-resistant and airtight; piano hinges extend the length of the case for added durability |
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10-year Worry Free Warranty |
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Rimowa |
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Rimowa Topas IATA Carry- On Luggage 21” Inch Multi-wheel 32L TSA Lock Spinner Suitcase Silver |
|
$ |
799 |
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Dimensions: 21.7“x7.9“x15.7“inch |
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4 wheel spinners for smooth-rolling mobility in any direction |
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The height-adjustable Flex-Divider system on the interior can also be set to accommodate the exact volume of your luggage and keeps your belongings in the greatest possible order |
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Integrated in the case, the innovative TSA lock that can be opened without damage during security checks |
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Zero Halliburton |
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Zero Halliburton Geo Aluminum 3.0 International Carry-On (Silver) |
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850 |
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Dimensions: 15x8x21” |
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Made in USA from imported Materials. Utilizes premium anodized aluminum that is as strong as steel but only one-fourth the weight. Innovative and unique double-rib design provides additional strength and durability as well as optimum protection of its contents. The intuitive 3-stage dual-button handle system allows for quicker release for both left and right-handed travelers. |
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Designed to securely close using two TSA accepted combination locks that are integrated into the draw-bolt latches. Seals airtight with the addition of a neoprene gasket seal around the opening’s perimeter. |
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The spinner wheels provide convenient and controlled ‘by-your-side’ mobility for easy traveling. Our superior piano hinge is used to keep the shells of each case in alignment and adds additional strength and integrity to the seal. |
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The interior is divided into two compartments with flat panels in place to hold clothes securely and discreetly. Our signature lining is stain-resistant and non-abrasive to clothes. |
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Our newly introduced ZH Global Tracking allows your case to be tracked anywhere in the world, providing additional peace of mind for your travel. |
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Samsonite |
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Samsonite LITE-BOX ALU SPINNER (4 WHEELS) 55CM |
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667 |
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Dimensions: 55 x 40 x 23 cm (including handles, wheels, bottom glides, side pockets and other external parts) |
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Volume: 40 L |
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Weight: 4.7 kg |
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Warranty: Limited 10 year global warranty |
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Model: Spinner (4 wheels) |
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Colour: Aluminum |
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Material: 100% High-end anodized aluminum |
Intellectual Property
Samsara owns a design patent
on its carry-on luggage product, issued in Israel (60249) on April 6, 2017, in the United States (136531) on October 3, 2017, in Europe
(004385086-0001) on October 10, 2017, and in China (315400) on October 29, 2017. Samsara also owns registered trademarks on the “Samsara”
and “Samsara Luggage” trade names.
Government Regulations
Several aspects of Samsara’s
smart luggage products, including its battery, locks and LED lights, are subject to the requirements of federal law relating to aviation
and homeland security, as well as international regulation of electronic devices. Part 15 of the FCC Rules requires operation of electronic
equipment not to cause harmful interference and to accept any interference received, including interference that may cause undesired
operation. The Transportation Security Administration (TSA) recommends that only TSA approved locks be used on luggage, to avoid risk
of TSA agents breaking the lock for inspection. The European Union requires all electronic devices to comply with the Restriction of
Hazardous Substances (ROHS) regulations which restricts the use of specific hazardous materials found in electrical and electronic products.
BS EN 62471 gives universal best-practice recommendations for the photobiological safety of electric lamps and lighting systems, including
LED lights. This standard specifies exposure limits, measurement techniques and classification systems to control photobiological and
light hazards. The EU radio equipment directive establishes a regulatory framework for placing radio equipment on the market, setting
requirements for safety and health, electromagnetic compatibility, and the efficient use of the radio spectrum. Additionally, smart luggage
products are subject to airline regulations applicable to manufacturing materials, size and weight.
Samsara believes that it
is in substantial compliance with the laws and regulations which regulate its business, as detailed below:
Air Travel Regulations
The Samsara Luggage Carry-on
case complies with all airline regulations applicable to manufacturing materials, size and weight. Additionally, it incorporates all
the electronic parts into one removeable unit, leaving an option for the suitcase to be completely electronic free, if needed, in compliance
with the airline regulations implemented by the International Air Transport Association in January 2018, requesting passengers to remove
batteries from checked-in smart luggage.
Samsara carry-on locks, bearing
the Travel Sentry logo, meet TSA recommendations for accepted locks which can be opened by the TSA without being broken.
Employees
Samsara maintains seven (7)
employees. All of the Company’s other business activities are performed by independent contractors and third-party service providers.
WHERE YOU CAN GET ADDITIONAL INFORMATION
We are required to file annual,
quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”).
You may read and copy our reports or other filings made with the SEC at the SEC’s Public Reference Room, located at 100 F Street,
N.E., Washington, DC 20549. You can obtain information on the operations of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
You can also access these reports and other filings electronically on the SEC’s web site, www.sec.gov.
If you would like to request
documents from Samsara, please send a request in writing or by telephone to Samsara at the following address:
|
Samsara Luggage, Inc.
135 E. 57th Street, Suite 18-130
New York, NY 10022
Telephone: 1-877-421-1574
Attn: Atara Dzikowski |
ITEM 1A. RISK FACTORS
Samsara has a limited operating history,
has incurred significant operating losses since its inception and expects to incur significant losses for the foreseeable future. Samsara
may never generate significant revenue or become profitable or, if Samsara achieves profitability, it may not be able to sustain it.
Samsara has a limited operating
history and has generated limited revenues to date. Samsara is dependent upon additional capital resources for the continuation of its
planned principal operations, which are subject to significant risks and uncertainties, including failing to secure funding to expand
commercialization of its products or failing to profitably operate the business.
Samsara has incurred significant
operating losses since its inception. Samsara’s net losses were $2,239,000 and $3,817,000 for the years ended December 31, 2022,
and December 31, 2021, respectively. As of December 31, 2022, Samsara had an accumulated deficit of $12,433,000. Substantially all of
Samsara’s losses have resulted from expenses incurred in connection with its research and development programs and from general
and administrative costs associated with Samsara’s operations. Samsara expects to continue to incur losses for the foreseeable
future and anticipates these losses will increase substantially as Samsara continues to develop and commercialize its products.
To become and remain profitable,
Samsara must succeed in developing and commercializing products that generate significant revenue. This will require Samsara to be successful
in a range of challenging activities, including manufacturing, and marketing and selling products. Samsara may never succeed in these
activities and, even if it does, may never generate revenues that are significant enough to achieve profitability. In addition, Samsara
has not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies
in new and rapidly evolving fields. Because of the numerous risks and uncertainties associated with smart luggage product development,
Samsara is unable to accurately predict the timing or amount of increased expenses or when, or if, Samsara will be able to achieve profitability.
Even if Samsara does achieve profitability, it may not be able to sustain or increase profitability on a quarterly or annual basis. Samsara’s
failure to become and remain profitable would depress the value of Samsara and could impair its ability to raise capital, expand its
business, maintain its research and development efforts, diversify its product candidates or even continue its operations. A decline
in the value of Samsara could also cause stockholders to lose all or part of their investment.
The report of Samsara’s independent
registered public accounting firm expresses substantial doubt about the ability of Samsara to continue as a going concern.
Samsara’s independent
registered public accounting firm indicated in its report on Samsara’s financial statements for the period ended December 31, 2022,
that conditions exist that raise substantial doubt about Samsara’s ability to continue as a “going concern.” A going
concern paragraph included in Samsara’s independent registered public accounting firm’s report on its consolidated financial
statements could impair investor perceptions and Samsara’s ability to finance its operations through the sale of equity, incurring
debt, or other financing alternatives. Samsara’s ability to continue as a going concern will depend upon many factors beyond Samsara’s
control including the availability and terms of future funding. If Samsara is unable to achieve its goals and raise the necessary funds
to finance its operations, its business would be jeopardized, and Samsara may not be able to continue.
Samsara will require substantial additional
financing to achieve its goals, and a failure to obtain this necessary capital when needed and on acceptable terms, or at all, could
force Samsara to delay, limit, reduce or terminate its product development programs, commercialization efforts or other operations.
Samsara expects its expenses
to increase in connection with its ongoing activities. Samsara also expects to incur significant commercialization expenses related to
product manufacturing, marketing, sales and distribution. Samsara cannot reasonably estimate the actual amounts necessary to successfully
complete the development and commercialization of its products. Samsara will need to obtain substantial additional funding in connection
with its continuing operations as a public company. If Samsara is unable to raise capital when needed or on attractive terms, Samsara
could be forced to delay, reduce or eliminate its research and development programs or any future commercialization efforts.
Samsara has based its estimates
on assumptions that may prove to be wrong, and Samsara could use its capital resources sooner than it currently expects. Samsara’s
operating plans and other demands on its cash resources may change as a result of many factors currently unknown to Samsara, and Samsara
may need to seek additional funds sooner than planned, through public or private equity or debt financings or other capital sources,
including potentially government funding, collaborations, licenses and other similar arrangements. In addition, Samsara may seek additional
capital due to favorable market conditions or strategic considerations even if Samsara believes it has sufficient funds for its current
or future operating plans. Attempting to secure additional financing may divert Samsara’s management from its day-to-day activities,
which may adversely affect Samsara’s ability to develop its product.
Samsara’s future capital
requirements will depend on many factors, including:
| ● | the
costs and timing of manufacturing for Samsara’s products, including commercial manufacturing
of its products; |
| ● | the
costs of obtaining, maintaining and enforcing Samsara’s intellectual property rights; |
| ● | Samsara’s
efforts to enhance operational systems and hire additional personnel to satisfy its obligations
as a public company, including enhanced internal controls over financial reporting; |
| ● | the
costs associated with hiring additional personnel and consultants as Samsara’s research
and development activities increase; |
| ● | the
timing and amount of the milestone or other payments Samsara must make to the licensors and
other third parties from whom Samsara has licensed or acquired technology; |
| ● | the
costs and timing of establishing or securing sales and marketing capabilities for its products; |
| ● | Samsara’s
ability to achieve market acceptance and adequate market share and revenue for its products;
and |
| ● | the
terms and timing of establishing and maintaining collaborations, licenses and other similar
arrangements. |
In addition, Samsara’s
products may not achieve commercial success.
Accordingly, Samsara will
need to continue to rely on additional financing to achieve its business objectives. Adequate additional financing may not be available
to Samsara on acceptable terms, or at all. In addition, Samsara may seek additional capital due to favorable market conditions or strategic
considerations, even if Samsara believes it has sufficient funds for its current or future operating plans.
Raising additional capital may cause dilution
to Samsara’s stockholders, restrict Samsara’s operations or require Samsara to relinquish rights to its technologies or product
candidates.
Until such time, if ever,
as Samsara can generate substantial product revenues, Samsara expects to finance its cash needs through equity offerings, debt financings
or other capital sources, including potentially government funding, collaborations, licenses and other similar arrangements. To the extent
that Samsara raises additional capital through the sale of equity or convertible debt securities, existing stockholders’ ownership
interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect stockholders’
rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants
limiting or restricting Samsara’s ability to take specific actions, such as incurring additional debt, making capital expenditures
or declaring dividends.
If Samsara raises funds through
future collaborations, licenses and other similar arrangements, Samsara may have to relinquish valuable rights to its future revenue
streams or products, or grant licenses on terms that may not be favorable to Samsara and/or that may reduce the value of Samsara’s
common stock.
Samsara’s executives and managerial personnel are critical
to our business, and they may not remain with us.
Samsara’s performance
substantially depends on the performance of our management team. The loss of the services of any of Samsara’s executives or managerial
personnel could cause us to incur increased operating expenses and divert senior management resources in searching for replacements.
We do not have a dedicated Chief Financial Officer, and our other executives have taken on substantially more responsibility for the
management of our business and of our financial reporting. These changes in our organization may have a disruptive impact on our ability
to implement our strategy and could have a material adverse effect on our business, internal controls, financial condition and results
of operations. Management transition inherently causes some loss of institutional knowledge, which can negatively affect strategy and
execution. Until we find a Chief Financial Officer, or if we have additional changes to our executives or highly skilled technical and
managerial personnel, we may be unable to successfully manage and grow our business, and our results of operations, internal controls
and financial condition could suffer as a result. The loss of the services of our executives or other personnel also could harm our reputation.
Risks Relating to Samsara’s Strategy
and Industry
Samsara’s success depends on independent
contractors to manufacture and supply Samsara with its smart luggage products, and to label, package, and ship these products.
Samsara has retained third
party manufacturers to manufacture and supply Samsara with its smart luggage products. Samsara relies on independent contractors for
the supply of its smart luggage products and for the labeling, packaging, and shipping of these products. Samsara may not be successful
in developing relationships with these independent contractors. In addition, these third party contractors may not dedicate sufficient
resources or give sufficient priority to satisfying Samsara’s requirements or needs. There is limited history upon which to base
any assumption as to the likelihood that Samsara will prove successful in selecting qualified third party independent contractors or
in negotiating any agreements with them. If Samsara is unsuccessful in addressing these risks, its results of operations could be adversely
affected.
Samsara does not have long term commitments
from suppliers and other independent contractors.
Samsara may experience shortages
of supplies and inventory because Samsara orders goods and services via purchase orders and has not signed long-term contracts with its
suppliers. Samsara currently utilizes the services of two manufacturers in China, one for the manufacture of the suitcase and the other
for the manufacture of the smart unit. In addition, Samsara utilizes the services of two contractors, one in China and one in the United
States, for the provision of order fulfillment services. Samsara’s success is dependent on Samsara’s ability to timely provide
its customers with Samsara’s smart luggage products. Although Samsara directly markets these products, Samsara is dependent on
its suppliers and other independent contractors for the manufacture and supply of Samsara’s smart luggage products and for the
labeling, packaging, and shipment of these products. No assurance can be given that Samsara will enter into agreements with other suppliers
for the supply of its smart luggage products at acceptable levels of quality and price, or with other independent contractors who will
provide Samsara with order fulfillment services at acceptable levels of quality and price. While Samsara currently has and anticipates
continuing to have good relationships with its suppliers and other independent contractors, if Samsara is unable to secure additional
sources of supply or order fulfillment services from one or more independent contractors on a timely basis and on acceptable terms, Samsara’s
results of operations could be adversely affected.
The selling of smart luggage products is
subject to current governmental regulations.
Several aspects of Samsara’s
smart luggage products, including its battery, locks and LED lights, are subject to the requirements of federal laws relating to aviation
and homeland security, as well as international regulation of electronic devices. Part 15 of the FCC Rules requires operation of electronic
equipment not to cause harmful interference and to accept any interference received, including interference that may cause undesired
operation. The Transportation Security Administration (TSA) recommends that only TSA approved locks be used on luggage, to avoid risk
of TSA agents breaking the lock for inspection. The European Union requires all electronic devices to comply with the Restriction of
Hazardous Substances (ROHS) regulations which restricts the use of specific hazardous materials found in electrical and electronic products.
BS EN 62471 gives universal best-practice recommendations for the photobiological safety of electric lamps and lighting systems, including
LED lights. This standard specifies exposure limits, measurement techniques and classification systems to control photobiological and
light hazards. The EU radio equipment directive establishes a regulatory framework for placing radio equipment on the market, setting
requirements for safety and health, electromagnetic compatibility, and the efficient use of the radio spectrum.
Additionally, smart luggage
products are subject to airline regulations applicable to manufacturing materials, size and weight. While Samsara believes that it is
and will be in substantial compliance with the laws and regulations which regulate its business, the failure to comply with any of these
laws or regulations, or the imposition of new laws or regulations could negatively impact Samsara’s proposed business.
Samsara faces intense competition and many
of its competitors have substantially greater resources than Samsara has.
Samsara operates in a highly
competitive environment. In addition, the competition in the market for smart luggage products may intensify. There are numerous well-established
companies based in the United States with longer operating histories, significantly greater resources and name recognition, and a larger
base of distributors and retailers. In addition, there are smaller entrepreneurial companies who are developing products that will compete
with the smart luggage products that Samsara currently sells. As a result, these competitors may have greater credibility with Samsara’s
potential customers. They also may be able to adopt more aggressive pricing policies and devote greater resources to the development,
promotion, and sale of their products. These competitors may make it difficult for Samsara to market and sell its products and compete
in the smart luggage market, which could harm Samsara’s business.
Samsara depends on market acceptance of
its smart luggage products. If these products do not gain market acceptance, Samsara’s ability to compete will be adversely affected.
Samsara’s success depends
in large part on Samsara’s ability to successfully market its smart luggage products. No assurances can be given that Samsara will
be able to successfully market its smart luggage products or achieve consumer acceptance. Moreover, failure to successfully commercialize
its smart luggage products on a timely and cost-effective basis will have a material adverse effect on Samsara’s ability to compete
in its targeted market.
Failure to meet customers’ expectations
or deliver expected performance could result in losses and negative publicity, which would harm Samsara’s business.
If the smart luggage products
which Samsara sells fail to perform in the manner expected by its customers, then Samsara’s revenues may be delayed or lost due
to adverse customer reaction. In addition, negative publicity about Samsara and its products could adversely affect Samsara’s ability
to attract or retain customers. Furthermore, disappointed customers may initiate claims for damages against Samsara, regardless of Samsara’s
responsibility for their disappointment.
Samsara needs to retain key personnel to
support its services and ongoing operations.
The marketing and sale of
Samsara’s smart luggage products will continue to place a significant strain on Samsara’s limited personnel, management,
and other resources. Samsara’s future success depends upon the continued services of its executive officers and the hiring of key
employees and contractors who have critical industry experience and relationships that Samara will need to rely on to implement its business
plan. The loss of the services of any of Samsara’s officers or the lack of availability of other skilled personnel would negatively
impact Samsara’s ability to market and sell its smart luggage products, which could adversely affect Samsara’s financial
results and impair Samsara’s growth.
If Samsara cannot build and maintain strong
brand loyalty to its products, its business may suffer.
Samsara believes that the
importance of brand recognition will increase as more companies produce smart luggage products. Development and awareness of Samsara’s
brand will depend largely on Samsara’s ability to successfully advertise and market its products. If Samsara is unsuccessful, its
products may not be able to gain widespread acceptance among consumers. A failure to develop Samsara’s smart luggage products sufficiently
could have a material adverse effect on Samsara’s business, results of operations and financial condition.
Samsara may be unable to protect its brand
name.
Brand recognition is critical
in attracting consumers to Samsara’s products. Samsara has researched the availability of the trademark “Samsara” and
have not found any inherent obstacle to registering the trademark with the US patent and trademark office. Nevertheless, if Samsara is
unable to trademark its brand name or to adequately protect its trade name against infringement or misappropriation, Samsara’s
competitive position in the smart luggage market may be undermined, which could lead to a significant decrease in the volume of products
that we sell. Such a result would materially and adversely affect Samsara’s results of operations.
Samsara may incur losses as a result of
claims that may be brought against Samsara due to defective products or as a result of product recalls.
While Samsara is not aware
of any claims having been brought in connection with Samsara’s smart luggage products, Samsara may be liable if the use of Samsara’s
products causes injury, illness, or death. Samsara also may be required to withdraw or recall some of its products if they are damaged
or defective. A significant product liability judgment against Samsara or a widespread product withdrawal or recall could have a material
adverse effect on Samsara’s business and financial condition.
If a third party asserts that Samsara’s
infringes upon its proprietary rights, Samsara could be required to redesign its products, change suppliers, pay significant royalties,
or enter into license agreements.
Although presently Samsara
is not aware of any such claims, a third party may assert that Samsara’s smart luggage products violate its intellectual property
rights. As the number of smart luggage products increases, infringement claims may become more common. Any claims against Samsara, regardless
of their merit, could:
| ● | Be
expensive and time-consuming to defend; |
| ● | Result
in negative publicity; |
| ● | Force
Samsara to stop selling its products; |
| ● | Divert
management’s attention and Samsara’s other resources; and |
| ● | Require
Samsara to enter into royalty or licensing agreements in order to obtain the right to sell
its products, which right may not be available on terms acceptable to Samsara, if at all. |
In addition, Samsara’s
believes that any successful challenge to its use of a trademark or domain name could substantially diminish Samsara’s ability
to conduct business in a particular market or jurisdiction and thus could decrease Samsara’s revenues and/or result in losses to
Samsara’s business.
Samsara’s lack of business diversification
could result in the loss of your investment if revenues from Samsara’s primary products decrease.
Currently, Samsara’s
business is focused on the marketing and sale of smart luggage products. Samsara does not have any other lines of business or other sources
of revenue if Samsara is unable to successfully implement its business plan. Samsara’s lack of business diversification could cause
you to lose all or some of your investment if Samsara is unable to generate significant revenues by the sale of smart luggage products
since Samsara does not have any other lines of business or alternative revenue sources.
Samsara relies on third parties to conduct
many of its activities. Any failure by a third-party to conduct these activities and other requirements and in a timely manner may delay
or prevent Samsara’s ability to commercialize its products.
Samsara is dependent on third
parties to perform certain activities. Specifically, Samsara has used and relied on, and intends to continue to use and rely on, GDF
/ Ming Hing Industries Development Ltd. and ABO Electronics (Shenzhen) Co., Ltd. for the manufacture of its luggage products, and on
FBA Sourcing China (DAPIGOO CO LTD) and Preferred Depot for order fulfillment services. While Samsara has signed purchase orders governing
the activities of its third-party contractors, Samsara has limited influence over their actual performance. There is no guarantee that
any such third parties will devote adequate time and resources to such activities or perform as contractually required. If any of these
third parties fail to meet expected deadlines, adhere to Samsara’s requirements, or otherwise performs in a substandard manner,
Samsara’s ability to fulfill customer orders for products may be undermined. In addition, many of the third parties with whom Samsara
contracts may also have relationships with other commercial entities, including Samsara’s competitors, for whom they may also be
conducting development activities that could harm Samsara’s competitive position.
If any of Samsara’s
relationships with these third parties terminate, Samsara may not be able to enter into arrangements with alternative third parties or
do so on commercially reasonable terms.
In addition, Samsara may
be unable to establish any agreements with third-party manufacturers or to do so on acceptable terms. Even if Samsara is able to establish
agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:
| ● | failure
of third-party manufacturers to comply with regulatory requirements and maintain quality
assurance; |
| ● | breach
of the manufacturing agreement by the third-party; |
| ● | failure
to manufacture Samsara’s product according to Samsara’s specifications; |
| ● | failure
to manufacture Samsara’s product according to Samsara’s schedule, or at all; |
| ● | misappropriation
of Samsara’s proprietary information, including Samsara’s trade secrets and know-how;
and |
| ● | termination
or nonrenewal of the agreement by the third-party at a time that is costly or inconvenient
for Samsara. |
Any performance failure on
the part of Samsara’s existing or future manufacturers could delay product development, and any related remedial measures may be
costly or time consuming to implement. Samsara does not currently have arrangements in place for redundant supply or a second source
for all required raw materials used in the manufacture of Samsara’s products. If Samsara’s current third-party manufacturers
cannot perform as agreed, Samsara may be required to replace such manufacturers and Samsara may be unable to replace them on a timely
basis or at all. Samsara’s current and anticipated future dependence upon others for the manufacture of Samsara’s products
may adversely affect Samsara’s future profit margins and Samsara’s ability to commercialize any products on a timely and
competitive basis.
Samsara’s reliance on third parties
requires Samsara to share its trade secrets, which increases the possibility that Samsara’s trade secrets will be misappropriated
or disclosed.
Because Samsara currently
relies on third parties to manufacture its products, Samsara must, at times, share its proprietary technology and confidential information,
including trade secrets, with them. Samsara seeks to protect its proprietary technology, in part, by entering into confidentiality agreements,
consulting agreements or other similar agreements with its advisors, employees, consultants and contractors prior to beginning research
or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose Samsara’s
confidential information. Despite the contractual provisions employed when working with third parties, the need to share trade secrets
and other confidential information increases the risk that such trade secrets may become known by Samsara’s competitors, are intentionally
or inadvertently incorporated into the technology of others or are disclosed or used in violation of these agreements. Given that Samsara’s
proprietary position is based, in part, on Samsara’s know-how and trade secrets, and despite Samsara’s efforts to protect
its trade secrets, a competitor’s discovery of Samsara’s proprietary technology and confidential information or other unauthorized
use or disclosure would impair Samsara’s competitive position and may have a material adverse effect on Samsara’s business,
financial condition, results of operations and prospects.
Samsara may seek to enter into collaborations,
licenses and other similar arrangements and may not be successful in doing so, and even if Samsara is, it may not realize the benefits
of such relationships.
Samsara may seek to enter
into collaborations, joint ventures, licenses and other similar arrangements for the development or commercialization of Samsara’s
products, due to capital costs required to develop or commercialize the products or manufacturing constraints. Samsara may not be successful
in its efforts to establish such collaborations for Samsara’s products. In addition, Samsara faces significant competition in seeking
appropriate strategic partners, and the negotiation process can be time consuming and complex. Further, any future collaboration agreements
may restrict Samsara from entering into additional agreements with potential collaborators. Samsara cannot be certain that, following
a strategic transaction or license, Samsara will achieve an economic benefit that justifies such transaction.
Even if Samsara is successful
in its efforts to establish such collaborations, the terms that Samsara agrees upon may not be favorable to Samsara, and Samsara may
not be able to maintain such collaborations.
In addition, any potential
future collaborations may be terminable by Samsara’s strategic partners, and Samsara may not be able to adequately protect its
rights under these agreements. Furthermore, strategic partners may negotiate for certain rights to control decisions regarding the development
and commercialization of Samsara’s products, if approved, and may not conduct those activities in the same manner as Samsara would.
Any termination of collaborations Samsara enters into in the future, or any delay in entering into collaborations related to Samsara’s
products, could delay the development and commercialization of Samsara’s products and reduce their competitiveness if they reach
the market, which could have a material adverse effect on Samsara’s business, financial condition and results of operations.
Samsara currently has a limited marketing
and sales organization and has limited experience as a company in commercializing products, and Samsara may have to invest significant
resources to develop these capabilities. If Samsara is unable to establish marketing and sales capabilities or enter into agreements
with third parties to market and sell its products, Samsara may not be able to generate product revenue.
Samsara has limited internal
sales, marketing and distribution capabilities. Samsara has limited experience as a company in the marketing, sale and distribution of
smart luggage products and there are significant risks involved in building and managing a sales organization, including Samsara’s
ability to hire, retain and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and
marketing personnel and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development
of Samsara’s internal sales, marketing and distribution capabilities would adversely impact the commercialization of these products.
Samsara may not be able to enter into collaborations or hire consultants or external service providers to assist Samsara in sales, marketing
and distribution functions on acceptable financial terms, or at all. In addition, Samsara’s product revenues and its profitability,
if any, may be lower if Samsara relies on third parties for these functions than if Samsara were to market, sell and distribute any products
that Samsara develops itself. Samsara likely will have little control over such third parties, and any of them may fail to devote the
necessary resources and attention to sell and market Samsara’s products effectively. If Samsara is not successful in commercializing
its products, either on its own or through arrangements with one or more third parties, Samsara may not be able to generate any future
product revenue and Samsara would incur significant additional losses.
Business disruptions could seriously harm
Samsara’s future revenue and financial condition and increase its costs and expenses.
Samsara’s operations
could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires,
extreme weather conditions, medical epidemics and other natural or manmade disasters or business interruptions, for which Samsara is
predominantly self-insured. Samsara relies on third- party manufacturers to produce Samsara’s products whose operations may be
disrupted by a man-made or natural disaster or other business interruption. The occurrence of any of these business disruptions could
seriously harm Samsara’s operations and financial condition and increase its costs and expenses.
Samsara is subject to U.S. and certain
foreign export and import controls, sanctions, embargoes, anti-corruption laws and anti-money laundering laws and regulations. Compliance
with these legal standards could impair Samsara’s ability to compete in domestic and international markets. Samsara could face
criminal liability and other serious consequences for violations, which could harm its business.
Samsara is subject to export
control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, and various
economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls, and
anti-corruption and anti-money laundering laws and regulations, including the U.S. Foreign Corrupt Practices Act of 1977, as amended,
the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and other state and national
anti-bribery and anti-money laundering laws in the countries in which Samsara conducts activities. Anti-corruption laws are interpreted
broadly and prohibit companies and their employees, agents, clinical research organizations, contractors and other collaborators and
partners from authorizing, promising, offering, providing, soliciting or receiving, directly or indirectly, improper payments or anything
else of value to recipients in the public or private sector. Samsara can be held liable for the corrupt or other illegal activities of
its employees, agents, contractors and other collaborators and partners, even if Samsara does not explicitly authorize or have actual
knowledge of such activities. Any violations of the laws and regulations described above may result in substantial civil and criminal
fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud
litigation, reputational harm and other consequences.
Samsara may engage in strategic transactions
that could impact its liquidity, increase its expenses and present significant distractions to Samsara’s management.
From time to time, Samsara
may consider strategic transactions, such as acquisitions of companies, asset purchases and licensing arrangements. Any future transactions
could increase Samsara’s near- and long-term expenditures, result in potentially dilutive issuances of Samsara’s equity securities,
including its common stock, or the incurrence of debt, contingent liabilities, amortization expenses or acquired in-process research
and development expenses, any of which could affect Samsara’s financial condition, liquidity and results of operations. Additional
potential transactions that Samsara may consider in the future include a variety of business arrangements, including spin-offs, strategic
partnerships, joint ventures, restructurings, divestitures, business combinations and investments. Future acquisitions may also require
Samsara to obtain additional financing, which may not be available on favorable terms or at all. These transactions may never be successful
and may require significant time and attention of management. In addition, the integration of any business that Samsara may acquire in
the future may disrupt Samsara’s existing business and may be a complex, risky and costly endeavor for which Samsara may never
realize the full benefits of the acquisition. Accordingly, although there can be no assurance that Samsara will undertake or successfully
complete any additional transactions of the nature described above, any additional transactions that Samsara does complete could have
a material adverse effect on Samsara’s business, results of operations, financial condition and prospects.
If Samsara fails to comply with its obligations
in the agreements under which it licenses intellectual property rights from third parties, or otherwise experiences disruptions in its
business relationships with its licensors, Samsara could lose license rights that are important to its business.
Samsara is a party to several
license agreements under which it is granted rights to intellectual property that are important to its business and Samsara may enter
into additional license agreements in the future. These license agreements impose, and Samsara expects that any future license agreements
where Samsara licenses intellectual property will impose, on Samsara, various development, regulatory and/or commercial diligence obligations,
payment of milestones and/or royalties and other obligations. If Samsara fails to comply with its obligations under these agreements,
or Samsara is subject to bankruptcy-related proceedings, the licensor may have the right to terminate the license, in which event Samsara
would not be able to market products covered by the license.
Samsara may need to obtain
licenses from third parties to advance its research or allow commercialization of its products, and Samsara cannot provide any assurances
that third-party patents do not exist which might be enforced against Samsara’s products in the absence of such a license. Samsara
may fail to obtain any of these licenses on commercially reasonable terms, if at all. Even if Samsara is able to obtain a license, it
may be non-exclusive, thereby giving Samsara’s competitors access to the same technologies licensed to Samsara. In that event,
Samsara may be required to expend significant time and resources to develop or license replacement technology. If Samsara is unable to
do so, Samsara may be unable to develop or commercialize the affected products, which could materially harm Samsara’s business
and the third parties owning such intellectual property rights could seek either an injunction prohibiting Samsara’s sales, or,
with respect to Samsara’s sales, an obligation on Samsara’s part to pay royalties and/or other forms of compensation. Licensing
of intellectual property is of critical importance to Samsara’s business and involves complex legal, business and scientific issues.
Disputes may arise between Samsara and its licensors regarding intellectual property subject to a license agreement, including:
| ● | the
scope of rights granted under the license agreement and other interpretation-related issues; |
| ● | whether
and the extent to which Samsara’s technology and processes infringe on intellectual
property of the licensor that is not subject to the licensing agreement; |
| ● | Samsara’s
right to sublicense patents and other rights to third parties; |
| ● | Samsara’s
diligence obligations with respect to the use of the licensed technology in relation to its
development and commercialization of Samsara’s products, and what activities satisfy
those diligence obligations; |
| ● | Samsara’s
right to transfer or assign the license; and |
| ● | the
ownership of inventions and know-how resulting from the joint creation or use of intellectual
property by Samsara’s licensors and Samsara and its partners. |
If disputes over intellectual
property that Samsara has licensed prevent or impair Samsara’s ability to maintain its current licensing arrangements on acceptable
terms, Samsara may not be able to successfully develop and commercialize the affected product candidates, which would have a material
adverse effect on Samsara’s business.
Samsara’s commercial success depends
significantly on its ability to operate without infringing the patents and other proprietary rights of third parties. Claims by third
parties that Samsara infringes their proprietary rights may result in liability for damages or prevent or delay Samsara’s developmental
and commercialization efforts.
Samsara’s commercial
success depends in part on avoiding infringement of the patents and proprietary rights of third parties. However, Samsara’s or
its licensee’s research, development and commercialization activities may be subject to claims that Samsara or its licensee infringes
or otherwise violates patents or other intellectual property rights owned or controlled by third parties. Other entities may have or
obtain patents or proprietary rights that could limit Samsara’s or its licensee’s ability to make, use, sell, offer for sale
or import Samsara’s products, or impair Samsara’s competitive position. There is a substantial amount of litigation, both
within and outside the United States, involving patent and other intellectual property rights. Numerous third-party U.S. and foreign
issued patents and pending patent applications exist in the fields in which Samsara is developing products.
Because patent applications
are maintained as confidential for a certain period of time, until the relevant application is published Samsara may be unaware of third-party
patents that may be infringed by commercialization of any of Samsara’s products, and Samsara cannot be certain that Samsara was
the first to file a patent application related to a product candidate or technology. Moreover, because patent applications can take many
years to issue, there may be currently-pending patent applications that may later result in issued patents that Samsara’s products
may infringe. In addition, identification of third-party patent rights that may be relevant to Samsara’s technology is difficult
because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing
the meaning of patent claims. In addition, third parties may obtain patents in the future and claim that use of Samsara’s technologies
infringes upon these patents. Any claims of patent infringement asserted by third parties would be time consuming and could:
|
● |
result in costly litigation that may cause negative publicity; |
|
● |
divert the time and attention of Samsara’s technical personnel
and management; |
|
● |
cause development delays; |
|
● |
subject Samsara to an injunction preventing Samsara from making, using,
selling, offering for sale, or importing Samsara products; |
|
● |
prevent Samsara from commercializing any of its products until the
asserted patent expires or is held finally invalid or not infringed in a court of law; |
|
● |
require Samsara to develop non-infringing technology, which may not
be possible on a cost-effective basis; |
|
● |
subject Samsara to significant liability to third parties; or |
|
● |
require Samsara to enter into royalty or licensing agreements, which
may not be available on commercially reasonable terms, or at all, or which might be non-exclusive, which could result in Samsara’s
competitors gaining access to the same technology. |
Although no third-party has
asserted a claim of patent infringement against Samsara as of the date of this Annual Report, others may hold proprietary rights that
could prevent Samsara’s products from being marketed. Any patent-related legal action against Samsara claiming damages and seeking
to enjoin activities relating to Samsara’s products could subject Samsara to potential liability for damages, including treble
damages if Samsara were determined to have willfully infringed, and require Samsara to obtain a license to manufacture or develop its
products. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial
diversion of employee resources from Samsara’s business. Samsara cannot predict whether it would prevail in any such actions or
that any license required under any of these patents would be made available on commercially reasonable terms, if at all. Moreover, even
if Samsara or its future strategic partners were able to obtain a license, the rights may be nonexclusive, which could result in Samsara’s
competitors gaining access to the same intellectual property. In addition, Samsara cannot be certain that it could redesign its products
to avoid infringement, if necessary. Accordingly, an adverse determination in a judicial or administrative proceeding, or the failure
to obtain necessary licenses, could prevent Samsara from developing and commercializing its products, which could harm Samsara’s
business, financial condition and operating results.
Parties making claims against
Samsara may be able to sustain the costs of complex patent litigation more effectively than Samsara can because they have substantially
greater resources. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation
or administrative proceedings, there is a risk that some of Samsara’s confidential information could be compromised by disclosure.
In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect
on Samsara’s ability to raise additional funds or otherwise have a material adverse effect on Samsara’s business, results
of operations, financial condition and prospects.
If Samsara is unable to protect the confidentiality
of its trade secrets, its business and competitive position would be harmed.
In addition, Samsara relies
on the protection of its trade secrets, including unpatented know-how, technology and other proprietary information to maintain Samsara’s
competitive position. Although Samsara has taken steps to protect its trade secrets and unpatented know-how, including entering into
confidentiality agreements with third parties, and confidential information and inventions agreements with employees, consultants and
advisors, Samsara cannot provide any assurances that all such agreements have been duly executed, and any of these parties may breach
the agreements and disclose Samsara’s proprietary information, including its trade secrets, and Samsara may not be able to obtain
adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult,
expensive and time consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less
willing or unwilling to protect trade secrets.
Moreover, third parties may
still obtain this information or may come upon this or similar information independently, and Samsara would have no right to prevent
them from using that technology or information to compete with Samsara. If any of these events occurs or if Samsara otherwise loses protection
for its trade secrets, the value of this information may be greatly reduced and Samsara’s competitive position would be harmed.
If Samsara does not apply for patent protection prior to such publication or if Samsara cannot otherwise maintain the confidentiality
of its proprietary technology and other confidential information, then Samsara’s ability to obtain patent protection or to protect
its trade secret information may be jeopardized.
Risks Related to the Company’s Common
Stock
An active, liquid and orderly market for
the Company’s common stock may not develop, and you may not be able to resell your common stock at or above the purchase price.
Samsara’s common stock
is quoted on the OTCQB. An active trading market for the Company’s common stock has not developed and may never develop or be sustained.
The lack of an active market may impair an investor’s ability to sell its shares at the time it wishes to sell them or at a price
that it considers reasonable. An inactive market may also impair the Company’s ability to raise capital by selling shares and may
impair the Company’s ability to acquire other businesses or technologies using the Company’s shares as consideration, which,
in turn, could materially adversely affect the Company’s business.
The trading price of the shares of the
Company’s common stock could be highly volatile, and purchasers of the Company’s common stock could incur substantial losses.
The Company’s stock
price is likely to be volatile. The stock market in general has experienced extreme volatility that has often been unrelated to the operating
performance of particular companies. As a result of this volatility, investors may not be able to sell their common stock at or above
their purchase price. The market price for the Company’s common stock may be influenced by those factors discussed in this “Risk
Factors” section and many others, including:
| ● | the
success or failure of the Company’s efforts to acquire, license or develop additional
products; |
| ● | innovations
or new products developed by the Company or its competitors; |
| ● | announcements
by the Company or its competitors of significant acquisitions, strategic partnerships, joint
ventures or capital commitments; |
| ● | manufacturing,
supply or distribution delays or shortages; |
| ● | any
changes to the Company’s relationship with any manufacturers, suppliers, licensors,
future collaborators or other strategic partners; |
| ● | achievement
of expected product sales and profitability; |
| ● | variations
in the Company’s financial results or those of companies that are perceived to be similar
to the Company; |
| ● | trading
volume of the Company’s common stock; |
| ● | an
inability to obtain additional funding; |
| ● | sales
of the Company’s stock by insiders and stockholders; |
| ● | general
economic, industry and market conditions other events or factors, many of which are beyond
the Company’s control; |
| ● | additions
or departures of key personnel; and |
| ● | intellectual
property, product liability or other litigation against the Company. |
Samsara’s executive officers and
directors control or significantly influence all matters submitted to stockholders for approval.
The Company’s executive
officers, directors and greater than 5% stockholders, in the aggregate, own in excess of 80% of the Company’s outstanding common
stock. Furthermore, the two directors of Samsara have the ability to control or significantly influence all matters submitted to the
Company’s board of directors or stockholders for approval, including the appointment of the Company’s management, the election
and removal of directors and approval of any significant transaction, as well as the Company’s management and business affairs.
This concentration of ownership may have the effect of delaying, deferring or preventing a change in control, impeding a merger, consolidation,
takeover or other business combination involving the Company, or discouraging a potential acquiror from making a tender offer or otherwise
attempting to obtain control of the Company’s business, even if such a transaction would benefit other stockholders.
Samsara does not currently intend to pay
dividends on its common stock, and, consequently, investors’ ability to achieve a return on your investment will depend on appreciation,
if any, in the price of the Company’s common stock.
Samsara has never declared
or paid any cash dividend on its common stock. Samsara currently anticipates that it will retain future earnings for the development,
operation and expansion of the Company’s business and does not anticipate declaring or paying any cash dividends for the foreseeable
future. Any return to stockholders will therefore be limited to the appreciation of their stock. There is no guarantee that shares of
the Company’s common stock will appreciate in value or even maintain the price at which stockholders have purchased their shares.
Sales of a substantial number of shares
of the Company’s common stock by the Company’s stockholders in the public market could cause the Company’s stock price
to fall.
Sales of a substantial number
of shares of the Company’s common stock in the public market or the perception that these sales might occur could significantly
reduce the market price of the Company’s common stock and impair the Company’s ability to raise adequate capital through
the sale of additional equity securities.
Samsara must incur significant increased
costs as a result of operating as a public company, and its management will be required to devote substantial time to new compliance
initiatives compared to that which they devoted as the management of a private company.
As a public company, Samsara
must incur significant legal, accounting and other expenses. Samsara is subject to the reporting requirements of the Exchange Act, which
will require, among other things, that Samsara file with the U.S. Securities and Exchange Commission, or SEC, annual, quarterly and current
reports with respect to its business and financial condition. In addition, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”),
as well as rules subsequently adopted by the SEC to implement provisions of Sarbanes-Oxley, impose significant requirements on public
companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate
governance practices. Further, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC has adopted
additional rules and regulations in these areas, such as mandatory “say on pay” voting requirements that now apply to Samsara.
Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may
lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in
which Samsara operates its business in ways Samsara cannot currently anticipate.
Samsara expects the rules
and regulations applicable to public companies to substantially increase Samsara’s legal and financial compliance costs compared
to those of the Target prior to the Merger, and to make some activities more time consuming and costly. If these requirements divert
the attention of Samsara’s management and personnel from other business concerns, they could have a material adverse effect on
Samsara’s business, financial condition and results of operations. The increased costs may increase Samsara’s net loss, and
may require Samsara to reduce costs in other areas of its business or increase the prices of its products or services. For example, Samsara
expects these rules and regulations to make it more difficult and more expensive for Samsara to obtain director and officer liability
insurance, and Samsara may be required to incur substantial costs to maintain the same or similar coverage. Samsara cannot predict or
estimate the amount or timing of additional costs Samsara may incur to respond to these requirements. The impact of these requirements
could also make it more difficult for Samsara to attract and retain qualified persons to serve on its board of directors, its board committees
or as executive officers.
If securities or industry analysts do not
publish research or reports or publish unfavorable research or reports about the Company’s business, the Company’s stock
price and trading volume could decline.
The trading market for the
Company’s common stock will depend in part on the research and reports that securities or industry analysts publish about the Company,
its business, its market or its competitors. Samsara does not currently have and may never obtain research coverage by securities and
industry analysts. If no securities or industry analysts commence coverage of the Company, the trading price for the Company’s
stock would be negatively impacted. In the event the Company obtains securities or industry analyst coverage, if one or more of the analysts
who covers the Company downgrades its stock, the Company’s stock price would likely decline. If one or more of these analysts ceases
to cover the Company or fails to regularly publish reports on the Company, interest in the Company’s stock could decrease, which
could cause the Company’s stock price or trading volume to decline.
If the Company fails to maintain proper
and effective internal control over financial reporting, the Company’s ability to produce accurate and timely financial statements
could be impaired, investors may lose confidence in the Company’s financial reporting and the trading price of the Company’s
common stock may decline.
Pursuant to Section 404 of
Sarbanes-Oxley, the Company’s management is required to report upon the effectiveness of the Company’s internal control over
financial reporting. Additionally, if the Company reaches an accelerated filer threshold, the Company’s independent registered
public accounting firm will be required to attest to the effectiveness of the Company’s internal control over financial reporting.
The rules governing the standards that must be met for management to assess the Company’s internal control over financial reporting
are complex and require significant documentation, testing and possible remediation. To comply with the requirements of being a reporting
company under the Exchange Act, the Company will need to upgrade its information technology systems; implement additional financial and
management controls, reporting systems and procedures; and hire additional accounting and finance staff. If the Company or, if required,
its auditors are unable to conclude that the Company’s internal control over financial reporting is effective, investors may lose
confidence in the Company’s financial reporting and the trading price of the Company’s common stock may decline.
The Company cannot assure
its investors that there will not be material weaknesses or significant deficiencies in the Company’s internal control over financial
reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit the Company’s
ability to accurately report its financial condition, results of operations or cash flows. If the Company is unable to conclude that
its internal control over financial reporting is effective, or if the Company’s independent registered public accounting firm determines
the Company has a material weakness or significant deficiency in the Company’s internal control over financial reporting once that
firm begin its Section 404 reviews, investors may lose confidence in the accuracy and completeness of the Company’s financial reports,
the market price of the Company’s common stock could decline, and the Company could be subject to sanctions or investigations by
the SEC or other regulatory authorities. Failure to remedy any material weakness in the Company’s internal control over financial
reporting, or to implement or maintain other effective control systems required of public companies, could also restrict the Company’s
future access to the capital markets.