UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

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

 

For the fiscal year ended December 31, 2019

 

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

 

For the transition period from __________ to __________

 

Commission file number: 000-54649

 

  SAMSARA LUGGAGE, INC.  
  (Exact name of registrant as specified in its charter)  

 


Nevada
  26-0299456
(State or other jurisdiction of
incorporation or organization)
 

(I.R.S. Employer

Identification No.)

 

One University Plaza, Suite 505
Hackensack, NJ

 

 

 

07601

(Address of principal executive offices)   (Zip Code)

 

  (877) 421-1574  
(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act: None

  

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

 

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

 

  Common Stock, $0.0001 par value  
  (Title of Class)  

  

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ☐ No ☒

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

 

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

  

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

 

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

 

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

 

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2019) was $15,277,952.

 

The number of shares of the registrant’s common stock outstanding as of January 30, 2020 was 3,535,935,553 shares.

 

Documents incorporated by reference: None

  

 

 

 

 

SAMSARA LUGGAGE, INC.

TABLE OF CONTENTS

 

PART I
ITEM 1. Business 1
ITEM 1A Risk Factors 7
ITEM 1B Unresolved Staff Comments 18
ITEM 2. Properties 18
ITEM 3. Legal Proceedings 18
ITEM 4. Mine Safety Disclosures 18
     
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 19
ITEM 6. Selected Financial Data 20
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation 20
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 21
ITEM 8. Financial Statements and Supplementary Data F-1
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 22
ITEM 9A. Controls and Procedures 22
ITEM 9B. Other Information 22
     
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance 23
ITEM 11. Executive Compensation 25
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 26
ITEM 13. Certain Relationships and Related Transactions, and Director Independence 27
ITEM 14. Principal Accountant Fees and Services 28
     
PART IV
ITEM 15. Exhibits and Financial Statement Schedules 29
     
SIGNATURE 30

  

i

 

 

FORWARD-LOOKING STATEMENTS

 

This Annual Report on Form 10-K (“Annual Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “foresee,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. These risks and uncertainties include the following:

 

the risks and other factors described under the caption “Risk Factors” under Item 1A of this Annual Report on Form 10-K;
     
our future operating results;
     
our business prospects;
     
any contractual arrangements and relationships with third parties;
     
the dependence of our future success on the general economy;
     
any possible financings; and
     
the adequacy of our cash resources and working capital.

 

Because the factors referred to above could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us, you should not place undue reliance on any such forward-looking statements. New factors emerge from time to time, and their emergence is impossible for us to predict. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

 

This Annual Report should be read completely and with the understanding that actual future results may be materially different from what we expect. The forward looking statements included in this Annual Report are made as of the date of this Annual Report and should be evaluated with consideration of any changes occurring after the date of this Annual Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Except as otherwise indicated by the context, references in this report to “Company”, “Samsara”, “we”, “us” and “our” are references to SAMSARA LUGGAGE, INC. All references to “USD” or United States Dollar refer to the legal currency of the United States of America.

  

ii

 

 

PART I

 

ITEM 1. BUSINESS

 

Formation

 

Samsara Luggage, Inc. (the “Company” or “Samsara”) was incorporated on May 7, 2007 under the name, “Darkstar Ventures, Inc.” under the laws of the State of Nevada. From the date of its formation until May 2011, the Company did not have any business activity except for the development of its website and locating companies through which it could offer products. Once its proprietary website was officially launched in July 2011, the Company engaged in the business of marketing eco-friendly health and wellness products, such as air and water filtration systems, organic baby products, and eco-friendly beds and linens through affiliate marketing arrangements.

 

On May 14, 2015, the founder of the Company, Chizkiyau Lapin, sold all of his shares of common stock of the Company, then constituting 51% of the issued and outstanding shares of common stock of the Company, to Mr. Avraham Bengio. Beginning in April 2016, the Company began to focus, through its wholly-owned Israeli subsidiary, Bengio Urban Renewal Ltd. (“Bengio Urban Renewal”), in the area of real estate development, particularly on the urban renewal market in Israel. As a result of the business activities of Bengio Urban Renewal, the Company’s Form 10-K for the fiscal year ended July 31, 2016, which was filed on November 14, 2016, stated that the Company was no longer a “shell” company as defined in Rule 12b-2 of the Exchange Act.

 

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.

 

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.

  

1

 

 

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 458.124 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.

 

Address and Market for Securities

 

Our principal executive offices are located at the following address: One University Plaza, Suite 505, Hackensack, NJ 07601. Our telephone number is (877) 421-1574. Our website is www.samsaraluggage.com.

 

Our common shares are quoted on the OTC Pink market of OTC Markets under the symbol “SAML.” On January 29, 2020, the closing price for shares of our common shares as reported on the OTC Pink was $0.0052 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.

 

Transactions during 2019

 

Share Purchase Agreements

 

On September 26, 2019, the Company entered into share purchase agreements with five non-U.S. investors pursuant to which the investors invested an aggregate amount of $500,000 in the Company, and the Company issued to the investors shares of common stock at a price per share equal to $0.0024. In addition, the Company issued to one of the investors additional shares of common stock valued at $50,000, at the $0.0024 price per share, as a finder’s fee for the transaction. The investors advanced the aggregate purchase price to the Company in May 2019. The aggregate number of shares of common stock issued to the investors upon closing was 229,166,666. The shares were issued to the investors after the Company increased its authorized share capital as part of the Merger. As part of this transaction, the Company also granted the investors warrants to purchase an aggregate amount of 104,166,666 shares of common stock of the Company at an exercise price equal to US$0.0048 per share. The warrants are exercisable during a period of one year from the date of grant.

 

License Agreement

 

On July 18, 2019, the Company entered into a License Agreement (“License Agreement”) with the Sterling/Winters Company, a California corporation, doing business as Meharey MIVI LLC (“Licensor”). Pursuant to the License Agreement, The Licensor licensed to the Company the name, likeness, and visual representation associated with Tommy Meharey for an initial term of three years with an option to renew the term for an additional five years. The Company is required to pay the Licensor royalties of 10% of the Company’s net sales of licensed products, with annual minimum royalty payments of $25,000 due upon signing, on August 1, 2020, and on August 1, 2021. The Company is also obligated to pay the Licensor brand participation payments of $25,000 per year, including an initial payment upon signing and additional payments on the first and second anniversaries of the effective date of the License Agreement. In addition, the Company agreed to grant the Licensor warrants to purchase five percent (5%) of the issued and outstanding shares of the Company calculated as of immediately following the consummation of the Merger.

  

2

 

 

Convertible Loan Agreement (YAII PN, Ltd.)

 

On June 5, 2019, the Company entered into a Securities Purchase Agreement (“SPA”) with YAII PN, Ltd. (the “Investor”), pursuant to which the Investor agreed to provide the Company with a convertible loan in the aggregate amount of $1,100,000 in three tranches, and the Company agreed to issue convertible debentures and a warrant to the Investor. The first tranche of the loan in the amount of $200,000 was provided upon signature of the SPA. The second tranche in the amount of $300,000 was provided following the Company’s filing of its Registration Statement on Form S-4 in connection with the Merger with Samsara Delaware. The third tranche in the amount of $600,000 was provided following the consummation of the Merger.

 

Each tranche of the loan will bear interest at an annual rate of ten percent (10%) and will be repayable after two years. Each tranche of the loan will be convertible after six months into shares of Company’s common stock at a conversion price equal to $0.003 per share.

 

As part of the transaction, the Company issued to the Investor a warrant to purchase 91,666,666 shares of common stock, at an exercise price equal to $0.003. The term of the warrant is five years from the issue date. The warrant may be exercised by cash payment or through cashless exercise by the surrender of warrant shares having a value equal to the exercise price of the portion of the warrant being exercised.

 

The SPA and the convertible debentures contain events of default, including, among other things, failure to repay the loan amount by the maturity date, and bankruptcy and insolvency events, that could result in the acceleration of the Investor’s right to convert the loan amount into shares of common stock.

 

Convertible Loan Agreement (Moshe Zuk)

 

On March 24, 2019, the Company entered into a Convertible Loan Agreement with Moshe Zuk (the “Lender”). Under the agreement, the Lender provided the Company with a loan in the amount of fifty thousand dollars ($50,000). The Company undertook to repay the loan principal, plus annual interest of 12%, within one year. The Lender may convert the loan plus interest into shares of the Company’s common stock at a price per share based on the lower of (a) a discount of twenty percent (20%) to the valuation of the Company at the Company’s first financing round, or (b) a one million dollar ($1,000,000) valuation.

 

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 6061aluminum 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 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.

 

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.

  

3

 

 

Samsara works with 3 designers on an ongoing basis, and with NOA Labs Ltd., a Hong Kong company.  Samsara’s R&D activities are overseen by David Dahan.

 

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 (Shen Zhen) 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 has recently begun selling its smart luggage products direct-to-consumer (D2C) via its own website.    In addition, Samsara has entered into an agreement with T.C.M. International Trade Ltd. pursuant to which T.C.M. is responsible for having Samsara’s products available for purchase on leading e-commerce websites.  Currently, Samsara’s products are available for purchase on Amazon.com.  T.C.M. has agreed to pay Samsara a fixed fee for each unit of product sold via an online platform, which price is linked to volume of sales.

 

Samsara has entered into a licensing agreement with MIVI, a brand by kiWW® founded by Kathy Ireland and Tommy Meharey to introduce an exclusive collection of smart luggage products under the Kathy Ireland brand. Kathy Ireland will serve as a member of Samsara’s Advisory Board and the partnership will include various marketing and public relations activities including online promotions, digital and social media campaigns, and televised initiatives to support the joint brand’s exposure on both a national and global level.

 

Competition

 

Samsara’s primary competitors offering aluminum suitcases in the carry-on luggage market include Away, Rimowa, Samsonite (Tumi), and Zero Halliburton.

 

Competitor   Product   Price     Features
               
Away   Aleon 21” Carry-On Aluminum Hardside Luggage   $ 549    

●     Dimensions: 20.9 x 15.7 x 9.0 inches, Weight: 10.6 lbs, Volume: 2098 cubic inches

●     Lightweight and extremely durable Aircraft Grade Aluminum Frame and Body with two TSA-Approved Resettable Combination Locks

●     Interior Compression Packing System will keep items from shifting to the bottom, and prevent wrinkles

●     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

●     10-year Worry Free Warranty

                 
Rimowa   Rimowa Topas IATA Carry- On Luggage 21” Inch Multi-wheel 32L TSA Lock Spinner Suitcase Silver   $ 799    

●     Dimensions: 21.7“x7.9“x15.7“inch

●     4 wheel spinners for smooth-rolling mobility in any direction

●     The height-adjustable Flex-Divider system on the interior can also be set to accomodate the exact volume of your luggage and keeps your belongings in the greatest possible order

●     Integrated in the case, the innovative TSA lock that can be opened without damage during security checks

  

4

 

 

Competitor   Product   Price     Features
                 
 Zero Halliburton    Zero Halliburton Geo Aluminum 3.0 International Carry-On (Silver)   $ 850    

●     Dimensions: 15x8x21”

●     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.

●     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.

●     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.

●     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.

●     Our newly introduced ZH Global Tracking allows your case to be tracked anywhere in the world, providing additional peace of mind for your travel.

                 
Samsonite   Samsonite LITE-BOX ALU SPINNER (4 WHEELS) 55CM   $ 667    

●     Dimensions: 55 x 40 x 23 cm (including handles, wheels, bottom glides, side pockets and other external parts)

●     Volume: 40 L

●     Weight: 4.7 kg

●     Warranty: Limited 10 year global warranty

●     Model: Spinner (4 wheels)

●     Colour: Aluminium

●     Material: 100% High-end anodized aluminium

  

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 of 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.

 

5

 

 

Electronic Equipment

 

On March 12, 2018, Samsara received a Grant of Equipment Authorization Certification Issued Under the Authority of the Federal Communications Commission stating that the Samsara smart unit is in compliance with the FCC part 15c (Regulating the interference of electronic equipment during operation).

  

On April 17, 2018, Samsara received a Certificate of Compliance with the European Union RoHS regulations (regulating and restricting the use of certain hazardous substances in electrical and electronic equipment).

 

On January 25, 2018, Samsara received an Attestation of Global Compliance with regulation EN 62471 (regulation of the photo biological safety of lamps and lamp systems).

 

On February 27, 2018, Samsara received the EU-RED (Radio Equipment Directive) Certificate of Conformity (regulating radio equipment, electromagnetic compatibility, and the efficient use of the radio spectrum.)

 

Employees

 

Samsara does not have any employees.  All of its 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.
One University Plaza, Suite 505
Hackensack, NJ   07601
Telephone: 1-877-421-1574
Attn: Atara Dzikowski

 

  

6

 

 

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 $3,142,000 and $1,604,000 for the years ended December 31, 2019, and December 31, 2018, respectively. As of December 31, 2019, Samsara had an accumulated deficit of $18,648,000.  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.

  

7

 

 

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, 2019, 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.  Furthermore, following the completion of the Merger, Samsara will incur the additional costs associated with operating as a public company. Accordingly, Samsara will need to obtain substantial additional funding in connection with its continuing operations. 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.

  

8

 

 

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.

 

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.

 

Ssmsara 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 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.

  

9

 

 

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.

  

10

 

 

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 (Shen Zhen) 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.

  

11

 

 

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.

  

12

 

 

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.

  

13

 

 

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;

  

14

 

 

  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 prospectus, 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 OTC Pink. 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.

  

15

 

 

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.

  

16

 

 

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.

 

The Target, whose former management team is now Samsara’s management team, was a private company. As a public company, Samsara must incur significant legal, accounting and other expenses that the Target did not have to incur prior to the Merger. 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.

  

17

 

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. PROPERTIES

 

Our office and mailing address is One University Plaza, Suite 505, Hackensack, NJ 07601. The lease period for our office commenced on May 1, 2010 and expires at midnight on May 1, 2020. We pay a fixed monthly rent of $200 per month. We believe that our leased property is satisfactory, suitable, and adequate for our current needs.

 

ITEM 3. LEGAL PROCEEDINGS

 

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interests.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

  

18

 

 

PART II

 

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market for our Common Stock

 

Our common stock is quoted on the OTC Pink market system. The Common Stock, which had previously traded through the close of business on November 11, 2019 under the ticker symbol “DAVC,” commenced trading on the OTC Pink under the ticker symbol “SAML” on November 12, 2019. The Common Stock has a new CUSIP number, 79589J101.

 

On December 31, 2019, the last trading day before the date of this Annual Report, the closing sale price of the Common Stock on OTC Pink was $0.0061 per share.

 

While our common stock is quoted on the OTC Pink market system, there is a limited public market for the shares of our common stock, and little to no trades of our common stock to date have taken place. Any quotations reflect interdealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

 

The table below sets forth the range of high and low bid information for our common shares as quoted on the OTC Pink for each of the quarters during the fiscal year ended December 31, 2019 and December 31, 2018:

 

For the Fiscal Year Ended December 31, 2019
For the Quarter ended   High     Low  
March 31     0.0034       0.0012  
June 30     0.0250       0.0014  
September 30     0.0079       0.0240  
December 31     0.0350       0.0025  

 

For the Fiscal Year Ended December 31, 2018
For the Quarter ended   High     Low  
March 31     0.3300       0.0200  
June 30     0.0445       0.0055  
September 30     0.0075       0.0029  
December 31     0.0115       0.0017  

 

Shareholders of Record

 

As of December 31, 2019, there were 170 stockholders of record holding 3,535,935,553 shares of common stock.

  

19

 

 

Recent Sales of Unregistered Securities

 

During the fiscal year ended December 31, 2019, in addition to the sales of equity securities not registered under the Securities Act that were included in our Quarterly Reports on Form 10-Q and in our Current Reports on Form 8-K, we have sold the following equity securities not registered under the Securities Act: On July 30, 2019, pursuant to the License Agreement with the Sterling/Winters Company, a California corporation, doing business as Meharey MIVI LLC (“Licensor”), we granted the Licensor warrants to purchase 161,842,544 shares of our common stock, at an exercise price of $0.01 per share, exercisable during a period of three (3) years from July 30, 2019. We issued the warrants under the exemptions from registration provided by Section 4(a)(2) of the Securities Act of 1933. We expect that any issuance of shares of common stock pursuant to the terms of the warrants will be exempt from registration under Section 4(a)(2) of the Securities Act of 1933.

 

Repurchase of Equity Securities

 

We have no plans, programs or other arrangements in regards to repurchases of our common stock.

 

Dividends

 

We have never declared or paid any cash dividends on our common stock and currently do not anticipate paying such cash dividends. We currently anticipate that we will retain all of our future earnings for use in the development and expansion of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our Board of Directors (the “Board”) and will depend upon our results of operations, financial condition, tax laws and other factors as the Board, in its discretion, deems relevant.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

None.

 

Use of Proceeds from the Sale of Registered Securities

 

None.

 

ITEM 6. SELECTED FINANCIAL DATA

 

We are a smaller reporting company and are not required to provide the information under this item.

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand our historical results of operations during the periods presented and our financial condition. This MD&A should be read in conjunction with our consolidated financial statements and the accompanying notes to consolidated financial statements, and contains forward-looking statements that involve risks and uncertainties. See section entitled “Forward-Looking Statements” above.

 

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. Currently, the Company develops and sell smart luggage products.

 

Results of Operations

 

Year ended December 31, 2019 compared to the year ended December 31, 2018

 

Revenue

 

The Company generates revenues through the sale and distribution of smart luggage products. Revenues during the year ended December 31, 2019 totaled $649,000 compared to $6,000 for the year ended December 31, 2018.

 

Costs of Revenue

 

Costs of revenue consists of the purchase of raw materials and the cost of production. Cost of revenues during the year ended December 31, 2019 totaled $525,000 compared to $4,000 for the year ended December 31, 2018. The increase in the total revenue is mainly due to the increase in sales.

 

Gross Profit

 

During the year ended December 31, 2019, Gross Profit totaled $124,000, representing a Gross Profit margin of 19%. During the year ended December 31, 2018, Gross Profit totaled $2,000 representing Gross Profit margin of 33.3%.

  

20

 

 

Operating Expenses

 

Operating expenses totaled $2,031,000 during the year ended December 31, 2019, compared to $1,469,000 during the year ended December 31, 2018, representing a net increase of $562,000. The increase in the operating expenses is mainly due to increase in the growth of the Company’s business.

 

Net Loss 

 

We incurred a net loss of $3,142,000 for the year ended December 31, 2019, as compared to a net loss of $1,604,000 for the year ended December 31, 2018 for the reasons described above.

 

Liquidity and Capital Resources

 

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.

 

As of December 31, 2019, the Company had $477,000 of cash, total current assets of $616,000, and total current liabilities of $1,810,000, creating a working capital deficit of $1,194,000. As of December 31, 2018, the Company had $129,000 of cash, total current assets of $369,000, and total current liabilities of $619,000, creating a working capital deficit of $250,000.

 

The increase in our working capital deficit was mainly attributable to the increase of $944,000 in Fair Value of the convertible component in a convertible loan, which was mitigated by an increase of $348,000 in cash and cash equivalents.

 

Net cash used in operating activities was $1,100,000 for the year ended December 31, 2019, as compared to cash used in operating activities of $370,000 for the year ended December 31, 2018. The Company’s primary uses of cash have been for professional support, research and development expenses, sales and marketing expenses, and working capital purposes.

 

Net cash used in investing activities was $6,000 for the year ended December 31, 2019, as compared to net cash generated from investing activities of $0 for the year ended December 31, 2018.

 

Net cash provided by financing activities was approximately $1,454,000 for the year ended December 31, 2019, as compared to approximately $401,000 for the year ended December 31, 2018. We have principally financed our operations through the sale of our common stock and the issuance of debt. Due to our operational losses, we relied to a large extent on financing our cash flow requirements through issuance of common stock and debt. There can be no assurance we will be successful in raising the necessary funds to execute our business plan.

 

Necessity of Additional Financing

 

Securing additional financing is critical to implementation of our business plan. If and when we obtain the required additional financing, we should be able to fully implement our business plan. In the event we are unable to raise any additional funds we will not be able to pursue our business plan, and we may fail entirely. We currently have no committed sources of financing.

 

Going Concern Consideration

 

The above conditions raise substantial doubt about our ability to continue as a going concern. Our independent auditors included an explanatory paragraph in their report on the accompanying financial statements regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors. Although we anticipate that our current operations will provide us with cash resources, we believe existing cash will not be sufficient to fund planned operations and projects through the next 12 months. Therefore, we believe we will need to increase our sales, attain profitability, and raise additional funds to finance our future operations. Any meaningful equity or debt financing will likely result in significant dilution to our existing stockholders. There is no assurance that additional funds will be available on terms acceptable to us, or at all.

  

To address these risks, we must, among other things, implement and successfully execute our business and marketing strategy surrounding our products, continually develop and upgrade our website, respond to competitive developments, lower our financing costs, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations

   

Seasonality

 

We do not expect our sales to be impacted by seasonal demands for our products.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

   

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company and are not required to provide the information under this item.

  

21

 

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

  

SAMSARA LUGGAGE, INC.

 

(FORMERLY DARKSTAR VENTURES, INC.)

 

FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2019

 

TABLE OF CONTENTS

 

  Page
   
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS F-2
   
FINANCIAL STATEMENTS:  
Balance sheets as of December 31, 2019 and December 31, 2018 F-3
Statements of operations and comprehensive loss for the years ended December 31, 2019 and 2018 F-4
Statements of changes in stockholders’ equity deficit for the years ended December 31, 2019 and 2018 F-5
Statements of cash flows for the years ended December 31, 2019 and 2018 F-6
Notes to financial statements F-7

 

F-1

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF

SAMSARA LUGGAGE, INC. (FORMERLY - DARKSTAR VENTURES, INC.)

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of Samsara Luggage, Inc (formerly - Darkstar Venture Inc.) (the “Company”) as of December 31, 2019 and 2018, the related statements of operations and comprehensive loss, changes in stockholders’ deficit and cash flows for the years in the period ended December 31, 2019 and 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the year in the period ended December 31, 2019 and 2018, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1C to the financial statements, the Company has not yet generated material revenues from its operations to fund its activities and is therefore dependent upon external sources for financing its operations. As of December 31, 2019, the Company has incurred accumulated deficit of $5,236 thousands and negative operating cash flows. These factor among others, as discussed in Note 1C to the financial statements raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1C to the financial statements. The financial statements do not include any adjustments that might result from the outcome of’ these uncertainties.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

/s/ Halperin Ilanit.

Certified Public Accountants (Isr.)

 

Tel Aviv, Israel

January 29, 2020

We have served as the Company’s auditor since 2019

 

F-2

 

 

SAMSARA LUGGAGE, INC.

(FORMERLY DARKSTAR VENTURES, INC.)

BALANCE SHEETS

 

    December 31,
2019
    December 31,
2018
 
    (U.S. dollars in thousands, except per share data)  
ASSETS            
CURRENT ASSETS:            
Cash and cash equivalents     477       129  
Inventory     125       183  
Other current assets     14       57  
Total current assets     616       369  
                 
Property and Equipment, net     5       -  
Total assets     621       369  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
CURRENT LIABILITIES:                
Convertible Promissory Note (Note 3)     -       56  
Trade payable     26       -  
Accrued Expense     57       13  
Related party payables     105       89  
Deferred revenue     -       460  
Convertible note and short-term loan (Note 4)     250       -  
Fair Value of convertible component in convertible loan, net of discounts and debt issue costs (Note 5)     1,053       -  
Fair value of warrants issued in convertible loan (Note 5)     319       -  
Total current liabilities     1,810       618  
                 
Long Term Loan (Note 6)     -       40  
                 
TOTAL LIABILITIES     1,810       658  
                 
STOCKHOLDERS’ DEFICIT (Note 7)                
Common stock subscribed                
Common stock, authorized 5,000,000,000 shares, $0.0001 par value; 3,535,935,553 and 2,589,506,080 issued and outstanding as of December 31, 2019 and December 31, 2018, respectively     354       259  
Additional paid in capital     5,366       2,454  
Services receivable     (1,673 )     (908 )
Accumulated deficit     (5,236 )     (2,094 )
Total stockholders’ deficit     (1,189 )     (289 )
                 
Total liabilities and stockholders’ deficit     621       369  

 

The accompanying notes are an integral part of these financial statements 

 

F-3

 

 

SAMSARA LUGGAGE, INC.

(FORMERLY DARKSTAR VENTURES, INC.)

STATEMENTS OF OPERATIONS

 

    Year Ended
December 31,
 
    2019     2018  
    (U.S. dollars in thousands,
except per share data)
 
       
Revenues from sales of products     649       6  
Cost of sales     525       2  
GROSS PROFIT     124       4  
                 
OPERATING EXPENSES                
Research and development expenses     168       136  
Selling and marketing expenses     438       171  
General and administrative (Note 8)     1,425       1,162  
TOTAL OPERATING EXPENSES     2,031       1,469  
                 
OPERATING LOSS     (1,907 )     (1,465 )
                 
FINANCING EXPENSES                
Interest on convertible loan and convertible note     (314 )     (139 )
Expenses in respect of warrants issued and convertible component in convertible loan, net interest expenses (Note 5)     (921 )     -  
TOTAL FINANCING EXPENSE     (1,235 )     (139 )
                 
NET LOSS     (3,142 )     (1,604 )
                 
Basic and Diluted net loss per share     (0.00 )     (0.00 )
                 
Weighted average number of basic and diluted common shares outstanding     3,272,649,554       2,402,660,180  

 

The accompanying notes are an integral part of these financial statements

 

F-4

 

 

SAMSARA LUGGAGE, INC.

(FORMERLY DARKSTAR VENTURES, INC.)

STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT 

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

 

    Common Stock     Additional     Proceeds on     Service     Accumulated     Stockholders’  
    Shares     Amount     Paid-in Capital     Account of shares     Receivables     Deficit     Deficit  
Balance December 31, 2017     2,290,620,000       229       1,771       32       (1,783 )     (490 )     (241 )
Issuance of common stock, net of issuance cost     71,885,638       7       172       (32 )     -       -       147  
Issuance of shares and warrants for services     227,000,442       23       511       -       (200 )     -       334  
Amortization of services     -       -                       1,075       -       1,075  
Net loss     --       -                           -       (1,604 )     (1,604 )
Balance December 31, 2018     2,589,506,080       259       2,454       -       (908 )     (2,094 )     (289 )
Issuance of common stock, net of issuance cost     229,166,666       23       477               -               -500  
Issued of Warrants for services     -       -       1,940               (1,940 )     -       -  
Shares Issuance of common stock for conversion of convertible note     69,917,807       7       560               -       -       567  
Effect of Reverse Capitalization     647,345,000       65       (65 )                     -       -  
Amortization of services     -       -                       1,175       -       1,175  
Net loss     --       -                       -       (3,142 )     (3,142 )
Balance December 31, 2019     3,535,935,553     $ 354     $ 5,366     $ -     $ (1,673 )   $ (5,236 )   $ (1.189 )

 

The accompanying notes are an integral part of these financial statements

 

F-5

 

 

SAMSARA LUGGAGE, INC.

(FORMERLY DARKSTAR VENTURES, INC.)

STATEMENTS OF CASH FLOWS

 

    For the Year Ended
December 31,
 
    2019     2018  
    (In thousands)  
Cash Flows from Operating Activities:            
Net loss   $ (3,142 )   $ (1,604 )
Adjustments to reconcile net income (loss) to net cash used in operating activities:                
Amortization of services receivable     1,175       1,075  
Interest on convertible note and short-term loan     258       130  
Expenses in respect of warrants issued and convertible component in convertible loan, net interest expenses     921       -  
Depreciation     1       -  
Changes in Operating Assets and Liabilities:                
Inventory     58       (182 )
Other current assets     36       19  
Accounts payable     26       -  
Management fee due to Related party, net     16       -  
Other accounts payables     11       101  
Deferred revenue     (460 )     92  
                 
Net Cash Used by Operating Activities     (1,100 )     (370 )
                 
Cash Flows from Investment Activities:                
Purchase of Property and Equipment     (6 )     -  
Net Cash Provided by Financing Activities     (6 )     -  
                 
Cash Flows from Financing Activities:                
Proceeds from (Repayments of) Convertible note from related parties     (56 )     54  
Proceeds from loan received     50       200  
Repayments of convertible notes, net of issuance cost of $100     1,000       -  
Repayments of long-term loans     (40 )     -  
Proceeds from issuance of shares, net of issuance cost     500       147  
Net Cash Provided by Financing Activities     1,454       401  
                 
Net Increase in Cash     348       31  
Cash at Beginning of Period     129       98  
Cash at End of Period   $ 477     $ 129  
                 
Supplemental disclosure of cash flow information                
Cash paid for interest   $ 58     $ -  
Cash paid for income taxes   $ -     $ -  
Supplemental disclosure of non-cash financing activities                
Common stock issued for conversion of convertible note   $ 567     $ -  
Issued shares and warrants against services   $ -     $ 27  

 

The accompanying notes are an integral part of these financial statements

 

F-6

 

 

SAMSARA LUGGAGE, INC.

(FORMERLY DARKSTAR VENTURES, INC.)

NOTES TO FINANCIAL STATEMENTS

 

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

 

A. Samsara Luggage, Inc. (the “Company”) was incorporated on May 7, 2007 under the name, “Darkstar Ventures, Inc.” under the laws of the State of Nevada. From the date of its formation until May 2011, the Company did not have any business activity except for the development of its website and locating companies through which it could offer products. Once its proprietary website was officially launched in July 2011, the Company engaged in the business of marketing eco-friendly health and wellness products, such as air and water filtration systems, organic baby products, and eco-friendly beds and linens through affiliate marketing arrangements. On May 14, 2015, the founder of the Company, Chizkiyau Lapin, sold all of his shares of common stock of the Company, then constituting 51% of the issued and outstanding shares of common stock of the Company, to Mr. Avraham Bengio. In April 2016, the Company began to focus, through its wholly-owned Israeli subsidiary, Bengio Urban Renewal Ltd. (“Bengio Urban Renewal”), in the area of real estate development, particularly on the urban renewal market in Israel.

 

B. 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, designing, manufacturing, and selling high quality luggage products to meet the evolving needs of frequent travelers and also seeking to present new technologies within the aluminum luggage industry, including an aluminum “smart” suitcase.

 

The 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 to “Samsara Luggage, Inc.” effective as of November 12, 2019; 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 effective as of 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 Delaware, $0.0001 par value, was converted into the right to receive 458.124 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.

 

F-7

 

 

SAMSARA LUGGAGE, INC.

(FORMERLY DARKSTAR VENTURES, INC.)

NOTES TO FINANCIAL STATEMENTS

 

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS (cont.)

 

Immediately after the Merger, assuming the issuance of all of the merger consideration, there were approximately 3,236,851,080 shares of Common Stock outstanding, of which (i) the former stockholders of Samsara Delaware owned 2,589,506,080 shares, representing approximately 80% of the outstanding shares of Common Stock; and (ii) the Company’s stockholders immediately prior to the Merger owned 647,345,000 shares, representing approximately 20% of the outstanding shares of Common Stock.

 

The transaction was accounted for as a reverse asset acquisition in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Under this method of accounting, Samsara Delaware was deemed to be the accounting acquirer for financial reporting purposes. This determination was primarily based on the facts that, immediately following the Merger: (i) Samsara Delaware’s stockholders owned a substantial majority of the voting rights in the combined company, (ii) Samsara Delaware designated a majority of the members of the initial board of directors of the combined company, and (iii) Samsara Delaware’s senior management holds all key positions in the senior management of the combined company. As a result of the Recapitalization Transaction, the shareholders of Samsara Delaware received the largest ownership interest in the Company, and Samsara Delaware was determined to be the “accounting acquirer” in the Recapitalization Transaction. As a result, the historical financial statements of the Company were replaced with the historical financial statements of Samsara Delaware. The number of shares prior to the reverse capitalization have been retroactively adjusted based on the equivalent number of shares received by the accounting acquirer in the Recapitalization Transaction.

 

The Common Stock listed on the OTC Pink Marketplace, previously trading through the close of business on November 11, 2019 under the ticker symbol “DAVC,” commenced trading on the OTC Pink Marketplace under the ticker symbol “SAML” on November 12, 2019. The Common Stock has a new CUSIP number, 79589J101.

 

On November 13, 2019, the Board of Directors of the Company 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.

  

C. GOING CONCERN

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As of December 31, 2019, the Company had approximately $477,000 in cash and cash equivalents, approximately $1,194,000 in deficit of working capital, a stockholders’ deficiency of approximately $1,189,000 and an accumulated deficit of approximately $5,236,000. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Company’s ability to continue as a going concern is dependent upon raising capital from financing transactions and revenue from operations. Management anticipates their business will require substantial additional investments that have not yet been secured. Management is continuing in the process of fund raising in the private equity and capital markets as the Company will need to finance future activities. These financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern.

 

F-8

 

 

SAMSARA LUGGAGE, INC.

(FORMERLY DARKSTAR VENTURES, INC.)

NOTES TO FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

 

The financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“‘US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. As applicable to the financial statements, the most significant estimates and assumptions relate to the measurement of Convertible Note and Going Concern.

 

Functional currency

 

The functional currency of the Company is the US dollar (“US$”), which is the currency of the primary economic environment in which the operations of the Company are conducted.

 

Reclassification of Prior Year Presentation

 

Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations.

 

Cash and cash equivalents

 

Cash equivalents are short-term highly liquid investments which include short term bank deposits (up to three months from date of deposit), that are not restricted as to withdrawals or use that are readily convertible to cash with maturities of three months or less as of the date acquired.

 

F-9

 

 

SAMSARA LUGGAGE, INC.

(FORMERLY DARKSTAR VENTURES, INC.)

NOTES TO FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (cont.)

 

Inventory

 

Inventories are valued at the lower of cost or net realizable value. Cost of raw and packaging materials, purchased products, manufactured finished products and products in process are determined on the average cost basis. The Company regularly reviews its inventories for impairment and reserves are established when necessary.

 

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation and amortization. The Company provides for depreciation and amortization using the straight-line method over the estimated useful lives of the related assets, which range from three to five years. Maintenance and repair costs are expensed as they are incurred while renewals and improvements which extend the useful life of an asset are capitalized. At the time of retirement or disposal of property and equipment, the cost and related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is reflected in the consolidated results of operations. 

 

Derivative Liabilities and Fair Value of Financial Instruments

 

Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments and measurement of their fair value for accounting purposes. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt under ASC 470, the Company will continue its evaluation process of these instruments as derivative financial instruments under ASC 815.

 

Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.

 

Fair value of certain of the Company’s financial instruments including cash, accounts receivable, account payable, accrued expenses, notes payables, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with ASC 820, “Fair Value Measurements and Disclosure” defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value investments.

 

Fair value, as defined in ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, the Company’s credit risk.

 

F-10

 

 

SAMSARA LUGGAGE, INC.

(FORMERLY DARKSTAR VENTURES, INC.)

NOTES TO FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (cont.)

 

Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:

 

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.

 

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and

 

Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.

 

Fair value measurements are required to be disclosed by the Level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in Level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings, and a description of where those gains or losses included in earning are reported in the statement of income.

 

The Company records a debt discount related to the issuance of convertible debts that have conversion features at adjustable rates. The debt discount for the convertible instruments is recognized and measured by allocating a portion of the proceeds as an increase in additional paid-in capital and as a reduction to the carrying amount of the convertible instrument equal to the fair value of the conversion features. The debt discount will be accreted by recording additional non-cash gains and losses related to the change in fair values of derivative liabilities over the life of the convertible notes. 

 

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows:

 

    Balance as of December 31, 2019  
    Level 1     Level 2     Level 3     Total  
    (U.S. dollars in thousands)  
Liabilities:                        
Fair Value of convertible component in convertible loan, net of discounts and debt issue costs     -       -       1,053       1,053  
Fair value of warrants issued in convertible loan     -       -       319       319  
Total liabilities     -       --       1,372       1,372  

 

F-11

 

 

SAMSARA LUGGAGE, INC.

(FORMERLY DARKSTAR VENTURES, INC.)

NOTES TO FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (cont.)

 

Revenue recognition

 

Revenues are recognized when delivery has occurred and there is persuasive evidence of an agreement, the fee is fixed or determinable and collection of the related receivables is reasonably assured, and no further obligations exist. Revenues from sales of products are recognized when title and risk and rewards for the products are transferred to the customer.

 

Research and development expenses

 

Research and development expenses are charged to operations as incurred.

  

Income Taxes

 

Income taxes are accounted for under the assets and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Use of net operating loss carry forwards for income tax purposes may be limited by Internal Revenue Code section 382 if a change of ownership occurs.

 

Net Loss Per Basic and Diluted Common Share

 

Basic loss per ordinary share is computed by dividing the loss for the period applicable to ordinary shareholders, by the weighted average number of shares of common stock outstanding during the period. Securities that may participate in dividends with the shares of common stock (such as the convertible preferred) are considered in the computation of basic loss per share under the two-class method. However, in periods of net loss, only the convertible preferred shares are considered, since such shares have a contractual obligation to share in the losses of the Company. In computing diluted loss per share, basic loss per share is adjusted to reflect the potential dilution that could occur upon the exercise of potential shares. Accordingly, in periods of net loss, no potential shares are considered

 

Stock-Based Compensation

 

Share-based payments awarded to consultants (non-employees) are accounted for in accordance with ASC Topic 505-50, “Equity-Based Payments to Non-Employees”. However, when the Company grants to non-employees a fully vested, nonforfeitable equity instrument, such grants are measured based on the fair value of the award at the date of grant. When the fully vested, nonforfeitable equity instruments are granted for services to be received in future periods, the measured cost is recognized as an increase to stockholders’ equity at the measurement date with an offsetting amount as a deduction from stockholders’ equity within the caption “Services receivable”. Such amount is subsequently amortized to the statement of operations over the term of the services as an operating expense, as if the Company has paid periodic payments of cash for the services received from such service provider.

 

Recently Issued Accounting Standards 

 

In June 2016, the FASB issued a new standard, ASU 2016-13 – “Financial Instruments—Credit Losses”, requiring measurement and recognition of expected credit losses on certain types of financial instruments. The standard also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. This standard is effective for the Company after December 15, 2019. The standard does not have a material impact on the Company’s financial statements.

 

F-12

 

 

SAMSARA LUGGAGE, INC.

(FORMERLY DARKSTAR VENTURES, INC.)

NOTES TO FINANCIAL STATEMENTS

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

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (cont.)

 

In February 2016, the FASB issued a new lease accounting standard, ASU 2016-02 - “Leases”, requiring the recognition of lease assets and liabilities on the balance sheet. This standard is effective starting January 1, 2019. The adoption of ASU 2016-02 is not expected to have a material impact on the Company’s financial statements.

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 “Revenue from Contracts with Customers,” and modified the standard thereafter. The objective of the ASU is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers that will supersede most current revenue recognition guidance.  The basis of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The Company adopted this standard as of January 1, 2018 using the modified retrospective method. See Note 2.H. to the consolidated financial statements for additional details.

 

On January 5, 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities. The standard requiring changes to recognition and measurement of certain financial assets and liabilities. The standard primarily affects equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. The Company adopted ASU 2016-01 in the first quarter of 2018 and the impact on its consolidated financial statements was not material.

 

In November 2016, the FASB issued ASU 2016-18 “Restricted Cash” to provide guidance on the presentation of restricted cash in the statement of cash flows. Currently, the statement of cash flows explained the change in cash and cash equivalents for the period. The ASU requires that the statement of cash flows explain the change in cash, cash equivalents and restricted cash for the period. The ASU is effective for the Company in the first quarter of 2018, with early adoption permitted. The Company did not have a material effect on the statements of cash flows as the Company’s restricted cash is not material.

 

In June 2018, the FASB issued ASU No. 2018-07 “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” These amendments expand the scope of Topic 718, Compensation – Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The ASU supersedes Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees. The Company plans to adopt this standard in the first quarter of 2019. ASU 2018-07 is not expected to have an impact on Company’s consolidated financial statements.

 

In August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements,” which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements and is effective for the Company beginning on January 1, 2020. The Company does not expect that this standard will have a material effect on the Company’s consolidated financial statements.

 

F-13

 

 

SAMSARA LUGGAGE, INC.

(FORMERLY DARKSTAR VENTURES, INC.)

NOTES TO FINANCIAL STATEMENTS

 

NOTE 3 – CONVERTIBLE PROMISSORY NOTE

 

On August 20, 2018 the Company entered into a Convertible Promissory Note (hereunder the “Note”) with a related party for the financing of the ongoing working capital of the Company in the amount of $54,000.

 

The Company promised to pay to related party in lawful money of the United States of America the principal sum of Fifty Four Thousand Dollars ($54,000), or such lesser amount as shall equal the outstanding principal amount hereof, together with interest from the date of this Note on the unpaid principal balance at a rate equal to 12% per annum, with such interest payable in the form of Shares of Common Stock of the Company, par value $0.001 (the “Shares”), at a price of Seventy Cents ($0.70) per Share, computed on the basis of the actual number of days elapsed and a year of 365 days.

 

The note was payable by August 20, 2019. In September 2019, the maturity of the loan was extended till December 31, 2019. The Company repaid the loan in December 2019.

 

NOTE 4 – CONVERTIBLE NOTE AND SHORT TERM-LOAN

 

A. On August 22, 2018 the Company (through a related company) entered into a Secured Loan and Service Agreement with a an affiliated entity of Moshe Zuk (hereunder “Zuk”) for the finance of the ongoing working capital of the Company, according to which Zuk granted the Company a loan in the amount of $200,000. The loan bears a monthly interest at a rate of 2% paid quarterly and calculated daily. The loan was guaranteed by the Company and by one of its shareholders.

 

In addition, Zuk granted the Company a credit line of up to $300,000 per year. The credit line shall bear a monthly interest of 1.5% of the utilized credit line. As of the date of this financial statements, the Company has not utilized such line of credit.

 

In addition, the Company issued on October 2018, Zuk 395,500 shares of common stock of the Company representing 7% of the issued and outstanding shares of the Company on a fully diluted basis, and warrants to purchase 169,500 shares of common stock of the Company representing 3% of the issued and outstanding shares of the Company on a fully diluted basis, against payment of $50,000. The Company estimated the fair value of such shares and warrants at a total of $334,000 of which $215,000 and $119,000 were recorded for interest expenses for the years ended December 31, 2019 and 2018, respectively.

 

On December 31, 2018, the balance of the Zuk loan, net of the unamortized portion of the Zuk shares and options, amounted to $7,000 and was presented in Other Current Assets.

 

B. On March 24, 2019, the Company entered into a Convertible Loan Agreement with Moshe Zuk (the “Lender”). Under the agreement, the Lender provided the Company with a loan in the amount of fifty thousand dollars ($50,000). The Company undertook to repay the loan principal, plus annual interest of 12%, within one year. The Lender may convert the loan plus interest into shares of the Company’s common stock at a price per share based on the lower of (a) a discount of twenty percent (20%) to the valuation of the Company at the Company’s first financing round, or (b) a one million-dollar ($1,000,000) valuation.

 

F-14

 

 

SAMSARA LUGGAGE, INC.

(FORMERLY DARKSTAR VENTURES, INC.)

NOTES TO FINANCIAL STATEMENTS

  

NOTE 5 – CONVERTIBLE NOTES

 

On June 5, 2019, the Company entered into a Securities Purchase Agreement (“SPA”) with YAII PN, Ltd. (the “Investor”), pursuant to which the Investor agreed to provide the Company with a convertible loan in the aggregate amount of $1,100,000 in three tranches, and the Company agreed to issue convertible debentures and a warrant to the Investor.

 

The first tranche of the convertible debentures in the amount of $200,000 was provided upon execution of the SPA. The second tranche in the amount of $300,000 was provided on October 23, 2019 upon the Company filing of a Registration Statement on Form S-4 in connection with the Merger with Samsara Delaware. The third tranche in the amount of $600,000 was provided on November 18, 2019 upon consummation of the Merger with Samsara Delaware and the fulfillment of all conditions required for the Merger. The Company incurred issuance cost of $100,000 with connection to those convertible debentures.

 

Each tranche of the loan will bear interest at an annual rate of ten percent (10%). The principal amount together with the accrued and unpaid interest will be repayable after two years. Each tranche of the loan together with the accrued and unpaid interest (or any portion at the discretion of the Investor) will be convertible at any time six months following the issuance date, into shares of Company’s common stock at a conversion price equal to the lower of $0.003 per share or 80% of the lowest volume-weighted average price (VWAP) of Company’s share during the period of 10 days preceding the conversion date.

 

In accordance with ASC 815-15-25 the conversion feature was considered embedded derivative instruments, and is to be recorded at their fair value as its fair value can be separated from the convertible loan and its conversion is independent of the underlying note value. The Company recorded finance expenses in respect of the convertible component in the convertible loan in the excess amount of the convertible component fair value over the face loan amount. The conversion liability is then marked to market each reporting period with the resulting gains or losses shown in the statements of operations.

 

The fair value of the convertible component was estimated by third party appraiser using the Monte Carlo Simulation Model to compute the fair value of the derivative and to mark to market the fair value of the derivative at each balance sheet date.  The following are the data and assumptions used as of the balance sheet date:

 

    December 31,
2019
 
Common stock price     0.0061  
Expected volatility     34.35 %
Expected term     1.43 years  
Risk free rate     1.59 %
Forfeiture rate     0 %
Expected dividend yield     0 %

 

F-15

 

 

SAMSARA LUGGAGE, INC.

(FORMERLY DARKSTAR VENTURES, INC.)

NOTES TO FINANCIAL STATEMENTS

 

NOTE 5 – CONVERTIBLE NOTES (cont.)

 

On December 9, 2019 and pursuant to the SPA, YAII exercised its option to convert the first Convertible Promissory Note in the amount of $210,000 into 69,917,807 shares of Common Stock of the Company.

 

In addition, the Company issued to the Investor a warrant to purchase 91,666,666 shares of common stock, at an exercise price equal to $0.003. The warrants may be exercised within 5 years from the issuance date by cash payment or through cashless exercise by the surrender of warrants shares having a value equal to the exercise price of the portion of the warrant being exercised.

 

The Company considered the provisions of ASC 815-40, “Derivatives and Hedging: Contracts in Entity’s Own Equity”, with respect to the detachable Warrants that were issued to the Convertible loan, and determined that as a result of the “cashless exercise” and variable exercise price that would adjust the number of Warrants and the exercise price of the Warrants based on the price at which the Company subsequently issues shares or other equity-linked financial instruments, such Warrants cannot be considered as indexed to the Company’s own stock. Accordingly, the Warrants were recognized as derivative liability at their fair value on initial recognition. In subsequent periods (and throughout July 31, 2019), the Warrants were marked to market with the changes in fair value recognized as financing expense or income in the consolidated statement of operations.

 

The warrants were estimated by third party appraiser using the Black-Scholes option-pricing model to compute the fair value of the derivative and to mark to market the fair value of the derivative at each balance sheet date.  The following are the data and assumptions used as of the balance sheet date:

 

    December 31,
2019
 
Common stock price     0.0061  
Expected volatility     32.55 %
Expected term      4.43 years  
Risk free rate     1.61 %
Forfeiture rate     0 %
Expected dividend yield     0 %

 

The following table presents the changes in fair value of the level 3 liabilities for the year ended December 31, 2019:

 

    Warrants     Convertible
component
 
    (U.S. dollars in thousands)  
Outstanding at January 1,2019     -       -  
Fair value of issued level 3 liability     553       2,453  
              (565 )
Changes in fair value     (234 )     (835 )
Outstanding at December 31,2019     319       1,053  

 

F-16

 

 

SAMSARA LUGGAGE, INC.

(FORMERLY DARKSTAR VENTURES, INC.)

NOTES TO FINANCIAL STATEMENTS

 

NOTE 6 – LONG TERM LOAN

 

On August 13, 2017 the Company entered into a loan agreement with YARN Investments Ltd (hereunder “YARN”) according to which YARN provided the Company with a loan investment of $40,000. The loan does not bear interest and its repayment is conditional upon raising at least $200,000. In addition, YARN had agreed to provide additional $60,000 to the Company in a way of payments to promotional consultants. The Company repaid the loan on December 16, 2019, and the additional loan was never utilized.

 

NOTE 7 – STOCKHOLDERS’ EQUITY

  

Common Stock

 

On November 12, 2019, the Company completed its merger with the Samsara Delaware in accordance with the terms of the Merger Agreement and Plan of Merger, dated as of May 10, 2019 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 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 to “Samsara Luggage, Inc.” effective as of November 12, 2019; 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 effective as of November 12, 2019.

 

Common Stock Activity During the Year Ended December 31, 2019

 

The following summarizes the Common Stock activity for the year ended December 31, 2019:

 

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 458.124 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. Immediately after the Merger, assuming the issuance of all of the merger consideration, there were approximately3,236,851,080 shares of Common Stock outstanding, of which (i) the former stockholders of Samsara Delaware owned 2,589,506,080 shares, representing approximately 80% of the outstanding shares of Common Stock; and (ii) the Company’s stockholders immediately prior to the Merger own 647,345,000 shares, representing approximately 20% of the outstanding shares of Common Stock.

 

On November 12, 2019, the Company issued 229,166,666 shares of its Common Stock in gross consideration of $500,000 pursuant to a serios securities purchase agreements from April 2019.

 

On December 9, 2019, and pursuant to the YAII Convertible Promissory Note, YAII exercised its option to convert the first Convertible Promissory Note in the amount of $210,000 into 69,917,807 shares of Common Stock of the Company.

 

F-17

 

 

SAMSARA LUGGAGE, INC.

(FORMERLY DARKSTAR VENTURES, INC.)

NOTES TO FINANCIAL STATEMENTS

 

NOTE 7 – STOCKHOLDERS’ EQUITY (cont.)

 

Warrants

 

On July 18, 2019, the Company entered into a License Agreement (“License Agreement”) with the Sterling/Winters Company, a California corporation, doing business as MIVI LLC (“Licensor”). Pursuant to the License Agreement, the Licensor licensed to the Company the name, likeness, and visual representation associated with Tommy Meharey for an initial term of three years with an option to renew the term for an additional five years. The Company is required to pay the Licensor royalties of 10% of the Company’s net sales of licensed products, with annual minimum royalty payments of $25 due upon signing, on August 1, 2020, and on August 1, 2021. The Company is also obligated to pay the Licensor brand participation payments of $25 per year, including an initial payment upon signing and additional payments on the first and second anniversaries of the effective date of the License Agreement.

 

In addition, the Company agreed to grant the Licensor warrants to purchase five percent (5%) of the issued and outstanding shares of the Company (post Merger). On November 12, 2019 the Company issued warrants to purchase 161,842,544 shares of common stock of the Company. The term of the warrants was three years and exercise price of the warrants is $0.01 per share.

 

The warrants were estimated using the Black-Scholes option-pricing model . The computed value of the warrants as of the issuance day was $1,940,000. The following are the data and assumptions used as of the balance sheet date:

 

    November 12,
2019
 
Common stock price     0.021  
Expected volatility     34.80 %
Expected term     3 years  
Risk free rate     1.65 %
Forfeiture rate     0 %
Expected dividend yield     0 %

 

F-18

 

 

SAMSARA LUGGAGE, INC.

(FORMERLY DARKSTAR VENTURES, INC.)

NOTES TO FINANCIAL STATEMENTS

 

NOTE 8 – GENERAL AND ADMINISTRATIVE EXPENSES

 

    Year ended
December 31
    Year ended
December 31
 
    2019     2018  
    (U.S. dollars in thousands)  
             
Professional fees     359       28  
Share based compensation     883       1,000  
Management fees (See Note 10)     100       100  
Other expenses     83       34  
      1,425       1,162  

 

NOTE 9 – INCOME TAXES

 

On December 22, 2017, the U.S. enacted new tax reform legislation which reduced the corporate tax rate to 21% effective for tax year beginning January 1, 2018. Under ASC 740, the effects of new tax legislation are recognized in the period which includes the enactment date. As a result, the deferred tax assets and liabilities existing on the enactment date must be revalued to reflect the rate at which these deferred balances will reverse. The corresponding adjustment would generally affect the Income Tax Expense (Benefit) shown on the financial statements. However, since the company has a full valuation allowance applied against all of its deferred tax asset, there is no impact to the Income Tax Expense for the year ending December 31, 2019.

 

IRC Section 382 potentially limits the utilization of NOLs and tax credits when there is a greater than 50% change of ownership. The Company has not performed an analysis under IRC 382 related to changes in ownership, which could place certain limits on the company’s ability to fully utilize its NOLs and tax credits. The Company’s has added a note to its financial statements to disclose that there may be some limitations and that an analysis has not been performed. In the interim, the Company has placed a full valuation allowance on its NOLs and other deferred tax items.

 

We recognized income tax benefits of $0 during the years ended December 31, 2019 and 2018. When it is more likely than not that a tax asset will not be realized through future income the Company must allow for this future tax benefit. We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward period. Effective December 22, 2017 a new tax bill was signed into law that reduced the federal income tax rate for corporations from 35% to 21%.

 

F-19

 

 

SAMSARA LUGGAGE, INC.

(FORMERLY DARKSTAR VENTURES, INC.)

NOTES TO FINANCIAL STATEMENTS

 

NOTE 9 – INCOME TAXES (cont.)

 

The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements for the years ended December 2019 or 2018 applicable under FASB ASC 740. We did not recognize any adjustment to the liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of accumulated deficit on the balance sheet. All tax returns for the Company remain open.

 

Reconciliation between the theoretical tax expense, assuming all income is taxed at the statutory tax rate applicable to income of the Company and the actual tax expense as reported in the Statement of Operations, is as follows:

 

    Year ended December 31,  
    2019     2018  
    (U.S. dollars in thousands)  
Loss before taxes, as reported in the statements of operations   $ 3,142     $ 1,604  
                 
Federal and State statutory rate     21 %     21 %
                 
Theoretical tax benefit on the above amount at federal statutory tax rate     660       337  
                 
Share-based compensation     (247 )     (251 )
Losses and other items for which a valuation allowance Was provided or benefit from loss carry forward     (413 )     (86 )
Actual tax income (expense)     -       -  

 

    2019     2018  
    U.S. dollars in thousands  
Deferred tax assets:            
Net operating loss carry-forward   $ 499     $ 86  
Valuation allowance     (499 )     (86 )
    $ -     $ -  

 

A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. Management has determined, based on its recurring net losses, lack of a commercially viable product and limitations under current tax rules, that a full valuation allowance is appropriate. 

 

    U.S. dollars in thousands  
Valuation allowance, December 31, 2018   $ 86  
Increase     413  
Valuation allowance, December 31, 2019   $ 499  

 

The net federal operating loss carry forward will begin expire in 2039. This carry forward may be limited upon the consummation of a business combination under IRC Section 382.

 

F-20

 

 

SAMSARA LUGGAGE, INC.

(FORMERLY DARKSTAR VENTURES, INC.)

NOTES TO FINANCIAL STATEMENTS

  

NOTE 10 – RELATED PARTY TRANSACTIONS

 

Related Parties Payable

 

    December 31,
2019
    December 31,
2018
 
    (U.S. dollars in thousands)  
Related Parties Payable due to management fee     105       89  

 

General and Administrative Expenses

 

    For the Year Ended
December 31,
 
    2019     2018  
    (U.S. dollars in thousands)  
Management Fee     100       100  

 

F-21

 

  

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

We have had no disagreements with accountants on accounting and financial disclosure.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

Disclosure controls and procedures are the controls and other procedures that are designed to provide reasonable assurance that information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the principal executive and principal financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

 

We have carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of the end of the fiscal year covered by this Annual Report.

 

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of the end of the fiscal year covered by this Annual Report on Form 10-K.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Securities Exchange Act Rule 13a-15(f). Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with U.S. GAAP.

 

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we conducted an assessment of the design and effectiveness of our internal control over financial reporting as of the fiscal year covered by this Report based on the framework issued by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission in Internal Control—Integrated Framework.

   

Based on this assessment, management concluded that, as of December 31, 2019, the Company’s internal control over financial reporting was effective.

 

This Annual Report does not include an attestation report of our Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this Annual Report.

 

Change in Internal Control over Financial Reporting

 

There were no significant changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our fourth fiscal quarter, that could materially affect, or are reasonably likely to materially affect, our internal control over financial reporting. However, internal control systems, no matter how well designed and operated, have inherent limitations. Therefore, even a system which is determined to be effective cannot provide absolute assurance that all control issues have been detected or prevented. Our systems of internal controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.

 

ITEM 9B. OTHER INFORMATION

 

None.

  

22

 

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

The following table lists the names, ages and positions of the individuals who serve as executive officers and directors of Samsara:

 

Name   Age   Position(s)
Atara Dzikowski   46   Chief Executive Officer and Director
David Dahan   47   Chief Technical Officer and Director

 

Atara Dzikowski

 

Atara Dzikowski served as Director and CEO of the Target from its inception in 2017 until the Merger, and following the Merger has served as Director and CEO of Samsara. She has served as Chairperson and CEO of Design Boxes Ltd. from 2013 to date. From 2009 to 2013, Ms. Dzikowski was Director of Development and Public Affairs of Shenkar College of Engineering, Design and Art. She holds a Master’s in Public Administration from Clark University and a BA degree in Communication and Management from The College of Management in Tel Aviv.  Since the Merger, Atara has been employed full time by Samsara as its Chief Executive Officer.

 

David Dahan

 

David Dahan served as Director and CTO of the Target from its inception in 2017 until the Merger, and following the Merger has served as Director and CTO of Samsara.  From 2015 to date, Mr. Dahan is also employed at Nova-Sight Ltd., a medical device company developing products for diagnostics and therapy in the field of ophthalmology, as its Software Department Manager.  In 2009, Mr. Dahan co-founded Serve Africa Ltd., a holding company that provides Satellite IP connectivity communication services throughout the continent of Africa, and from 2013 to 2017 he served as its CEO.   In 2008, Mr. Dahan founded Viramedics Ltd., a Bio-Tech firm dealing with Skin Cancer detection, working with leading medical institutes worldwide towards clinical studies and implementation, and served as its CTO through 2009.  He also serves as a consultant to companies, mainly in the software algorithm field.   Mr. Dahan holds a B.sc degree in Physics and Computer Science from Ben Gurion University.  Since the Merger, David has been employed part-time by Samsara as its Chief Technical Officer.

 

Committees of the Board of Directors

 

Samsara does not have a separately constituted audit committee, compensation committee, nominating committee, executive committee or any other committee of the Board of Directors. As such, the entire Board of Directors acts as Samsara’s audit committee.

  

23

 

 

Audit Committee Financial Expert

 

Samsara does not have any member who qualifies as an audit committee financial expert.  Samsara believes that the cost of retaining such a financial expert at this time is prohibitive. Further, because the Company is still in an early development stage, Samsara believes the services of an audit committee financial expert are not necessary at this time.

 

Term of Office

 

Each director is elected by the Board and serves until his or her successor is elected and qualified, unless he or she resigns or is removed earlier. Each of our officers is elected by the Board to a term of one (1) year and serves until his or her successor is duly elected and qualified, or until he or she is earlier removed from office or resigns.

 

Family Relationships

 

There are no family relationships between or among any of our directors, executive officers and incoming directors or executive officers.

 

Involvement in Legal Proceedings

 

None of Samsara’s Directors or officers has appeared as a party during the past ten years in any legal proceedings that may bear on his ability or integrity to serve as a Director or officer of the combined company.

  

Board Leadership Structure

 

The Company has chosen to combine the principal executive officer and Board chairman positions.  Samsara believes that this Board leadership structure is the most appropriate for the Company.  The Company is still in an early stage where it would be more efficient to have the leadership of the Board in the same hands as the principal executive officer of the Company.  The challenges faced by the Company at this stage, including obtaining financing and implementing a commercialization plan, are most efficiently dealt with by having one person intimately familiar with both the operational aspects as well as the strategic aspects of the Company’s business.

 

Code of Ethics

 

We have adopted a Code of Ethics applicable to the Company’s principal executive, financial and accounting officers. A written copy of the Code is available upon written request to the Company and may be found at the Company’s website at www.samsaraluggage.com.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act requires our executive officers and directors, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings.

 

Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that our officers, directors and greater than 10% percent beneficial owners have complied with all applicable filing requirements.

 

Potential Conflict of Interest

 

Since Samsara does not have an audit or compensation committee comprised of independent Directors, the functions that would have been performed by such committees are performed by the Board of Directors. Thus, there is a potential conflict of interest in that Samsara’s Directors have the authority to determine issues concerning management compensation, in essence their own, and audit issues that may affect management decisions.

 

Board’s Role in Risk Oversight

 

The Board assesses on an ongoing basis the risks faced by the Company.  These risks include financial, technological, competitive, and operational risks.  The Board dedicates time at each of its meetings to review and consider the relevant risks faced by the Company at that time.  In addition, since the Company does not have an Audit Committee, the Board is also responsible for the assessment and oversight of the Company’s financial risk exposures.

  

24

 

 

Nominations to the Board of Directors

 

Our directors take a critical role in guiding our strategic direction and oversee the management of the Company. Board candidates are considered based upon various criteria, such as their broad-based business and professional skills and experiences, a global business and social perspective, concern for the long-term interests of the stockholders, diversity, and personal integrity and judgment.

 

In addition, directors must have time available to devote to Board activities and to enhance their knowledge in the growing business. Accordingly, we seek to attract and retain highly qualified directors who have sufficient time to attend to their substantial duties and responsibilities to the Company.

 

As of December 31, 2019, we did not make any material changes to the procedures by which our shareholders may recommend nominees to our Board.

 

Employment Arrangements

 

None of our officers, directors, or employees are party to employment agreements with the Company. The Company has no pension, health, annuity, bonus, insurance profit sharing or similar benefit plans; however, the Company may adopt such plans in the future. There are no personal benefits available for directors, officers or employees of the Company.

 

ITEM 11. EXECUTIVE COMPENSATION

 

Executive Compensation

 

The following table shows, for the twelve months ended December 31, 2019 and December 31, 2018, compensation awarded or paid to, or earned by, our Chief Executive Officer, our Chief Technical Officer, and our Chief Financial Officer:

  

SUMMARY COMPENSATION TABLE
Name   Year   Salary
($)
    Bonus
($)
    Stock
Awards
($)
    Option
Awards
($)
    Non-Equity
Incentive Plan
Compensation
($)
    Nonqualified
Deferred
Compensation
Earnings
($)
    All Other
Compensation
($)
    Total
($)
 
Atara Dzikowski(1)   2019     100,000       0       0       0       0       0       0       100,000  
(CEO)   2018     100,000       0       0       0       0       0       0       100,000  
David Dahan(2)   2019     0       0       0       0       0       0       0       0  
(CTO)   2018     0       0       0       0       0       0       0       0  

 

(1) From January 1, 2018 until the effective date of the Merger, November 12, 2019, Atara Dzikowski served as the CEO of the Delaware company, Samsara Luggage, Inc.

 

(2) From January 1, 2018 until the effective date of the Merger, November 12, 2019, David Dahan served as CTO of the Delaware company, Samsara Luggage, Inc.

  

Employment Contracts

 

We currently do not have any employment contracts with any of our executive officers.

 

Option/SAR Grants

 

Samsara does not currently have a stock option plan.  No individual grants of stock options, whether or not in tandem with stock appreciation rights known as SARs or freestanding SARs have been made to any executive officer or any Director since inception; accordingly, no stock options have been granted or exercised by any of the officers or Directors since Samsara was founded.

 

Long-Term Incentive Plans and Awards

 

Samsara does not have any long-term incentive plans that provide compensation intended to serve as incentive for performance. No individual grants or agreements regarding future payouts under non-stock price-based plans have been made to any executive officer or any Director or any employee or consultant since Samsara’s inception; accordingly, no future payouts under non-stock price-based plans or agreements have been granted or entered into or exercised by any of the officers or Directors or employees or consultants since Samsara was founded.

   

25

 

 

Potential Payments upon Termination or Change-in-Control

 

We currently have no plans or arrangements in respect of payments to our executive officers in the event of termination of employment (as a result of resignation, retirement, or change of control) or a change of responsibilities following a change of control.

 

Retirement Benefits

 

There are currently no arrangements or plans in which we provide pension, retirement or similar benefits for our Directors and officers.

 

Compensation of Directors

 

We have no arrangement to compensate directors for their services in their capacity as directors. Directors are not paid for meetings attended. However, we intend to review and consider future proposals regarding board compensation. All travel and lodging expenses associated with corporate matters are reimbursed by us, if and when incurred.

 

Compensation Committee

 

We do not have a separate compensation committee. Instead, our Board reviews and approves executive compensation policies and practices, reviews salaries and bonuses for other officers, administers our stock option plans and other benefit plans, if any, and considers other matters that may be brought forth to it.

 

Risk Management Considerations

 

We believe that our compensation policies and practices for our employees, including our executive officers, do not create risks that are reasonably likely to have a material adverse effect on our Company.

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

As of January 30, 2020, we had 3,535,935,553 shares of common stock outstanding. The following table sets forth, as of January 30, 2020, certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5 percent of our common stock, as well as by each of our current Directors and executive officers, and by all of the Company’s Directors and executive officers as a group.

 

Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.

  

Name of Beneficial Owner   Number of
Shares Owned
    Percent  
Atara Dzikowski (Director and CEO)     916,362,531       25.92 %
David Dahan (Director and CTO)     916,362,531       25.92 %
Y.A.R.N. Investments Ltd.     458,124,000       12.96 %
Avraham Bengio     444,645,000       12.58 %
Directors and officers as a group (2 persons)     1,832,725,062       51.83 %

 

Change in Control

 

We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change of control of our Company.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

None.

 

26

 

 

Long-Term Incentive Plans and Awards

 

We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance. No individual grants or agreements regarding future payouts under non-stock price-based plans have been made to any executive officer or any director or any employee or consultant since our inception; accordingly, no future payouts under non-stock price-based plans or agreement s have been granted or entered into or exercised by our officer or director or employees or consultants since we were founded.

 

Grants of Plan-Based Awards Table

 

None of our named executive officers received any grants of stock, option awards or other plan-based awards during the fiscal period ended December 31, 2019. The Company has no activity with respect to these awards.

 

Options Exercised and Stock Vested Table

 

None of our named executive officers exercised any stock options, and no restricted stock units if any, held by our named executive officers vested during the fiscal period ended December 31, 2019. The Company has no activity with respect to these awards.

 

Outstanding Equity Awards at Fiscal Year-End Table

 

None of our named executive officers had any outstanding stock or option awards as of December 31, 2019. The Company has not issued any awards to its named executive officers. The Company and its board may grant awards as it sees fit to its employees as well as key consultants and other outside professionals.

 

Non-Cumulative Voting

 

The holders of our shares of common stock do not have cumulative voting rights, which means that the holders of more than 50% of such outstanding shares, voting for the election of Directors, can elect all of the Directors to be elected, if they so choose. In such event, the holders of the remaining shares will not be able to elect any of our Directors.

 

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

Described below are any transactions occurring during the fiscal year ending December 31, 2019 and any currently proposed transactions to which Samsara was a party and in which a director, executive officer, holder of more than 5% of the outstanding capital stock of Samsara, or any member of such person’s immediate family had or will have a direct or indirect material interest:

 

Bengio Urban Spin-Off Transaction

 

In connection with the Merger, the Company and Bengio entered into an Assignment and Assumption Agreement dated November 12, 2019, pursuant to which the Company sold 100% of the issued and outstanding shares of Bengio Urban, and all of the Company’s interest in Bengio Urban (including all debts and liabilities owed by the Company to Bengio Urban and the debts of Bengio Urban to the Company) to Avraham Bengio, our former CEO and sole director.

 

Review, Approval or Ratification of Transactions with Related Persons

 

Although we adopted a Code of Ethics, we still rely on our Board to review related party transactions on an ongoing basis to prevent conflicts of interest. Our Board reviews a transaction in light of the affiliations of the director, officer or employee and the affiliations of such person’s immediate family. Transactions are presented to our Board for approval before they are entered into or, if this is not possible, for ratification after the transaction has occurred. If our Board finds that a conflict of interest exists, then it will determine the appropriate remedial action, if any. Our Board approves or ratifies a transaction if it determines that the transaction is consistent with the best interests of the Company.

 

Director Independence

 

Samsara is not subject to listing requirements of any national securities exchange or national securities association and, as a result, Samsara is not at this time required to have a board comprised of a majority of “independent Directors.”  Samsara does not believe that any of the directors of the Company meet the definition of “independent” as promulgated by the rules and regulations of NASDAQ.

  

27

 

 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Audit Fees

 

We utilized the services of two independent registered public accounting firms over the last two years. From January 1, 2018 through August 24, 2019, our principal independent accountant was Dov Weinstein & Co., CPA (“Dov Weinstein”). Dov Weinstein audited the Company’s July 31, 2018 financial statements and reviewed the quarters ended October 31, 2018, January 31, 2019, and April 30, 2019.

 

The Securities and Exchange Commission (the “SEC”) recently determined that Dov Weinstein engaged in improper professional conduct pursuant to Section 4C(a)(2) of the Exchange Act and Rule 102(e)(1)(ii) of the Commission’s Rules of Practice, and denied Dov Weinstein the privilege of appearing or practicing before the SEC as an accountant.

 

On August 25, 2019, the Board of Directors resolved to replace Dov Weinstein as the Company’s independent registered public accounting firm with the accounting firm of Halperin CPA, Financial Consulting & Management (“Halperin”). Halperin audited the Company’s financial statements for the years ended July 31, 2018, July 31, 2019, and December 31, 2019 (after the change to the fiscal year-end date).

 

The aggregate fees billed or billable for each of the last two fiscal years for professional services rendered by the principal account for the audit of our financial statements and review of financial statements included in our quarterly Reports on Form 10-Q and for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:

 

Fees(1)   December 31,
2019
    December 31,
2018
 
Audit Fees   $ 31,250     $ 0  
Audit Related Fees   $ 0     $ 0  
Tax Fees   $ 0     $ 0  
All Other Fees   $ 0     $ 0  

 

(1) The fees in this table are the fees paid by the Delaware corporation previously known as “Samsara Luggage, Inc.” from January 1, 2018 until the effective date of the Merger, November 12, 2019, and the fees paid by the Company following the Merger.

 

In each of the last two fiscal years ended December 31, 2019 and 2018, there were no fees billed for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of our financial statements and are not reported under Item 9(e)(1) of Schedule 14A, for professional services rendered by the principal account for tax compliance, tax advice, and tax planning, for products and services provided by the principal accountant, other than the services reported in Item 9(e)(1) through 9(d)(3) of Schedule 14A.

 

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

 

Given the small size of our Board as well as the limited activities of our Company, our Board of Directors acts as our Audit Committee. Our Board pre-approves all audit and permissible non-audit services. These services may include audit services, audit-related services, tax services, and other services. Our Board approves these services on a case-by-case basis.

  

28

 

 

PART IV

 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

(a) Financial Statements and financial statement schedules

 

(1) and (2) The financial statements and financial statement schedules required to be filed as part of this report are set forth in Item 8 of Part II of this report.

 

(3) Exhibits. See Item 15(b) below.

 

(b) Exhibits required by Item 601 of Regulation S-K

 

Exhibit No.   Description
2.1   Merger Agreement, dated May 10, 2019, among the Company, Avraham Bengio, and Samsara Luggage, Inc. (filed as Exhibit 10.1 to the Company’s Form 8-K filed on May 10, 2019 and incorporated herein by reference).
3.1   Articles of Incorporation of the Company (filed as Exhibit 3.1 to the Company’s Form S-1 (File No. 333-176969) filed on September 23, 2011 and incorporated herein by reference).
3.2   Certificate of Amendment to Articles of Incorporation (filed as Exhibit 3.1 to the Company’s current Report on Form 8-K filed on November 12, 2019 and incorporated herein by reference).
3.3   Articles of Merger (filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on November 12, 2019 and incorporated herein by reference).
3.4   Amended Bylaws (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 14, 2019 and incorporated herein by reference).
10.1   Securities Purchase Agreement, dated June 5, 2019, between the Company and YAII PN, Ltd. (filed as Exhibit 10.1 to the Company’s Form 8-K filed on June 7, 2019 and incorporated herein by reference).
10.2   Form of Share Purchase Agreement, signed on September 26, 2019, between the Company and investors who invested $500,000 in the Company (filed as Exhibit 10.1 to the Company’s Form 8-K filed on October 2, 2019 and incorporated herein by reference).
10.3   Assignment and Assumption Agreement, dated as of November 12, 2019, between the Company and Avraham Bengio (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 12, 2019 and incorporated herein by reference).
10.4*   License Agreement dated as of July 18, 2019, between the Company and Sterling/Winters Company, a California corporation, doing business as Meharey MIVI LLC.
14.1*   Code of Ethics
31*   Section 302 Certification of the Sarbanes-Oxley Act of 2002 of Atara Dzikowski
32*   Section 906 Certification of the Sarbanes-Oxley Act of 2002 of Atara Dzikowski
101.INS   XBRL Instance Document#
101.SCH   XBRL Taxonomy Extension Schema #
101.CAL   XBRL Taxonomy Extension Calculation Linkbase#
101.DEF   XBRL Taxonomy Extension Definition Linkbase#
101.LAB   XBRL Taxonomy Extension Labels Linkbase#
101.PRE   XBRL Taxonomy Extension Presentation Linkbase#

 

* Filed herewith

 

# The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

 

29

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  SAMSARA LUGGAGE, INC.
  (Registrant)
     
Date: February 3, 2020 By:  /s/ Atara Dzikowski
    Atara Dzikowski
   

Chief Executive Officer

(Principal Executive Officer, and

Principal Financial and Accounting Officer)

 

 

30

 

Exhibit 10.4

   

LICENSE AGREEMENT

 

THIS LICENSE AGREEMENT (“Agreement”) is made and entered into as of this 18th day of July 2019, between Sterling/Winters Company, a California Corporation DBA: Tommy Meharey MIVITM LLC (“Licensor”), and, Samsara Luggage Inc., which is currently in process of merging with Publicly Traded Darkstar Ventures Inc. [OTC: DAVC] (“Licensee”), as follows:

 

WITNESSETH:

 

WHEREAS, Tommy Meharey (“Mr. Meharey”) is an internationally famous man and designer with a highly favorable public image and strong brand identity: and a strong portfolio of multiple brands and ambassadors, also with a highly favorable public image and strong brand identi1y.

 

WHEREAS, Licensor has the right and authority to license certain registered trademarks and rights to the name, likeness, and visual representation of Mr. Meharey and such name, likeness, and visual representation being well known and recognized by the general public and associated in the public mind with Licensor.

 

WHEREAS, Licensor is the owner, by assignment, of the name. nick name, image, likeness, initials, mark, appearance, signature (including reproduced signature), autograph, endorsement, voice, and biographical material (including history, video and motion picture film portrayals, and still photography), Internet domain names and online social media user/screen names of Mr. Meharey and has developed and used intellectual property and is engaged in the licensing of the property identified in the attached Exhibit A (hereinafter, with the MIVITM LLC, (collectively referred to as the “Licensed Marks”);”, the “Licensed Property” or the “Brand”):

 

WHEREAS, Licensee is a manufacturer and seller of Aluminum Smart Hi-tech Luggage, and desires to use the Licensed Marks, as specifically defined in Paragraph 1.1 below, in connection with the manufacture, sale, and distribution of the Licensed Products, as specifically defined in Paragraph 1.6 below, subject to the terms and conditions provided herein; and

 

WHEREAS, in addition to agreeing to Licensee’s use of the Licensed Marks, Licensor wishes to cooperate with Licensee in order to develop, promote, and expand recognition of the Licensed Marks image for the mutual benefit of Licensor, Licensee, and Licensee’s customers;

 

WHEREAS, Licensee agrees to fully comply with Licensor Human Rights – Code of Conduct, EXHIBIT C and,

 

WHEREAS, Licensee will fully adopt, as well as meaningfully contribute to, the following Millennium Development Goal(s) (all of which are attached hereto as Exhibit D and incorporated herein by reference): 8. Build Global Partnerships for development (“Licensee Millennium Development Goal(s)”), and

  

 

 

-1-

Initials: _______
Initials: _______

 

 

NOW, THEREFORE, in consideration of the mutual promises herein contained, it is hereby agreed:

 

1. DEFINITIONS

 

1.1 The term “Brand” shall mean the Licensed Products offered under the Licensed Marks.

 

1.2 The term “Allowance” or “Allowances” shall mean any reductions in the wholesale sales price of any Licensed Product by promotional off-invoice amounts or accruals which are directly reflected in Licensee’s written vendor agreement(s) with the specific retailer customer to which the Allowance applies.

 

1.3 The term “MIVITM LLC Corporate Headquarters” shall mean Rancho Mirage, CA., 92270

 

1.4 The term “Channels of Distribution” shall mean only those channels, which are listed on Exhibit B attached hereto and incorporated by reference herein. Exhibit B may only be modified, supplemented, and/or amended by written agreement of the Parties as provided herein.

 

1.5 The term “Licensed Marks” shall mean only those of Tommy Meharey’s name, likeness, visual representation and/or each of the individual components thereof, and those trademarks, service marks, logos, designs, and/or any other symbols/devices, which are set forth in Exhibit A attached hereto and incorporated by reference herein.

 

1.6 The term “Licensed Products” shall mean only those items, which are listed in Exhibit B attached hereto. Exhibit B may only be modified, supplemented, and/or amended by written agreement of the Parties as provided herein.

 

1.7 The term “Manufacturing Territory” shall mean China.

 

1.8 The term “Sales Territory” shall mean the North America, additional territories as approved by Licensor.

 

1.9 The term “Net Sales” shall mean the gross invoice amount billed (exclusive of any and all sales, Value Added Tax (“VAT”), Handling charges and restocking fees excise, local privilege or any other taxes collected from customers and owed or actually paid by Licensee to any government entity and exclusive of any and all shipping and handling charges, in all cases) to customers purchasing or receiving Licensed Products from Licensee, less Allowances, and less Trade Discounts for Licensed Products given to wholesale customers actually shown on the invoices and actually given to the customers (except cash discounts, which are not deductible in the calculation of Royalty) and, further, less any bona fide Returns actually made or allowed, or credits actually issued in lieu of Returns of the Licensed Products, as supported by credit memoranda actually issued to wholesale customers (subject to the pricing provisions of Section 5.1). No other costs incurred in the manufacturing, selling, advertising, and/or distribution of the Licensed Products shall be deducted

  

 

 

-2-

Initials: _______
Initials: _______

 

 

1.10 The term “Parties” and/or “Party” shall mean Licensor and/or Licensee.

   

1.11 The term “Returns” shall mean any Licensed Product, which Licensee accepts back from any customer after purchase and delivery thereof and for which Licensee refunds the actual purchase price or issues a credit memo.

 

1.12 The term “Termination Date” shall mean the date, whichever is earliest, that (i) this Agreement (subject to any renewals or extensions) expires by its own terms; (ii) is thirty (30) days after receipt of notice of termination under Section 22; or (iii) any other event occurs which terminates this Agreement where no notice is required.

 

1.13 The term “Trade Discounts” shall mean any reductions or charge backs in the wholesale sales price of any Licensed Product, and actually granted by Licensee in writing to any customer prior to delivery.

 

1.14 The term “Initial Term” shall mean the period of time from the Effective Date through and including July 11, 2022.

 

1.15 The term “Contract Year 1” shall mean the period of time from the Effective Date through and including July 11, 2020.

 

1.16 The term “Contract Year 2” shall mean the period of time from July 12, 2020 through and including July 11, 2021.

 

1.17 The term “Contract Year 3” shall mean the period of time from July 12, 2021 through and including July 11, 2022.

 

1.18 The term “Royalty” or “Royalties” shall have that meaning set out in Paragraph 5.1 below.

 

1.19 The term “Term” shall mean the Initial Term plus any extensions, renewals of this Agreement or modifications thereof.

 

 

1.20 The term “Minimum Royalty Guarantee” shall have the meaning set out in Paragraph 5.10 below.

 

1.21 The term “Minimum Net Sales” shall have that meaning set out in Paragraph 3.9 below.

 

1.22 The term “Business Plan” shall mean a merchandise strategy and business plan for the Brand, including any supporting brands set forth in Exhibit A.

 

1.23 The term “Effective Date” shall mean July 12, 2019.

  

 

 

-3-

Initials: _______
Initials: _______

 

 

2. GRANT OF LICENSE

 

2.1 Upon the terms and conditions set forth herein, Licensor hereby grants to Licensee the exclusive, non-transferable right, license, and privilege, and Licensee hereby accepts the exclusive, non-transferable right, license, and privilege, of using the Licensed Marks for the sale, marketing and distribution of the Licensed Products through the Channels of Distribution in the Territory during the Term (with the exceptions as stated on Exhibit B), and the nonexclusive, nontransferable right, license, and privilege of using the Licensed Marks solely upon and in connection with the manufacture of Licensed Products in the Manufacturing Territory.

  

2.2 Licensee agrees that it will not distribute or sell, nor authorize anyone else to distribute or sell, the Licensed Products bearing the Licensed Marks outside of the Territory or the Channels of Distribution, and that it will not knowingly sell Licensed Products bearing the Licensed Marks to persons who intend to distribute or sell the Licensed Products outside of the Territory or the Channels of Distribution.

 

2.3 During the Term, Licensor agrees that it will not authorize others to distribute or sell the Licensed Products bearing the Licensed Marks in the Channels of Distribution in the Territory. Licensee acknowledges that Licensor may continue to license the Licensed Marks and related marks to others to develop and promote other lines apart from the Licensed Products in the Channels of Distribution in the Territory during the Term.

 

2.4 All proposed Channels of Distribution and distribution outlets in Exhibit B shall be submitted in advance to Licensor and shall be subject to Licensor’s prior written approval.

 

2.5 Licensee may not assign or sub-license the use of the Licensed Marks to any third party without prior written approval by Licensor, and such right is expressly withheld from this Agreement. In the event that Licensor approves a sub-license to a third party, the Parties shall mutually agree upon the terms and conditions of said sub-license, including without limitation the minimum royalty guarantee and royalty rate, in a separate writing signed by the Parties.

 

2.6 Licensee may use sub-contractors to manufacture and/or package Licensed Products, however, such products shall only be for sale to Licensee or Licensee’s customers as sub-contractor of Licensee. Prior to producing Licensed Products, all such sub-contractors must be approved by Licensor in writing (including being audited for compliance with local laws and the Approved Code of Conduct, if Licensor requires, such audit results being satisfactory to Licensor in its sole discretion), Such sub-contractors must agree to be bound by the same terms and conditions as is Licensee under this Agreement, and Licensee must execute a Sub-Contractor Agreement, confirming the foregoing, copies of which will be provided to Licensor. Licensee will ensure that any sub-contractors will comply with all local laws regarding compensation, workplace conditions and worker ages. Licensee shall ensure that Licensor or any third-party auditors designated by Licensor shall have full access to sub-contractor’s production facilities and dormitories, and Licensor shall not be required to give Licensee any notice prior to a visit of any audit team. Licensee ensures that sub-contractors will allow Licensor or third-party auditors access to their payroll and employee records for the purpose of verifying compliance with local laws and the Approved Code. Licensee shall bear all costs of audits. Further, Licensee and all sub-contractors must conform to Licensor’s code of conduct or any other specific code of conduct adopted by Licensor from time to time. Licensor may withdraw its consent and approval of any sub-contractor at any time at the sole discretion of Licensor. Licensor’s approved code of conduct is attached as Exhibit C and incorporated by reference herein (the “Approved Code”). If Licensee or any of its sub-contractors are not in compliance with local laws or the Approved Code, Licensor, in its sole discretion, may terminate this Agreement.

 

 

 

-4-

Initials: _______
Initials: _______

 

 

2.7 The name and address of any manufacturer or sub-contractor, other than Licensee, chosen to manufacture the Licensed Products as permitted under this Agreement and all items related thereto, including without limitation labels, hang tags, and packaging, shall be disclosed to Licensor and approved by Licensor in writing prior to production of the Licensed Products and items related thereto. The Parties further agree to have meaningful consultation prior to the selection and use of said sub-contractors, vendors, and/or manufacturers. Licensor’s approval of sub-contractors proposed by Licensee shall be in the sole discretion of the Licensor.

 

2.8 During the life of this Agreement, Licensee shall only sell, distribute and market Licensed Products bearing the Licensed Marks in the Channels of Distribution, and Licensee shall not conduct any other business in the Channels of Distribution other than the sale, distribution and marketing of the Licensed Products bearing the Licensed Marks, unless consented to in writing by the Licensor, such consent to be given by Licensor in its sole discretion.

 

2.9 .

 

3. BRAND DEVELOPMENT

  

3.1 Licensee will work diligently to conduct market research and design support and to develop a merchandise strategy and business plan for the Brand, including all supporting brands set forth in Exhibit A (Licensed Property). Licensee shall submit the Business Plan to Licensor for its review and approval within ninety (90) days of the Effective Date of this Agreement. The Parties shall work in good faith to craft a Business Plan that shall best promote and benefit the Brand

 

3.2 Licensee will develop a long-term strategic plan for, any and all, launch(es) of the Brand in the Channels of Distribution and Territory which shall be subject to the approval of the Licensor, such approval may not be unreasonably withheld (the “Launch Plan”). If Licensee has not launched, in a meaningful manner any Licensed Product into any Channels of Distribution or Territory under the Brand by December 1, 2019, (the outside date) Licensor may terminate this Agreement. If Licensee fails to launch the brand into agreed channels of distribution and territory within six (6) months of the agreed date for each Channel of Distribution and territory, under the brand, (but never later than the outside date), and if Licensor has not agreed otherwise, in writing, then Licensor may delete and remove any channels within the channels of distribution and any Territories, from this agreement where Licensed products have not been launched, per the launch plan and this provision. The Launch Plan must include every licensed product and every Licensed Territory.

  

 

 

-5-

Initials: _______
Initials: _______

 

 

3.3 Licensee will begin shipping of Licensed Products A.S.A.P., however no later than December 1, 2019.

 

3.4 Licensee will work diligently to develop a strategic 3-year sales growth plan.

 

3.5

   

3.6 Licensee agrees that all designs, colors and names of Licensed Products are proprietary to Licensor. More specifically, Licensor shall own all intellectual property rights in the Licensed Products and Related Materials and in all sketches, artwork and/or designs for the Licensed Products and the Related Materials, at no cost to Licensor and to the extent Licensee has any rights in such intellectual property, Licensee agrees to assign and does hereby assign to Licensor (or any person or entity designated by Licensor) all of its right, title and interest in and to such products and materials.

  

PERIOD   MINIMUM NET SALES
Contract Year 1   $
Contract Year 2   $
Contract Year 3   $
Contract Year 4   $
Contract Year 5   $

   

3.7 Licensee will make best efforts to meet the following minimum totals of Net Sales of Licensed Products for the specified periods:

 

 

 

-6-

Initials: _______
Initials: _______

 

 

3.8

 

3.9 In addition, if any particular product category of the Licensed Products does not increase at least ten percent (10%) in total gross sales above the total gross sales for the prior year, the Licensor may at any time, in its sole discretion, remove that product category from the list of Licensed Products and delete that category from the license granted to Licensee hereunder.

  

3.10 Licensee will promptly provide to Licensor any color, trend or forecast information it obtains.

 

3.11 Licensee agrees to become a member of Send Out Cards within 30 days of the execution of this agreement.   Licensee will use Send Out Cards as a powerful marketing tool to help communicate our Partnership and promote sales.  Please contact 310-557-2700 ext.193 for all information, prior to signing up with Send Out Cards.

 

3.12 Licensee agrees to become a member and utilize Salesforce.com, Dependable Solutions a product approval and royalty reports service. Ireland® pay, a credit card process service or any similar web platform as may be utilized by Licensor from time to time as a means of conducting Brand business and coordinating with Licensor and other licensees

 

3.13 At no time may Licensee’s sales of Licensed Products in the Discount and Better Off-Price Channel of Distribution account for more than twenty percent (20%) of Licensee’s total Net Sales.

   

4 TERMS

 

4.1 The term of the license hereby granted shall commence on the date of execution (the effective Date”) and shall be effective through July 31, 2022, unless terminated sooner in accordance with the provisions hereof.

 

4.2 Licensee shall have an option to renew this Agreement for an additional term of (5) five years and it shall be renewed, expiring on July 31, 2027, only so long as the following conditions are met:

 

i) This Agreement has not been terminated for any reason prior to the expiration of the Initial Term;

 

ii) At least twelve (12) months prior the expiration of the Initial Term, Licensee tenders a written notice to Licensor of its intent to exercise the option to renew the Agreement;

 

iii) Licensee is in full compliance with this Agreement, including but not limited to all Minimum Guaranteed Royalty requirements and the Minimum Net Sales requirements through the expiration of the Initial Term; and,

 

iv) By March 1, 2021, the Parties have agreed to the Marketing Fees, Minimum Guaranteed Royalty and any Minimum Net Sales requirements for the renewal term.

 

4.3 The period during which the Agreement is in full force and effect shall be the Term.

  

 

 

-7-

Initials: _______
Initials: _______

 

 

5 ROYALTY AND PAYMENT

 

5.1 In consideration of the grant hereunder, Licensee shall pay Licensor royalties in U.S. dollars at a rate of Ten percent (10%) of the Net Sales for all Licensed Products sold under the Licensed Marks. Licensee further agrees to use its best efforts to increase its sales of the Licensed Products during each year of the Term. If any sales of Licensed Products are made in currencies aside from the U.S. dollar, then Royalty payments for those sales shall still be made in U.S. Dollars and shall be based on the equivalent amount in local currency calculated on the basis of the exchange rate stated in New York edition of the Wall Street Journal on the last calendar day of the applicable calendar month.

 

5.2

 

5.3

 

5.4 Licensee’s Royalty obligation shall accrue upon the sale or distribution, and each distribution of each Licensed Product. Licensee’s Royalty obligation for sales shall accrue upon the sale of each Licensed Product, regardless of the time of collection by Licensee and pursuant to Section 1.9 above. Such an item shall be considered “sold” when it is billed, invoiced, delivered, transferred to a customer or shipped, whichever occurs first. If Licensee distributes or sells any Licensed Product to any affiliated or related party at an amount that is less than Licensee’s lowest wholesale price charged in arms-length sales to other parties, the Royalty shall be computed at Licensee’s lowest wholesale price charged in like arms-length sales to non-affiliated third parties.

   

5.5 If the payment of funds to Licensor in any country is blocked from export out of any country in the Manufacturing Territory (“Blocked Funds”), such payment either may be held by Licensee, or, at the election of Licensor, deposited in an interest-bearing escrow banking or other interest-bearing escrow account, in Licensee’s name on behalf of Licensor in the blocking country (if permitted by local law) or may be removed from such country and paid to Licensor, subject to whatever restrictions, limitations, and/or taxes may be imposed by the government of such county upon such Blocked Funds. In the event of any such blockage, Licensor and Licensee shall cooperate in seeking an equitable solution. If no such solution is quickly attained, Licensor may require Licensee to, or Licensee may voluntarily upon notice to Licensor, terminate Licensee’s marketing and sale of Licensed Products in such blocked country, and this Agreement shall be deemed amended accordingly.

 

5.6 Within fifteen (15) days after the end of each month, Licensee shall furnish to Licensor a complete sales and royalty report certified to be accurate by the Chief Financial Officer of Licensee or by some other authorized designee of Licensee showing the number, description, and Net Sales Price of the Licensed Products distributed and/or sold by Licensee during the preceding month, as well as the number of Licensed Products in inventory at the beginning and end of the month. For this purpose, Licensee shall use the approved report form by Licensor. Such report shall be furnished to Licensor whether or not any of the Licensed Products have been sold during the preceding month. Licensee shall tender both hard copy sales and royalty report and sales in royalty report in Excel spreadsheet format to Licensor. Sales and Royalty will be furnished separately for each brand listed in Exhibit A in Excel spreadsheet format to the Licensor and sent to:

  

  Erik Sterling and Financial Committee
  P.O. Box 1410
  Rancho Mirage, CA 92270
  Via Email:  FinancialCommittee@sterlingwinters.com

  

 

 

-8-

Initials: _______
Initials: _______

 

 

5.7 The receipt or acceptance by Licensor of any of the reports furnished by Licensee pursuant to this Agreement or of any royalties paid by Licensee hereunder (or the cashing of any royalty checks paid by Licensee hereunder) shall not preclude Licensor from questioning the accuracy thereof at any time, and in the event that any inconsistencies or mistakes are discovered in such reports or payments, any inconsistency, mistake, or inaccuracy shall immediately be rectified, and any appropriate payment due and owing shall immediately be paid by Licensee to Licensor.

 

5.8 At the time Licensee delivers the above-referenced royalty reports to Licensor, Licensee shall pay all royalties due and owing directly to Licensor as indicated in the sales and royalty report for the month in which earned. Unless otherwise instructed by Licensor, all payments required by this agreement, shall be sent via wire transfer to the account indicated below, or to any other account designated in writing by Licensor. Licensee will send separate wires and reports for each Brand.

   

  To: STERLING/WINTERS COMPANY
    % Comerica Bank
    2000 Avenue of the Stars, Suite 210
    Los Angeles, CA 90067
    Domestic Wire - Routing #121137522
    Account Name: STERLING/WINTERS COMPANY
    Account #: 1891-365692

  

5.9 Licensee shall pay Licensor the following Minimum Guaranteed Royalties on the schedule set out below:

  

Time Period

  Minimum Guaranteed Royalty Payment   Payment Due Date
Contract Year 1   $25,000.00   Upon Signing
Contract Year 2   $25,000.00   August 1, 2020
Contract Year 3   $25,000.00   August 1, 2021

  

 

 

-9-

Initials: _______
Initials: _______

 

 

5.10 Minimum Guaranteed Royalty payments shall be only credited towards Royalties in the Contract Year for which they apply (i.e., Licensee receives credit towards Royalties for the Minimum Guaranteed Royalty payment made in that particular Contract Year). Credits for Minimum Guaranteed Royalty payments do not carry over into other Contract Years. The Parties understand and agree that each payment, whether it is a Royalty or the Minimum Guaranteed Royalty amounts as set forth above, is a separate and independent obligation.

 

5.11 Any amount (i.e., Royalties, Minimum Guaranteed Royalties, marketing fees, etc.) not paid to Licensor when due under this Agreement shall bear a late payment charge on the unpaid balance at the rate of 1.5% per month, compounded, or the maximum amount permitted by law, whichever is less

 

5.12 In addition to the payments above, Licensee shall pay Licensor the following brand participation fees on the following calendar year dates for the purpose of general advertising, good will and promotion of the overall MIVITM brand (not limited solely to the Licensed Products produced by Licensee under this Agreement, but the for benefit of the entire MIVITM Brand line of products):

 

Year 1: [$25,000.00] due on execution of this Agreement

 

Year 2: [$25,000.00] due on first anniversary of contract effective date.

 

Year 3: [$25,000.00] due on second anniversary of contract effective date.

 

5.13 Licensee will pay to Licensor or Designated Party, assigned by Licensor, warrants in the amount of five percent (5%) annually, of the outstanding shares of DAVC – Post merger with Samsara Luggage.

 

5.14 Licensor will provide (6) six product samples to Licensee, for the production marketing materials.

   

6 ACCOUNTING

 

6.1 Licensee agrees to keep accurate books of account and records covering all transactions relating to the license hereby granted, and Licensor and its duly authorized representatives shall have the right after giving reasonable notice at all reasonable hours of the day to an examination of said books of account and records relating to Licensee’s performance under the Agreement, and of all other documents and materials in the possession or under the control of Licensee or any of its affiliated, associated, or subsidiary companies or agents, with respect to the subject matter and terms of this Agreement, and shall have free and full access thereto for said purposes and for the purpose of making extracts therefrom. Upon request of Licensor, Licensee shall furnish to Licensor a detailed statement by an independent certified public accountant showing the number, description, and Net Sales of the Licensed Products covered by this Agreement distributed and/or sold by Licensee to the date of Licensor’s demand. All books of account and records shall be kept available for no less than Seven (7) years. Or, as long as required by the Internal Revenue Service, if longer than 7 years.

  

 

 

-10-

Initials: _______
Initials: _______

 

 

6.2 Within thirty (30) days after the close of each calendar year during the term or any renewal thereof, Licensee shall furnish to Licensor an updated audited financial statement for the preceding calendar year or such other financial information as requested by Licensor. Licensor may take reasonable steps to acquire an interest in Licensee’s inventory to protect Licensor’s rights to royalties and quality control.

 

6.3 Each calendar year in which this contract is in effect, and after expiration or termination of this Agreement, Licensor shall be entitled to an independent audit of and be given access to Licensee’s account books, records, invoices and other pertinent data by a certified public accountant or qualified auditor designated by Licensor. The audit shall be conducted to determine Licensee’s sales of Licensed Products, as well as all returns and trade discounts, and shall be conducted during normal business hours at Licensee’s business office or location of such files and records. The cost of the audit shall be borne by Licensor unless the audit reveals that Licensee understated sales and or royalties of Licensed Products by more than two percent (2%), in which case Licensee may be required to pay all of Licensor’s costs of the audit.

 

6.4 Licensors exercise in whole or impart inspect records or accounts, Licensors acceptance of any statement or statements from, or the receipt our acceptance by Licensor of any payment tendered by or on behalf of, Licensee, shall be without prejudice to Licensors rights or remedies permitted by this agreement or as a matter of equity of law, and shall not preclude or prevent Licensor thereafter disputing the accuracy of any such statement or payment.

  

7 QUALITY ASSURANCE

 

7.1 Licensee acknowledges the good reputation of Mr. Meharey, and further acknowledges that all Licensed Products manufactured, distributed, and/or sold by Licensee will enhance the reputation and recognition of Mr. Meharey to the mutual benefit of the Parties. The quality of the Licensed Products shall be consistent with or exceed the average of similar products manufactured, distributed, and/or sold by Licensee, shall serve to enhance Brand recognition of the Licensed Products to the mutual benefit of the Parties, and shall be suitable for the use for which they are intended.

  

 

 

-11-

Initials: _______
Initials: _______

 

 

7.2 All Licensed Products developed, manufactured and sold hereunder, and all labels, hang tags, packaging, catalogs, brochures, publications, printed matter, advertising, signs, promotional displays, websites, webpages, video and sound recordings, online social media pages (hereinafter the “Promotional Materials”) and other forms of publicity material for the Licensed Products, shall be subject to Licensor’s written approval in advance of use, distribution, marketing or sale. Without cost to Licensor, Licensee shall submit to Licensor for its inspection and approval, at least three (3) samples of each Licensed Product, sign, promotional display, label, hang tag, packaging, catalog, brochure, publication, printed matter, advertising, video and sound recording, and other forms of publicity material including but not limited to website and online social network pages for the Licensed Products depicting the Licensed Marks (hereinafter the “Samples”), prior to any use, marketing, advertising, sale or other distribution to the public. In lieu of submitting three (3) Samples of the Promotional Materials under this Paragraph, Licensee may submit either a computer diskette or e-mail attachment containing a depiction of one (1) Sample for Licensor’s inspection and approval. Licensor’s representative, or any duly authorized representative of Licensor designated by it in writing, shall have FIFTEEN (15) BUSINESS DAYS from Licensor’s confirmed receipt of the supplied Samples to approve or reject in writing such samples. If any such time period lapses without Licensee receiving express written approval or rejection of the supplied Samples, the Samples will be deemed approved by Licensor, provided that copies of all correspondence accompanying the Samples are submitted or sent to Licensor’s counsel in accordance with the Notice Provisions of Section 24. Licensee shall not manufacture, distribute, market and/or sell any Licensed Product, or Promotional Material depicting or incorporating the Licensed Marks until Licensee has received Licensor’s written approval of the Sample. Once Licensor approves a Sample under the terms herein, that Sample will be deemed approved for all uses unless it is materially modified. From time to time after Licensee has commenced selling the Licensed Products, and upon Licensor’s request, Licensee shall furnish without cost to Licensor a minimum of two (2) additional random samples of each Licensed Product being manufactured and sold by Licensee hereunder (and, if requested, detailed photographs, descriptions, and/or videos of the Licensed Product(s), together with the related Materials, if any, used in connection therewith.

 

7.3 All materials submitted for approval to Licensor in a language other than English will be accompanied by a complete and accurate English translation.

   

7.4 In addition to the standards required above, Licensee acknowledges the great value of the goodwill associated with Mr. Meharey and the Licensed Marks and the worldwide recognition thereof, and Licensee agrees that it will not use the Licensed Marks in any manner which, directly or indirectly, would demean, ridicule or otherwise tarnish the reputation or image of Licensor, Mr. Meharey or the Licensed Marks. Without limiting the foregoing, (i) all Licensed Products shall in all respects be manufactured, marketed and distributed in a manner consistent with the high quality standards and image of Licensor, and (ii) Licensee shall not permit the manufacture, marketing or distribution of any Licensed Product that represents, depicts or promotes (a) the glorification of violence, including but not limited to any representations of gang- or terrorist-related imagery, firearms or explosive devices, (b) sexual activities, including but not limited to any representations of body parts or sex toys, (c) religious beliefs, including but not limited to any religious iconography or any image commonly associated with any religious organization or cult, (d) any political content or (e) tobacco, alcohol or drug use.

 

7.5 Should any Licensed Product fail to meet the quality standards established by this Section, or fail to be manufactured, sold, and/or distributed in accordance with the same or higher quality standards and all applicable Federal, State, and local laws, or industry standards, or be subject to recall by any government or industry organization, except as provided herein, the offending products shall immediately be removed from distribution and sale, and Licensor shall have the right to remove that product from the list of Licensed Products. Licensor shall also have the option to terminate this Agreement in its entirety in its sole discretion.

  

 

 

-12-

Initials: _______
Initials: _______

 

 

7.6 Licensee, from time to time, shall have the right to sell goods deemed irregulars and second quality as instructed by Licensor under the same royalty conditions as set out in Section 5.1 above. Licensee may sell such seconds in a way which shall not reduce the value of the Licensed Mark(s) or detract from Licensors or Mr. Meharey’s reputation and shall obtain the written approval of Licensor with respect to the terms and method of such disposal. The Percentage of seconds of any Licensed Products which may be disposed of in any given year pursuant to this section shall not, in any event, exceed Five (5%) Percent of the total number of units of that particular licensed product distributed or sold by Licensee in that year.

 

7.7 If any retail customer of Licensee notifies Licensee or claims to Licensee that there is a significant quality issue with any Licensed Products sold to it by Licensee, Licensee shall notify Licensor of such alleged quality issues within forty-eight (48) hours of being notified by the retailer customer involved.

 

7.8 From time to time, Licensor shall notify Licensee of consumer quality issues received by Licensor by Licensor’s website. Licensee shall reply back to applicable consumers within forty-eight (48) hours of its receipt of the issues from Licensor’s website.

 

7.9 Licensor will have the right to purchase products from the Licensee at cost for personal use, wear testing, giveaways, and other promotional uses. Products purchased hereunder shall not be for commercial resale.

   

7.10 Licensor shall have the right to inspect Licensee’s manufacturing premises for the sole purpose of ensuring that Licensed Marks and the quality of the Licensed Products are satisfactory. Licensee will permit a duly authorized representative of Licensor to perform such inspection during normal business hours upon reasonable notice for the purpose of ascertaining or determining compliance with this provision. Licensor will notify Licensee at least Five (5) Days in advance of any requested inspection date. All communication, verbal and written, will be conducted through Licensee during the Term of this License Agreement and for a period of three years thereafter. All information regarding the manufacturer is considered to be valuable and therefore confidential between Licensee and Licensor.

  

8 DISPLAY OF MERCHANDISE

 

8.1 Licensee agrees to maintain space in its showroom located in various high traffic locations and dedicated to display of the Licensed Products under the Brand. Licensee further agrees that the Licensed Products shall be displayed at Licensee’s showroom in the most favorable manner possible to enhance the recognition of the Brand and the Licensed Products to the mutual benefit of the Parties. The display of the Licensed Products shall be subject to the written approval of Licensor prior to any display thereof.

  

 

 

-13-

Initials: _______
Initials: _______

 

 

8.2 All signage related to the Licensed Products shall be maintained, cleaned, updated, and replaced regularly so that the signage maintains a fresh appearance to enhance the Brand recognition of the Licensed Products to the mutual benefit of the Parties. The Parties agree to have meaningful consultation as to the design and placement of all signage. Licensor shall approve all signage in writing prior to any use thereof.

 

8.3 Licensee may display and offer the Licensed Products on its own company or business web page/site in a manner, which makes the Licensed Products distinctive and enhances the recognition of the Brand and the Licensed Products to the mutual benefit of the Parties. Products other than Licensed Products bearing the Licensed Marks may be displayed on the web page/site only with the written approval of Licensor. Licensee shall provide a link from its web page/site to Licensor’s web page/site. Licensor shall approve any display of the Licensed Products bearing the Licensed Marks on Licensee’s web page/site in writing prior to any display or use thereof. Licensee shall establish its web page/site within forty-five (45) days of the Effective Date of this Agreement and shall update its web page/site on a monthly basis.

 

8.4 Licensee may not supply the Brand to any electronic channel of distribution, including but not limited to television channels and Internet websites. All such channels are expressly excluded from the Channels of Distribution under this License and are expressly retained and reserved solely by Licensor. From time to time, in its sole discretion, Licensor may seek opportunities for distribution of the Brand through certain electronic channels of distribution, and in that event, Licensee shall assist in such efforts as may be reasonably requested by Licensor, however, Licensor is in no way bound to seek such opportunities.

   

9 LABELING

 

9.1 Licensee agrees that it will cause to appear on or within each Licensed Product manufactured, sold, and/or distributed under this Agreement and on or within all advertising, marketing, promotional, or display material bearing the Licensed Marks, the appropriate trademark and copyright notices, markings, and/or designations, and/or any other notice requested by Licensor. In the event that any Licensed Product is distributed and/or sold in a carton, container, packing and/or wrapping material bearing the Licensed Marks, such notices shall also appear upon the said carton, container, packing, and/or wrapping material.

 

9.2 Licensee further agrees that on all Related Materials for the Licensed Products, a licensing statement inclusive of Licensor’s web page/site address, and a mission statement, both subject to Licensor’s approval, shall appear during the term of this Agreement and any renewal or extension thereof. A true and correct copy of the licensing statement and mission statement approved by Licensor is set forth in Exhibit F attached hereto and incorporated by reference herein. Licensor reserves the right to modify, supplement, and/or alter the licensing statement or mission statement in its sole discretion and upon reasonable notice to Licensee. Each Related Material containing any such statements or Licensed Marks, as well as all advertising, marketing, promotional, and/or display material which reference the Licensed Marks and/or relate to the Licensed Products, shall be submitted to Licensor for its approval prior to any use by Licensee.

  

 

 

-14-

Initials: _______
Initials: _______

 

 

9.3 The Parties further agree that should any of the Licensed Products be manufactured, distributed, or sold without the appropriate or requested trademark and copyright notices, markings, and/or designations, in addition to any other rights it may have, Licensor may demand the removal of the offending product from distribution and sale, and may remove that product from the list of Licensed Products.

 

10 PROMOTIONAL MATERIAL

 

10.1 Licensee is required to provide substantial advertising and promotional support for the Licensed Products bearing the Licensed Marks including, but not limited to, the following:

 

a. Licensee will budget not less than ___ percent (___%) of its corporate resources to design, market, present and sell the Licensed Products under the Brand.

 

b. Licensee will budget not less than ___ percent (___%) of its total media-advertising budget for the Licensed Products under the Brand.

 

c. Licensee will run full-page advertising in trade publications such as [LIST TRADE PUBLICATIONS] to insure retail recognition for the Brand in the [_____] marketplace.

 

d. Any print advertisements for the Licensed Products under the Brand will be full-page advertisements. In the event that a print advertisement of less than a full page is published, Licensee agrees to buy two (2) full page advertisements in the next issue of the publication, as well as publishing online advertising in a manner to be agreed between the parties.

 

e. Licensee will use its best efforts to convey to the market that it is a licensee of the Brand, including but not limited to placing signage depicting the Brand prominently and in the first position at Licensee’s corporate offices and showrooms, and on Licensee’s corporate stationery, point of sale, marketing and other materials.

   

f. Carton/box marking denoting Brand.

 

g. Custom Brand hangtags for each Licensed Product.

 

h. Point of purchase easels supplied to dealers.

  

 

 

-15-

Initials: _______
Initials: _______

 

 

i. Point of purchase banners, mobiles and signage supplied to dealers as needed for display set-up.

 

j. Licensee will use contacts in marketplace to gain product placement with key customers.

 

k. Licensee will merchandise the Licensed Products to motivate customers to build the Brand within stores, including opening order discount co-op advertising and promotional discounts as needed to properly promote the Licensed Products.

 

l. Licensee will make reasonable efforts to assure adequate public relations and press coverage of the Brand within the trade.

 

m. On-site sales training programs for Brand dealers.

 

n. Sales event support and display set-up assistance as reasonably required.

 

o. Custom catalog inserts, lithographs, tear sheets and brochures supporting the Licensed Products under the Brand.

 

p. Editorial content for use on Licensor’s website.

 

10.2 No advertising, marketing, promotional, and display materials, or other artwork shall be used without prior written approval by Licensor. The Parties further agree that all artwork and designs involving the Licensed Marks shall be produced under appropriate “work for hire” provisions or are hereby assigned to and shall remain the property of Licensor, notwithstanding their creation by Licensee or others. Licensee shall ensure that, prior to utilizing any non-employees to create advertising, marketing, promotional, and display materials or other artwork, advertising copy, and/or other copyrightable materials related to the Licensed Marks, such persons or entities shall have executed the necessary valid agreements to convey the ownership and copyrights to these items to Licensor.

 

10.3 Licensee agrees not to offer for sale, advertise, publicize, market, or otherwise promote any of the Licensed Products in any manner whatsoever, including without limitation print media, radio, television, cable, internet, or other multi-media, without the prior written approval of Licensor, which approval shall not be unreasonably withheld.

 

10.4 The Parties further agree that in the event Licensor elects to pay for or to otherwise make a voluntary financial contribution to produce any advertising, marketing, promotional, and/or display materials of any kind, including without limitation print media, radio, television, cable, internet, or other multi-media, in connection with the Licensed Products, Licensor shall have unfettered discretion to do so.

   

 

 

-16-

Initials: _______
Initials: _______

 

 

11 BRAND MANAGER

 

11.1 Licensee agrees to establish and fill a position of Brand Manager to work with Licensor to facilitate the merchandising, promotion and public relations, development, assortment, quality, and design of the Licensed Products. The choice of individual to fill the position of Brand Manager shall be subject to the prior written approval of Licensor. Said Brand Manager shall perform his/her/their duties during the term of this Agreement, and any renewal or extension thereof, and shall cooperate with Licensor to maximize the opportunities for brand development and/or brand recognition of the Licensed Products to the mutual benefit of the Parties. Brand Manager’s services will be in mutual cooperation with Licensor to achieve the common goals of the Brand. Licensor acknowledges that the Brand Manager will coordinate with specific departments inside Licensee to carry out the business under this Agreement, and that the Brand Manager will have other duties tasked to them by Licensee.

 

11.2 Licensor may periodically hold a Brand Summit for attendance of representatives of its licensees.

 

12 CONSULTATION

 

12.1 Licensor and Licensee agree to have meaningful consultation with each other regularly throughout the term of this Agreement and any renewal or extension thereof. The Parties agree that the purpose of the consultation will be to discuss methods and strategies to develop, promote, and expand the MIVITM brand and image for the mutual benefit of Licensor, Licensee and Licensee’s customers. To attain this mutual goal of the Parties, Licensor, or its designees, agrees to meet in person throughout the calendar year, in conformity with mutually agreed upon schedules, with Licensee, or its designees, to discuss merchandise, marketing, showroom and advertising plans and to solicit input and ideas from Licensor or its designees.

 

12.2 Mr. Meharey is the Chief Designer of the Brand. In addition to the services provided by Brand Manager, Licensor hereby designates Jason Winters and Jon Carrasco to serve as liaison with Licensee. Licensor may designate additional members of the MIVITM team to serve as its liaison with Licensee. Licensor reserves the right to change, modify, supplement, and/or alter this designation in any way and at any time in its sole and unfettered discretion.

 

12.3 The Parties further agree that Licensor may from time to time recommend sub-contractors, vendors, and/or manufacturers to Licensee that Licensee will consider in good faith. Licensee will use its best efforts to use the sub-contractors, vendors, and/or manufacturers suggested by Licensor.

 

 

 

-17-

Initials: _______
Initials: _______

 

 

13 TRADE SHOWS

 

13.1 Licensor agrees to make Mr. Meharey available for one (1) personal appearance at a trade show in the United States on behalf of Licensee during each twelve (12) month period this Agreement is in effect. Requests for such appearances shall be made not less than five (5) weeks prior to the desired appearance and shall be subject to Mr. Meharey’s pre-existing personal and professional commitments. Each Trade Show Event will occur at a single location and Mr. Meharey shall not be obligated to appear for more than (90) ninety minutes per Event (unless approved by Licensor in its sole discretion). Licensee shall not promote in any manner any Trade Show Event as an autograph show.

 

13.2 All travel, lodging, meals, and related incidental expenses incurred by Mr. Meharey and by all traveling companions she reasonably requires for the personal appearances provided under this Section shall be paid by Licensee. Mr. Meharey and the traveling companions she reasonably requires shall either travel via private plane or first-class air and with portal-to-portal SUV ground transportation. If private plane travel is used, Licensee shall pay the round-trip fuel costs and landing fees for the relevant flight, and if airline travel is used, then Licensee shall pay for first class air travel. Mr. Meharey and the traveling companions she reasonably requires shall be lodged in first class hotel accommodations, and each shall be provided with all meals in connection with such appearances. Where any appearance is for the benefit of multiple licensees, Licensee’s portion of expenses shall be their relative percentage of such expenses based upon the number of other licensees involved.

 

13.3 Licensee to provided, via email to Licensor each October a list of trade shows they will be attending the following year. Email address; familycontracts@sterlingwinters.com

 

14 PHOTO SESSIONS

 

14.1 Licensor shall make Mr. Meharey available to participate in two (2) photo sessions each year during the term of this Agreement at a mutually acceptable time and place in California featuring Mr. Meharey with Licensed Products under the Brand. Said photo sessions shall be scheduled at Mr. Meharey’s convenience upon not less than five (5) weeks’ prior notice subject to his pre-existing personal and professional commitments. The photo sessions may not exceed eight (8) hours in length.

 

14.2 In addition to any other sums payable hereunder, Licensee shall pay Licensor all expenses for each photo session promptly upon receipt of invoice. The Parties agree that Licensor shall have the unfettered right to produce and/or manage any such photo session. Any amount paid under this Section shall not be included in the calculation of royalties pursuant to Section 5, or Brand Participation Fees pursuant to Section 5.13.

 

14.3 The photographs resulting from any photo session(s) shall be contracted for under “work for hire” provisions and all rights, including without limitation copyright, to the photos, negatives, and any other tangible materials bearing Mr. Meharey’s image or relating to said photo session(s), shall be the property of Licensor and are hereby assigned to Licensor. If Licensee uses photographic service of other than its employees, Licensee shall obtain written assignments to the Licensor of all copyright and other rights in any photographs, negatives, or any other materials bearing Mr. Meharey’s image. All photographs of Mr. Meharey, which the Licensee desires to use, shall be submitted to Licensor for its absolute written approval prior to any use thereof. This shall include the approval of all final retouched versions of the photos as well as the specific negatives, which might be used.

  

 

 

-18-

Initials: _______
Initials: _______

 

 

14.4 All travel, lodging, meals, and related incidental expenses incurred by Mr. Meharey or his designee and by all traveling companions she reasonably requires for the photo session(s) provided under this Section shall be paid by Licensee. Mr. Meharey or his designee and the traveling companions she reasonably requires shall travel either by private plane or via first class air and with portal-to-portal SUV ground transportation. If private plane travel is used, Licensee shall pay the round-trip fuel costs and landing fees for the relevant flight, and if airline travel is used, then Licensee shall pay for first class air travel. Mr. Meharey or her designee and the traveling companions she reasonably requires shall be lodged in first class hotel accommodations, and each shall be provided with all meals in connection with such photo session(s).

 

15 RECORDING & FILMING

 

15.1 Except as provided herein, under no circumstance shall any recording be made by Licensee in any manner whatsoever, whether on video or audio tape, film, celluloid, and/or by any other means possible, of Mr. Meharey in connection with any appearance provided under this Agreement, including without limitation all personal appearances and photo sessions, without the prior written approval of Licensor. Should Licensor approve any such recording of any appearance by Mr. Meharey in connection herewith, said recording shall be contracted for under “work for hire” provisions and all rights, including the copyright, related to said recording of Mr. Meharey, shall belong solely to Licensor and are hereby assigned to Licensor. If Licensee uses the services of someone other than its employees to make any such recording, Licensee shall obtain written assignments to Licensor of all copyright and other rights in any recordings, negatives, or any other materials bearing Mr. Meharey’s image and/or voice. It is further agreed that any such recording of Mr. Meharey, which Licensee desires to use for any purpose whatsoever, shall be submitted to Licensor for its absolute written approval prior to any use thereof. In addition to approving the recording itself, the intended use must also be approved in writing by Licensor prior to any use thereof.

 

15.2 Guild/Union Requirements (SAG-AFTRA) – Tommy Meharey is a union member and Licensee will make payments accordingly for any audio or visual recordings.

 

16 GOOD WILL

 

16.1 Licensee recognizes the great value of the good will associated with the Licensed Marks and acknowledges that the Licensed Marks are distinct and all rights therein and goodwill pertaining thereto belong exclusively to Licensor, and that the Licensed Marks have a secondary meaning in the mind of the public.

  

 

 

-19-

Initials: _______
Initials: _______

 

 

16.2 Licensee will take all reasonable steps to enhance the reputation of Mr. Meharey and the good will associated with the Licensed Marks and will not do harm thereto at any time.

   

17 LICENSOR’S RIGHTS

 

17.1 Nothing in this Agreement shall be construed to prevent Licensor from granting any other license for the use of the Licensed Marks or from utilizing the Licensed Marks in any manner whatsoever.

 

17.2 Licensee agrees that rights not specifically granted to Licensee are reserved by Licensor and may be used by Licensor without limitation.

 

17.3 Licensee agrees to furnish any Licensed Product requested by Licensor, Mr. Meharey, or Sterling/Winters Company, at manufacturer’s cost; provided, however, that any Licensed Product provided by Licensee under Section 7 shall be at no charge.

 

17.4 Any approval by Licensor hereunder shall not constitute waiver of Licensor’s rights or Licensee’s duties under any provision of the License Agreement.

 

18 PROTECTION OF LICENSOR’S RIGHTS

 

18.1 Licensee agrees that during the term of this Agreement, or thereafter, it will not register or attempt to register any of the Licensed Marks, nor will Licensee form or incorporate any entity under a name that includes the Licensed Marks. Licensee will not attack the title or any rights of Licensor in and to the Licensed Marks or the Licensed Products or attack the validity of this Agreement.

 

18.2 Licensee recognizes the great value of the goodwill that is associated with the trademarks, service marks, copyrights, Internet domain names and social media user/screen names in the Licensed Marks, and Licensee acknowledges that, as between the parties, such goodwill is owned exclusively by Licensor and any goodwill created by Licensee’s use of the Licensed Marks shall inure to Licensor’s benefit. Licensee further acknowledges that, as between the parties, all right, title and interest in and to the trademarks, service marks, copyrights, Internet domain names and social media user/screen names in the Licensed Property are owned exclusively by Licensor. Licensee shall not challenge or contest Licensor’s ownership of the trademarks, service marks, copyrights, Internet domain names and social media user/screen names in the Licensed Marks, or their validity, or the validity of the license granted by this License Agreement.

 

18.3 Licensee further agrees to cooperate fully and in good faith with Licensor for the purpose of securing and preserving Licensor’s rights in and to the Licensed Marks. In the event there has not been a previous registration of any Licensed Mark and/or any material relating thereto for a particular Licensed Product, Licensor may register and maintain, at its Licensee’s expense, trademarks and/or service marks in the appropriate class(es) and/or copyrights in the name of Licensor. Licensee is not permitted to register any copyright, trademark, and/or service mark on behalf of Licensor. It is further agreed that nothing contained in this Agreement, and no act or omission by Licensor and/or by Licensee shall be construed as an assignment or grant to Licensee of any right, title, or interest in or to the Licensed Marks, it being understood that all rights relating thereto are reserved by Licensor, except for the license hereunder to Licensee of the right to use and utilize the Licensed Marks only as specifically and expressly provided in this Agreement.

  

 

 

-20-

Initials: _______
Initials: _______

 

 

18.4 Licensee also agrees to assist Licensor to the extent necessary in the procurement of any protection or to protect any of Licensor’s rights to the Licensed Marks. Licensor, if it so desires, may commence or prosecute any claims or suits in its own name, and Licensee may commence or prosecute any claims or suits only with the prior written approval of Licensor. Licensee shall notify Licensor in writing within five (5) days of any infringement or imitation by others of the Licensed Marks which may come to Licensee’s attention, and Licensor shall have the sole right to determine whether or not any action shall be taken on account of any such infringement or imitation. Licensor may, but is not required, to seek, obtain and maintain, in its own name, such intellectual property. Internet Domain name and social media user/screen name protection for the Licensed Marks in the Territory, which Licensor, in its sole discretion, believes to be appropriate and financially sound. Licensor in its sole discretion, shall designate, appoint and retain, the attorney or attorneys responsible for filing, producing and maintaining all intellectual property, Internet domain name and social media user / screen name registrations and protection for the Licensed Marks.

 

18.5 Licensee acknowledges that Licensor has sole and exclusive ownership of all right, title, and interest in and to the Licensed Marks and any registrations that have been issued or may be issued thereon. Licensee agrees that it will not at any time do or cause to be done any act or thing contesting or in any way impairing or tending to impair any part of such right, title and interest, including without limitation applying for trademark registration in Licensee’s name for any word or mark that is the same or likely to be confusingly similar to the Licensed Marks. Licensee further agrees that its every use of the Licensed Marks shall inure to the benefit of Licensor, and that Licensee shall not at any time acquire any rights in such Licensed Marks by virtue of any use it may make of the Licensed Marks.

 

18.6 Nothing contained in this License Agreement shall give Licensee any right, title or interest in or to the Licensed Marks except for the rights expressly licensed by this License Agreement, and subject to its terms and conditions. Licensee shall not make any representation or do any act, which may reasonably be taken to indicate that it owns the Licensed Marks or owns any rights in the Licensed Marks other than the rights to use Licensed Marks licensed by this License Agreement.

 

18.7 Adaptations and modifications of Licensed Marks prepared under this License Agreement shall be included as part of the Licensed Marks.

 

18.8 All registrations for intellectual property, Internet domain names and social media user/screen names in the Licensed Marks are to be applied for and obtained exclusively in Licensor’s name. Licensee shall not file or register any intellectual property applications or seek any Internet domain name and/or social media user/screen name registration in the Licensed Marks, Licensed Products or any derivations, improvements, variations or modification thereof, without Licensor’s prior written approval.

  

 

 

-21-

Initials: _______
Initials: _______

 

 

18.9 Licensee shall notify Licensor, or its designated representative, prior to entering into any agreement with any individual, company or business, for sales outside the United States of any Licensed Product, to permit the timely filing of foreign and/or international trademark and copyright applications, or other intellectual property protection, covering the Licensed Marks, in Licensor’s sole discretion.

 

18.10 Licensee agrees to cooperate fully and in good faith with Licensor for the purpose of securing and preserving Licensor’s rights in and to the Licensed Marks. In the event there has not been a previous registration of any Licensed Mark and/or any material relating thereto for a particular Licensed Product, Licensor may register and maintain, at its Licensee’s expense, trademarks and/or service marks in the appropriate class(es) and/or copyrights in the name of Licensor. Licensee is not permitted to register any copyright, trademark, and/or service mark on behalf of Licensor. It is further agreed that nothing contained in this Agreement, and no act or omission by Licensor and/or by Licensee shall be construed as an assignment or grant to Licensee of any right, title, or interest in or to the Licensed Marks, it being understood that all rights relating thereto are reserved by Licensor, except for the license hereunder to Licensee of the right to use and utilize the Licensed Marks only as specifically and expressly provided in this Agreement.

 

19 WARRANTIES AND INDEMNIFICATION

 

19.1 Licensor hereby indemnifies Licensee and undertakes to hold it harmless against any claims or suits, demands, losses, injuries, liabilities costs, judgments, arbitration awards, license fees, settlement, damages and expenses (including reasonable attorneys’ fees and costs, whether or not any legal proceeding is commenced) (“Losses”) for trademark infringement arising solely out of the validity of the rights to the Licensed Marks and from Licensee’s use of the Licensed Marks as granted herein and authorized under the terms of this Agreement, provided that prompt notice is given to Licensor within ten (10) days of any such claim or suit, and provided, further, that Licensor shall have the option to undertake and conduct the defense of any suit so brought, and no settlement of any such claim or suit is made without the prior written consent of Licensor. Licensor’s indemnification under this Section shall be apportioned and limited to only the portion of, and extent that, such Losses are, or are claimed to be, proximately caused by or attributable specifically to Licensee’s use of Licensed Marks in a manner permitted by this License Agreement. It is further agreed that Licensor reserves the unfettered right to select counsel to defend any such claims.

 

19.2 Licensee shall defend, indemnify, and hold Licensor harmless against any and all actions, claims, demands, lawsuits, loss, costs, damages, judgments, liabilities, license fees, settlement or expenses incurred, claimed, obtained, or sustained, including without limitation attorneys’ fees and costs, of any nature whatsoever, whether in law or in equity, including without limitation claims relating to or allegedly relating to the design, manufacture, sale, purchase, use, advertising, marketing, and/or distribution of any Licensed Product, whether for personal injury, product liability, intellectual property infringement, dilution, misappropriation or otherwise. Licensor reserves the right to select counsel to defend and/or bring any such claims. Notwithstanding Licensor’s right to the choice of counsel, Licensee shall solely be responsible for any and all attorneys’ fees, costs, and expenses relating to any and all such actions.

  

 

 

-22-

Initials: _______
Initials: _______

 

 

19.3 Licensor warrants that it has the lawful capacity to execute this Agreement and that it is the owner of the Licensed Marks or the authorized licensor with right to sublicense. Licensor believes that it and Licensee are entitled to use the Licensed Marks in commerce relating to the Licensed Products, and that to the best of its knowledge and belief, no other person or entity has the right to use the Licensed Marks in commerce on the Licensed Products, either in the identical form or in such near resemblance thereto as may be likely, when applied to the goods of such other person or entity, to cause confusion, mistake, or deception.

 

19.4 Licensor makes no representations or warranties with respect to the design, manufacture, sale, purchase, use, marketing, and/or distribution of any Licensed Product manufactured, sold, and/or distributed by Licensee and disclaims any liability arising out of the design, manufacture, sale, purchase, use, marketing, and/or distribution of any Licensed Product, and any such express or implied warranties are hereby disclaimed.

 

19.5 Licensee represents and warrants to Licensor that: (i) Licensee has the full power and authority to enter into this License Agreement on behalf of Licensee and to perform all of Licensee’s material obligations pursuant to this License Agreement, and that the Licensed Products manufactured, sold, and/or distributed by Licensee under this Agreement shall be suitable for the purpose for which they are intended to be used and shall comply with all applicable Federal, State, and local laws, and industry standards. (ii) Licensee will not harm or misuse the Licensed Property or bring the Licensed Marks into disrepute, (iii) except as specifically provided in this License Agreement, Licensee will not create any expenses chargeable to Licensor or Mr. Meharey without the prior written approval of Licensor, (iv) all Licensed Products (and the content contained or used in the Licensed Products) designed, developed, marketed, distributed, published, performed or sold by Licensee pursuant to this License Agreement do not, and will not, infringe any intellectual property right or any personal right of any third party, and (v) Licensee will not knowingly permit, do or commit any act or thing that would degrade, tarnish or deprecate or disparage the Licensed Property or Licensor’s or Mr. Meharey’s public image in society or standing in the community, or prejudice Licensor or Mr. Meharey and that it will terminate such activities promptly upon written notice, and failure to do so constitutes a material breach of this License Agreement. Licensee acknowledges and agrees that there are no warranties, guarantees, conditions, covenants, or representations by Licensor as to marketability, fitness for a particular purpose, or other attributes of the Licensed Products, whether express or implied (in law or in fact), oral or written.

 

19.6 Licensee shall provide Licensor with prompt written notice of any lawsuits or threatened lawsuits, or other significant developments, investigations, claims, or final refusals in which Licensee is or may be named as a party or for which Licensee is obligated or has agreed to indemnify any party, and Licensee shall thereafter provide Licensor with periodic written updates concerning relevant developments in any such lawsuits as they arise.

  

 

 

-23-

Initials: _______
Initials: _______

 

 

19.7 For purposes of this Section 19, the term “Licensor” shall mean Licensor and, without limitation, any of its agents, employees, servants, representatives, parents, subsidiaries, affiliates, officials, directors, officers, shareholders, attorneys, divisions, branches, units, affiliated organizations, successors, predecessors, contractors, assigns, and all persons acting by, through, under, or in concert with them, past or present, specifically including Mr. Meharey, MIVITM LLC, Ms. Ireland, kathy ireland® Worldwide, kathy ireland® LLC, Sterling/Winters Company, Moretz Marketing, LLC its executives and employees.

 

20 INSURANCE

 

20.1 Licensee represents that it has obtained, and agrees to maintain, at its own expense, in full force and effect at all times during which the Licensed Products are being manufactured, sold, and distributed, insurance for bodily injury, advertising injury, property damage, and product liability from a recognized insurance company approved by Licensor, which is qualified to do business in the State of California, providing protection at least in the amount of $5,000,000 per occurrence and $5,000,000 in the aggregate for Licensor and for Licensee against any actions, claims, demands, lawsuits, loss, costs, attorneys’ fees, damages, judgments, and liabilities of any nature whatsoever relating to the Licensed Products. As proof of such insurance, a fully paid certificate of insurance naming Licensor (as defined above) as Licensee shall submit an insured party certificate to Licensor for Licensor’s prior written approval before any Licensed Product is manufactured, sold, or distributed. Any proposed change in certificates of insurance shall be submitted to Licensor for its prior written approval. Licensor shall be entitled to a copy of the prevailing certificate of insurance, which shall be furnished to Licensor by Licensee. The certificate(s) shall conform to the language requirements set out in Exhibit G attached hereto.

 

20.2 For purposes of this Section 20, the term “Licensor” shall mean Licensor and, without limitation, any of its agents, employees, servants, representatives, parents, subsidiaries, affiliates, officials, directors, officers, shareholders, attorneys, divisions, branches, units, affiliated organizations, successors, predecessors, contractors, assigns, and all persons acting by, through, under, or in concert with them, past or present, specifically including Mr. Tommy Meharey, MIVITM, Ms. Ireland, kathy ireland® Worldwide, kathy ireland® LLC, Sterling/Winters Company, ACDC, LLC, and Moretz Marketing, LLC its executives and employees.

  

 

 

-24-

Initials: _______
Initials: _______

 

 

21 INSOLVENCY; CHANGE OF CONTROL

 

21.1 If Licensee files a petition in bankruptcy or is adjudicated a bankrupt or if a petition in bankruptcy is filed against Licensee, or if it becomes dissolved, or becomes insolvent or unable to pay or discharge its liabilities in the ordinary course of business, or if Licensee assigns the whole or any substantial part of its assets or undertakings for the benefit of creditors or makes an assignment for the benefit of its creditors or any similar arrangement pursuant to any federal or state law, compulsory or voluntarily, or if a receiver or other similar officer is appointed for the whole or any part of the assets or undertakings of Licensee or its business, or if Licensee stops payment to its creditors generally, or ceases or threatens to cease to carry on its business or any substantial part thereof, or if Licensee merges or consolidates with or into any other corporation, or directly or indirectly sells or otherwise transfers, sells, or disposes of all or a substantial portion of its business or assets, or if a third party who does not own stock acquires a majority of the voting stock of Licensee, Licensor may terminate this Agreement by giving notice to Licensee of its intention to terminate and such termination shall be effective immediately. In the event this Agreement is so terminated, Licensee, its receivers, representatives, trustees, agents, administrators, successors, and/or assigns shall have no right to sell, exploit, or in any way deal with or in any Licensed Products covered by this Agreement or any related advertising, marketing, promotional, and display materials, including without limitation cartons, containers, packing, and wrapping materials, except with and under the special consent and instructions of Licensor in writing, which they shall be obligated to follow.

   

21.2 In the event this Agreement is so terminated under this Section 22, Licensee, its receivers, representatives, trustees, agents, administrators, successors, and/or assigns shall have no right to sell, exploit, or in any way deal with or in any Licensed Products covered by this Agreement or any related advertising, marketing, promotional, and display materials, including without limitation cartons, containers, packing, and wrapping materials, except with and under the special consent and instructions of Licensor in writing, which they shall be obligated to follow.

 

22 TERMINATION

 

22.1 Except as otherwise provided herein, in the event either party breaches or fails to perform any of its material duties and obligations pursuant to the terms of this Agreement, the non-breaching party shall have the right to terminate this Agreement upon thirty (30) days’ notice in writing, and such notice of termination shall become effective unless the breaching party shall remedy the breach within the thirty (30) day period to the reasonable satisfaction of the non-breaching party. The Parties agree to make a reasonable effort to resolve any disputes or breaches prior to exercising the right of termination.

 

22.2 Termination of this Agreement shall be without prejudice to any rights, which Licensor may otherwise have against Licensee. Upon the termination of this Agreement, notwithstanding anything to the contrary herein, all royalties on sales theretofore made and any other monies owed, shall become immediately due and payable, and all rights and licenses granted hereunder shall cease and revert to Licensor. Further, Licensee will withdraw or cancel any governmental filings made on its behalf that include the Licensed Marks. Licensee shall immediately cease and desist from using the Licensed Marks in any way. Unless otherwise stated in this Agreement, Licensee shall have no right to sell, exploit, or in any way deal with or in any Licensed Products covered by this Agreement or any related advertising, marketing, promotional, and display materials, including without limitation cartons, containers, packing, and wrapping materials, except with and under the special consent and instructions of Licensor in writing, which they shall be obligated to follow. Licensee shall immediately return any and all Confidential Information of Licensor to Licensor, as well as marketing and advertising materials bearing the Licensed Marks.

  

 

 

-25-

Initials: _______
Initials: _______

 

 

22.3 Upon the natural expiration or termination of this Agreement, neither Party shall make any publicly disparaging comments regarding the other or its business, whether written, oral, or electronic. This provision shall survive the expiration or termination of this Agreement. However, nothing herein shall limit either Party’s right to arbitration or other judicial remedies as set out in this Agreement.

 

22.4 Licensee acknowledges that a failure (except as otherwise expressly provided herein) to cease the manufacture, sale, transmission, broadcast or distribution of the Licensed Products upon the terminations or expiation of this License Agreement will result in immediate and irreparable damage to Licensor and Mr. Meharey. Licensee further acknowledges that there is no adequate remedy at law for such failure to cease manufacture, sale or distribution, and in the event of such failure, Licensor and/or Mr. Meharey shall be entitled to equitable relief and such further relief as a court or agency with jurisdiction may deem just and proper.

 

22.5 Upon termination or expiration of this License Agreement, all of the rights granted hereunder to Licensee, and all rights, title and interest in and to the Licensed Marks, including but not limited to, patent, industrial design, copyright, trademark, service mark, trade dress and all improvements, additions and changes thereto, trade secret rights, and goodwill relating to the Licensed Marks, shall revert to Licensor. Licensee agrees to promptly execute all documents that may be reasonably necessary to affect the foregoing. This right and obligation shall survive the terminations or expiration of this License Agreement.

 

23 FORCE MAJEURE

 

23.1 The Parties shall be released from their obligations hereunder, and this Agreement shall terminate in the event that governmental regulations or other causes arising out of a state or national emergency or war or causes beyond the control of the Parties render performance impossible, and one Party so informs the other in writing of such causes and its desire to be so released. In such event, all royalties on sales and all other monies due, theretofore made shall become immediately due and payable to Licensor.

 

24 NOTICES

 

24.1 Any notice, communication, statement, payment, or legal service of process required or permitted under this Agreement shall be in writing and shall be effective when hand delivered; or on the date when the notice, communication, statement, payment, or legal service of process is transmitted by confirmed electronic facsimile (with a confirmation copy sent by mail); or the day after the notice, communication, statement, payment, or legal service of process is sent by reputable overnight air courier service (e.g., Federal Express). All such communications shall be sent to the Parties at the notice addresses listed below or to such other persons and the Parties to each other may designate notice addresses as in writing.

  

 

 

-26-

Initials: _______
Initials: _______

 

 

  If to Licensor:

Sterling/Winters Company

PO Box #1410

Rancho Mirage, CA 92270

Facsimile: 310 557-1722

Attention: Erik Sterling

Email: esterling@sterlingwinters.com

 

  With a copy to:

Mr. Marty Singer

Lavely & Singer Professional Corp.

2049 Century Park East #2400

Los Angeles CA. 90067

Email: MDSinger@lavelysinger.com

Facsimile: (310) 556-3615

 

  If to Licensee:

Samsara Luggage, Inc.

One University Plaza, Suite #505

Hackensack, NJ 07601

Phone: 011-972-52-5345343 Israel

Attention: Atara Dzikowski

Email: atara@samsaraluggage.com

 

25 NEGATION OF AGENCY

 

25.1 Licensee is an independent contractor. Nothing contained herein shall be deemed to create an agency, joint venture, franchise, or partnership relation between the Parties, and neither Party shall so hold itself out. Licensee shall have no right to obligate or bind Licensor in any manner whatsoever, and nothing contained in this Agreement shall give, or is intended to give, any rights of any kind to any third person(s).

 

26 ASSIGNABILITY

 

26.1 This Agreement shall inure to the benefit of Licensor, its successors, and assigns, but will be personal to Licensee, and shall be assignable by Licensee only with the prior written consent of Licensor. Licensee shall not mortgage, assign, sub-license, or otherwise encumber this Agreement without the prior written consent of Licensor. Licensor shall be entitled to assign this Agreement to any third party with notice to Licensee, including any such assignment in connection with the sale or transfer of Licensor’s business, provided, however, that Licensor shall have the option to terminate this Agreement in lieu of assignment to any successor of Licensor’s business in connection with any such sale or transfer.

 

26.2 In the event Licensor terminates this Agreement in connection with a sale of its business, Licensee shall have a period of six (6) months from the effective date of termination in which to sell off its inventory of Licensed Products, subject to the terms and conditions of this Agreement, including paying Royalties.

  

 

 

-27-

Initials: _______
Initials: _______

 

 

27 MODIFICATION AND WAIVER

 

27.1 Except as otherwise provided herein, no agreement or understanding purporting to add to or to modify the terms and conditions of this Agreement shall be binding unless agreed to by the Parties in writing. Any terms and conditions set forth in any forms used by the Parties, which are in conflict with the terms and conditions of this Agreement, shall be void and have no effect. The Parties further agree that the Exhibits to this Agreement may be modified, amended, altered, and/or supplemented from time to time in writing signed by authorized representatives of the Parties.

 

27.2 It is agreed that no waiver by either Party hereto or any breach or default of any of the provisions set forth herein shall be deemed a waiver as to any subsequent and/or similar breach or default.

 

28 GOVERNING LAW

 

28.1 This Agreement shall be construed in accordance with and the laws of the State of California shall govern all disputes relating hereto without giving effect to any conflicts of law provisions. The Parties consent to the jurisdiction of the courts of competent jurisdiction, federal or state, situated in the State of California, County of Los Angeles for the bringing of any and all actions relating hereto. It is further agreed that, subject to mutual agreement of the Parties in writing signed by authorized representatives of the Parties, Licensor and Licensee may consider mediating disputes relating to this Agreement, if any, prior to arbitration and/or any action relating hereto.

 

29 CONFIDENTIALITY

 

29.1 The Parties agree that the terms, conditions, and subject matter of this Agreement constitute confidential and proprietary information belonging to Licensor. Licensee agrees not to divulge any confidential and proprietary information pertaining to Licensor or this Agreement to any third party without prior written consent of Licensor. Licensee shall take any and all lawful measures to prevent the unauthorized use and/or disclosure of such confidential information, and to prevent unauthorized persons or entities from obtaining or using such information. Licensee further agrees to refrain from directly or indirectly taking any action, which would constitute or facilitate the unauthorized use or disclosure of such confidential information. Licensee may disclose such confidential and proprietary information to its officers, directors, employees, agents, and authorized representatives to the extent necessary to enable Licensee to perform its obligations under this Agreement, provided that said officers, directors, employees, agents, and/or authorized representatives execute an appropriate confidentiality agreement approved by Licensor, which by its terms shall be enforceable by injunctive relief. Licensee shall be liable for any unauthorized use and disclosure of such confidential information by its officers, directors, employees, agents, and authorized representatives, including without limitation its attorneys and accountants. The Parties further agree that any breach or threatened breach of this Section would cause irreparable harm to Licensor, that a remedy at law or in damages would be inadequate, and that the provisions of this Section may be enforced by way of injunctive relief in addition to any other rights available to Licensor in law or in equity.

  

 

 

-28-

Initials: _______
Initials: _______

 

 

29.2 For purposes of this Agreement, “confidential and proprietary information” includes, but is not limited to, the terms, conditions, and subject matter of this Agreement, and Licensor’s business, including any financial, cost, pricing, and royalty information; product development, business, marketing, promotion, distribution, sales, sales plans, and strategies; information concerning Licensor’s product development and intellectual property; information concerning manufacturing processes relating to the Licensed Products, or trade secrets. The foregoing confidentiality obligations shall not apply to information that: (1) was previously known to the recipient free of any obligation to keep it confidential; (2) was independently developed by recipient; or (3) is or becomes publicly available by means other than the unauthorized disclosure by recipient.

 

29.3 In the event that any judicial or regulatory authority requests or requires disclosure of any Confidential Information of the other party, the receiving party shall promptly notify the disclosing party of the requested or required disclosure and shall cooperate with the disclosing party in any effort to avoid or limit such disclosure.

 

30 ENTIRE AGREEMENT AND ADMISSIBILITY

 

30.1 This Agreement constitutes the complete understanding between the Parties and supersedes any and makes void any and all prior agreements, promises, representations, or inducements, no matter their form, concerning the subject matter of this Agreement. The Parties desire that this Agreement represent a single and completely integrated contract expressing the entire agreement of the Parties with respect to the subject matter of this Agreement. No promises, agreements, or modifications to this Agreement made subsequent to the execution of this Agreement by the Parties shall be binding unless reduced to writing and signed by authorized representatives of the Parties. The Parties to this Agreement agree that this Agreement may be used as evidence in any subsequent proceeding in which any Party alleges a breach of this Agreement or seeks to enforce its terms, provisions, or obligations.

 

31 SEVERABILITY

 

31.1 Whenever possible, each provision of this Agreement shall be interpreted in such a manner to be effective and valid under applicable law. Should any of the provisions or terms of this Agreement be determined illegal, invalid, or unenforceable by any court of competent jurisdiction, validity of the remaining parts, terms, or provisions shall not be affected thereby, and said illegal, invalid, or unenforceable part, term, or provision shall be deemed not to be a part of this Agreement.

 

32 RECITALS & PARAGRAPH HEADINGS

 

32.1 The terms of this Agreement are contractual, not a mere recital, and are the result of joint negotiations between, and joint drafting by, the Parties, and are therefore not to be construed in favor of or against either Party. All recitals are incorporated by reference into this Agreement. Caption and Paragraph headings are used for convenience and reference only, are no part of this Agreement, and shall not be used in interpreting, construing, defining, limiting, extending, or describing the scope of this Agreement, or any provision hereof, in any way.

  

 

 

-29-

Initials: _______
Initials: _______

 

 

33 ATTORNEY FEES AND COSTS

 

33.1 Should any action be necessary to enforce the terms of this Agreement, the prevailing Party will be entitled to recover reasonable attorneys’ fees and costs.

 

34 EXECUTION OF COUNTERPARTS

 

34.1 This Agreement may be executed in two or more duplicate bond or facsimile counterparts, each of which shall be considered an original, but all of which together shall constitute one and the same instrument, and in pleading or proving any provision of the Agreement, it shall not be necessary to produce more than one such counterpart.

 

35 EQUITABLE RELIEF

 

35.1 The Parties acknowledge that the subject matter of this Agreement relates to services and rights, which are extraordinary and unique, and which cannot be replaced or adequately compensated in money damages, and any breach by Licensee of this Agreement will cause irreparable injury to Licensor.

 

36 ARBITRATION

 

36.1 Arbitration - Mandatory Confidential Binding Arbitration of Disputes. The exclusive manner of resolution of any and all future disputes or controversies of any kind or nature between the Parties, however characterized, including without limitation any claim arising from alleged unauthorized disclosure of Confidential Information, any claim for breach, non-performance, specific enforcement, enforcement, interpretation or validity of this Agreement, among other claims, shall be pursuant to the procedures set forth below for Mandatory Confidential BINDING Arbitration. Mandatory Confidential BINDING Arbitration shall take place in Los Angeles, California administered by either JAMS (“JAMS”) under the JAMS Comprehensive Arbitration Rules and Procedures (“JAMS Rules,” available at http://www.jamsadr.com/), applying California law. The Parties expressly consent to such jurisdiction and venue. Such Arbitration shall be before one neutral Arbitrator selected either by mutual agreement of the Parties or selected pursuant to JAMS Rules. Any papers required to be delivered or served on the Parties in connection with such Arbitration may be sent pursuant to this Agreement’s Notice provisions.

 

36.2 The Arbitration proceeding and hearing shall be confidential and shall constitute Confidential Information protected from disclosure by this Agreement. All costs, fees, expenses and/or charges required to be paid to the Arbitrator and/or JAMS shall be borne pursuant to JAMS Rules, subject to reassessment in favor of the prevailing Party, who shall be entitled to recovery of same. The Parties shall have the right to conduct discovery in accordance with California Code of Civil Procedure § 1283.05 et seq. and the written discovery requests and discovery results shall be deemed to constitute Confidential Information. The Arbitrator shall render a written opinion which contains his/her factual and legal reasoning. The decision of the Arbitrator shall be binding and conclusive on the Parties and not reviewable or appealable other than as provided by California law.

  

36.3 Whether a dispute is arbitrable and enforceability of this Agreement shall be determined by the Arbitrator and not by any court. The Arbitrator shall be empowered to rule on his/her own jurisdiction, and shall have the right to impose any and all legal and equitable remedies that would be available to any Party before any governmental dispute resolution forum or court of competent jurisdiction, including without limitation temporary, preliminary and permanent injunctive relief, compensatory damages, actual damages, liquidated damages, accounting, disgorgement, specific performance, attorneys’ fees and costs, and punitive damages. In the event of any actual or threatened breach of this Agreement may cause a Party irreparable harm, such Party may seek on an expedited basis pursuant to JAMS Rules ex parte issuance of a restraining order and preliminary injunction or interim award.

 

36.4 If a request for extraordinary and/or immediate provisional relief is filed by a Party and if no Arbitrator has been appointed, JAMS shall appoint an Arbitrator who shall determine the request at the earliest practicable time. The Arbitrator so appointed shall be determined by JAMS in its discretion not to have any material disclosure as to any Party or counsel, and the Parties shall waive the right to formal disclosure and the right to disqualify the arbitrator so appointed as otherwise permitted by the California Arbitration Act. The Parties understand that these waivers are intended to effectuate their agreed process of immediate determination of a request for provisional relief.

   

 

 

-30-

Initials: _______
Initials: _______

 

 

IN WITNESS WHEREOF, the Parties hereto have caused this instrument to be duly executed as of the day and year first above written.

  

  Sterling/Winters Company, a California Corporation, DBA: MIVITM  LLC:
   
  By: /s/ Tommy Meharey
    Name: Tommy Meharey
    Title: Co-Founder
  Date: July 30, 2019
   
  Samsara Luggage Inc.:
   
  By: /s/ Atara Feiglin Dzikowski
    Name: Atara Feiglin Dzikowski
    Title: CEO
  Date: July 24, 2019

  

 

 

-31-

Initials: _______
Initials: _______

 

 

EXHIBIT A

Licensed Property

 

1. Tommy Meharey MIVITM

 

2. Tommy Meharey likeness, only as approved in writing by Licensor and only in connection with the Licensed Products specified in Exhibit B to this Agreement.

 

3. MIVITM logo(s) only for the Licensed Products specified in Exhibit B to this Agreement and only as shown in the following specimen(s):

 

4. Licensor may designate other supporting brands or categories, in writing from time to time.

 

 

 

-32-

Initials: _______
Initials: _______

 

 

EXHIBIT B

 

LICENSED PRODUCTS:

 

Aluminum Smart Hi-Tech Luggage

 

CHANNELS OF DISTRIBUTION:

 

[Insert Channels of distribution]; and,

Retail websites owned and operated by retailers in the above channels

 

Mass Market and Low Tier Department Stores (i.e., Wal-Mart, K-Mart, Target, and Sears), as well as club stores (i.e. Sam’s), are specifically excluded from the approved Channels of Distribution under this Agreement. Internet Retailers will be handled on an individually, approved by Licensor basis. Internet and Electronic channels of distribution must maintain the integrity of the Brand

 

Televised retail channels (HSN, QVC, etc.) are approved Channels of Distribution. However, acceptance of any channels of distribution must not require the personal appearance of Tommy Meharey.

  

 

 

-33-

Initials: _______
Initials: _______

 

 

EXHIBIT C

 

CODE OF CONDUCT

 

行为守则

 

1. PURPOSE: [LICENSEE] is committed to using only manufacturers to strive to conduct business in a highly professional and ethical manner. This document outlines those commitments each facility makes in respect to its compliance with applicable law and tis personal practices and policies.

 

1.目的:[被许可人]承诺只使用了力争在一个高度专业和道德的方式开展业务的厂家。本文概述了这些各设施使得在尊重其遵守适用的法律和个人的做法和政策的承诺。

 

2. CHILD LABOR: The facility agrees not to use child labor in the manufacturing, or distribution of the Goods. The term “child” refers to a person younger than the local legal minimum age for employment or the age for completing compulsory education; provided, however, in no event shall the Facility use any person below the age of (15) fifteen. The Facility also agrees to comply with all other Laws applicable to employees, regardless of the age of an employee.

 

2. 童工:该中心同意不使用童工在制造,或货物配送。 “童工”是指一个人年龄低于当地法定最低就业年龄或年龄在完成义务教育;提供的,但是,在任何情况下,基金使用任何人(15)15岁以下。该基金还同意遵守适用于所有员工的其他法律,不论雇员的年龄。

 

3.FORCED LABOR: The Facility agrees to employ only persons whose presence is voluntary. The Facility agrees not to use any forced or involuntary labor, whether prison, bonded, indentured or otherwise.

 

3. 强迫劳动:该基金同意只雇用人员,其存在是自愿的。该基金同意不使用任何强迫或非自愿劳动,无论是监狱,保税,契约或其他方面。

 

4. ABUSE OF LABOR: The Facility agrees to treat each employee with dignity and respect and not to use corporal punishment, threats of violence, or other forms of physical, sexual, psychological or verbal harassment or abuse.

 

4. 滥用劳动:该基金同意把每个员工的尊严和尊重,不使用体罚,暴力威胁或其他形式的身体,性,心理或言语上的骚扰或虐待。

  

-33-

 

 

5. NON-DISCRIMINATION: The Facility agrees not to discriminate in hiring and employment practices, including salary, benefits, advancement, discipline, termination, or retirement on the basis of race, religion, age, nationality, social or ethnic origin, sexual orientation, gender, political opinion or disability.

 

5. 不歧视:该基金同意不会在雇佣和招聘活动,包括工资,福利,晋升,纪律,终止或退休种族,宗教,年龄,国籍,社会或民族,性取向,性别的基础上歧视,政治观点或残疾。

 

6. ASSOCIATION: The Facility agrees to follow employees to organize and bargain collectively without penalty or interference in accordance with local Laws.

 

6. 关联关系:该基金同意遵守雇员组织和集体谈判不受处罚或干预按照当地的法律。

 

7. WAGES, DENEFITS AND WORKING HOURS: The facility recognizes that wages are essential to meeting employee’s basic needs. The Facility agrees to comply, at a minimum, with all applicable wages and hour Laws, including minimum wage, overtime hours, maximum hours, piece rates and other elements of compensation and shall provide legally mandated benefits.

 

7. 工资,福利和工作时间:该厂认识到,工资是必要的,以满足员工的基本需求。该基金同意遵守,至少,所有适用的工资和工时的法律,包括最低工资,加班,最长工时,计件工资和补偿等内容,并应提供法定福利。

 

8. HEALTH AND SAFETY: The Facility agrees to provide employees with a safe and healthy workplace environment in accordance with all applicable Laws, ensuring at a minimum, reasonable access to potable water and sanitary facilities, fine safety and adequate lighting and ventilation. The Facility also agrees to ensure that the same standards of health and safety are applied to any housing it provides for employees.

 

8. 健康和安全:该基金同意为员工提供一个安全和健康的工作环境符合所有适用法律,确保在最低限度,合理获得饮用水和卫生设施,精美的安全性和足够的照明和通风。该基金也同意,以确保健康和安全的相同标准适用于它提供了雇员的住房

 

9. COMPLIANCE: The Facility agrees to take appropriate steps to ensure that the provisions of the COC are communicated to its employees, including by prominent posting a copy of this COC in the local language on one or more bulletin boards in places readily accessible to employees at all times.

 

9. 合规性:本基金同意采取适当措施,以确保奥委会的规定传达给员工,其中包括由著名张贴在当地语言的一个或多个电子公告板的名额该行为准则的副本容易获得员工的所有次。

  

-34-

 

 

10. ENVIRONMENT: Business partners should share our concern for the environment and adhere to their local and national laws regarding the protection and preservation of the environment.

 

10. 环境:业务合作伙伴应该分享我们对环境的关注,并坚持对环境的保护和维护当地和国家法律。

 

11. LEGAL REQUIREMENTS: Business partners should be in compliance with all legal requirements involved in conducting the business.

 

11. 法律要求:业务合作伙伴应符合参与开展业务的所有法律要求。

 

12. Our Business Partners are required to provide full access to their facilities and those of their manufacturers, vendors and subcontractors, and to release records relating to employment practices. We may conduct on-site inspections of facilities to monitor the standards and assure the quality of our products.

 

12. 我们的业务合作伙伴必须提供完全访问他们的设备和那些他们的制造商,供应商和分包商,并发布有关用工行为记录。我们可以进行现场视察设施,以监控标准,确保了产品的质量。

 

Please report Violations Anonymously by emailing to: esterling@sterlingwinters.com

 

esterling@sterlingwinters.com:请通过电子邮件以匿名方式举报违规行为

  

-35-

 

 

EXHIBIT E

 

Approved Royalty Report Form

  

-36-

 

 

EXHIBIT F

 

Approved Licensing Statement

 

Manufactured and distributed by.

Samsara Luggage

On behalf of MIVITM LLC.

 

Website

 

TBD

  

-37-

 

 

EXHIBIT G

 

REQUIRED INSURANCE CERTIFICATE

 

Under Description of Operations state the following: 

 

Certificate Holder Kathy Ireland, kathy ireland® Worldwide, kathy ireland® LLC, The Sterling/Winters Company, and Moretz Marketing LLC it’s partners, subsidiaries, affiliates; their directors, officers and employees are named additional insured with regards to liability arising out of operations of the named insured.

 

The Certificate Holder should be listed as:

 

kathy ireland® Worldwide  

PO Box #1410

Rancho Mirage, CA., 92270

 

Send copies of Certificate to:

 

kathy ireland® Worldwide

Erik Sterling

FinancialCommittee@sterlingwinters.com

 

Mitchka Lyonnais

mlyonnais@mmibi.com

Momentous Insurance Brokerage, Inc.

  

- END OF CONTRACT-

 

-38-

 

Exhibit 14.1

 

SAMSARA LUGGAGE, INC.

CODE OF BUSINESS CONDUCT AND ETHICS

 

I. POLICY STATEMENT

 

1.1 Acting ethically and obeying the law, both in letter and spirit, are among Samsara Luggage, Inc.’s (the “Company”) core values. The Company expects its employees, officers, and directors to understand the legal and regulatory requirements applicable to their area of responsibility, including federal, state, and foreign laws, as well as the relevant regulatory schemes. All employees and directors are also expected to act with integrity and to exercise good judgment and common sense in their efforts to comply with all applicable laws, rules, and regulations and are encouraged to ask their supervisors for advice when they are uncertain about them. This Code of Business Conduct and Ethics (this “Code”) applies to the Company’s employees, officers and directors, and is designed to promote:

 

honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

full, fair, accurate, timely and understandable disclosure in the reports and documents the Company files with, or submits to, the Securities and Exchange Commission and in other public communications made by the Company;

 

compliance with applicable governmental laws, rules and regulations;

 

the prompt internal reporting to the appropriate person of violations of this Code; and

 

accountability for adherence to this Code.

 

1.2 The Company promotes ethical behavior and encourages employees to talk to supervisors, managers, or other appropriate personnel when in doubt about the best course of action in a particular situation. Non-employee directors are encouraged to talk to the Chairman of the Board or the Chairman of the Audit Committee in such situations. Anyone aware of a situation that he or she believes may violate or lead to a violation of this Code should follow the guidelines under “Compliance and Reporting” below.

 

1.3 This Code covers a wide range of business practices and procedures and sets out basic principles to guide you. Although there can be no better course of action than to apply common sense and sound judgment, do not hesitate to use the resources available whenever it is necessary to seek clarification.

 

1.4 Certain violations may be referred to legal authorities for investigation and civil or criminal prosecution. If you become aware of the violation of any law by the Company, whether by its officers, employees, or any third party doing business on behalf of the Company, it is your responsibility to promptly report the matter to your supervisor or directly to the Company’s CEO, Chairman of the Board, or Chairman of the Audit Committee. While the Company strives to address matters internally, nothing in this Code should discourage you from reporting illegal activity, including any violation of the law whether federal, state, local, or foreign law, rule or regulation, to the appropriate regulatory authority. This Code should not be construed to prohibit employees from testifying, participating, or otherwise assisting in any state or federal administrative, judicial or legislative proceeding or investigation.

 

1

 

 

II. CONFLICTS OF INTEREST

 

2.1 Best Interests of the Company. A conflict of interest arises when your personal interests interfere with your ability to act in the best interests of the Company. Employees must discharge their responsibilities on the basis of what is in the best interest of the Company independent of personal consideration or relationships. Non-employee directors must discharge their fiduciary duties as directors of the Company.

 

2.2 Disclosure of Conflicts. Employees should disclose any potential conflicts of interest to the CEO or such officer’s designee, who can advise the employee as to whether or not the Company believes a conflict of interest exists. An employee should also disclose potential conflicts of interest involving the employee’s spouse, siblings, parents, in-laws, children and other members of the employee’s household.

 

2.3 Activities Outside the Company. Employees must make sure that their outside activities do not conflict or interfere with their responsibilities to the Company. For example, a Company employee generally may not, without approval by the Company:

 

engage in self-employment or perform paid or unpaid work for others in a field of interest similar to the Company;

 

use proprietary or confidential Company information for personal gain or to the Company’s detriment;

 

use Company assets or labor for personal use, except for incidental use permitted under the Company’s policies;

 

acquire any interest in property or assets of any kind for the purpose of selling or leasing it to the Company; or

 

appear to represent the Company as the participant in an outside activity unless the Company has authorized the employee to represent it.

 

2.4 Service on Outside Boards of Directors. Serving as a director of a competitor corporation is not allowed. If in doubt, you should consult with the CEO about your proposed service as a director of another corporation.

 

2.5 Corporate Opportunities & Resources. You are prohibited from taking for yourself personal opportunities that are discovered through the use of corporate property, information or position without approval. Without approval, you may not use corporate property, information or position for personal gain. No employee may compete with the Company, directly or indirectly. You should protect the Company's assets and ensure their efficient use. Theft, carelessness and waste have a direct impact on the Company's profitability. Company resources may be used for minor personal uses, so long as such use is reasonable, does not interfere with your duties, is not done for pecuniary gain, does not conflict with the Company’s business and does not violate any Company policy.

 

2

 

 

2.6 Indirect Interests and Relationships. A conflict of interest can also arise because of the business activities of your close relations. For example, a significant relationship with, or a significant financial interest in, any supplier, customer or competitor. An employee may not make or attempt to influence any decision that could directly or indirectly benefit his or her close relative. To protect the employee and the Company from the appearance of a conflict of interest, he or she should make appropriate disclosure of the interest to the CEO or such officer’s designee.

 

III. BUSINESS RELATIONSHIPS

 

3.1 Fair Dealing. The Company seeks to outperform its competition fairly and with honesty. The Company seeks competitive advantages through superior performance, not unethical or illegal business practices. Each employee must endeavor to deal fairly with the Company's customers, suppliers, competitors and employees and must not take advantage of them through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any unfair-dealing practice.

 

3.2 Customer Relationships. Our customers are of the utmost importance to us. The Company’s employees must always treat customers and potential customers according to the highest standards of business conduct. It is the Company’s policy to sell its products and services on their merits and to avoid making disparaging comments about the products and services of competitors unless they can be substantiated. Employees should be careful in this regard in commenting upon the character, financial condition, or potential legal or regulatory problems of competitors.

 

3.3 Suppliers. The Company’s suppliers are important to our business, and as such Company employees should always treat suppliers and potential suppliers in accordance with the highest standards of business conduct. Suppliers must be selected on the basis of objective criteria, such as value (quality for price), price, technical excellence, service reputation, the Company’s past experience with working with them and production/service capacity.

 

3.4 Contracts and Commitments. You may not enter into any agreement binding the Company without authorization. Employees involved in proposals, bid preparations or contract negotiations should strive to ensure that all statements, communications, and representations to prospective customers are truthful and accurate.

 

IV. FAIR COMPETITION

 

Fair competition laws, including U.S. antitrust rules, limit what the Company can do with another company and what the Company can do on its own. Generally, the laws are designed to prohibit agreements or actions that reduce competition and harm consumers. You may not enter into agreements or discussions with competitors that have the effect of fixing or controlling prices, dividing and allocating markets or territories, or boycotting suppliers or customers.

 

V. GIFTS, ENTERTAINMENT AND OTHER CONSIDERATIONS

 

5.1 Use of Company funds or other Company property for illegal, unethical or otherwise improper purposes is prohibited. The purpose of business entertainment and “Gifts” (as defined below) in a commercial setting is to create goodwill and a sound working relationship, not to gain personal advantage with customers or suppliers.

 

3

 

 

5.2 Gifts. The term “Gift” includes any payment, compensation, loan or other financial favor, such as hosting activity, which generally includes travel, meals and invitations to events and conventions. Except as set out below, without approval by the CEO or such officer’s designee, employees must refrain from giving and receiving business-related Gifts.

 

You may not give or accept a Gift to or from a person or organization with the intention of influencing the recipient’s business judgment or conduct.

 

You must be careful and avoid even the appearance of impropriety in giving or receiving Gifts. In general, you cannot offer, provide or accept any Gifts in connection with your service to the Company except in a manner consistent with customary business practices, such as customary and reasonable meals and entertainment.

 

Gifts should be considered permitted in case the following cumulative conditions:

 

Gifts may only be offered, or accepted, if they are intended to serve legitimate business goals and comply with this policy.

 

The Gift is not lavish.

 

Gifts must not be granted too frequently.

 

The Gift is permitted under local law.

 

It is never appropriate or permissible to accept or give cash or a cash equivalent from or to a vendor, supplier or customer outside the Company’s normal business. Cash equivalents include, among other things, checks, money orders and vouchers.