Reborn Coffee, Inc.

Previous wording

Reborn Coffee is focused on serving high quality, specialty-roasted coffee at retail locations, kiosks and cafes. We are an innovative company that strives for constant improvement in the coffee experience through exploration of new technology and premier service, guided by traditional brewing techniques. We believe Reborn differentiates itself from other coffee roasters through its innovative techniques, including sourcing, washing, roasting, and brewing our coffee beans with a balance of precision and craft.

Current wording

Reborn Coffee is focused on serving high quality, specialty-roasted coffee at retail locations, kiosks and cafes. We are an innovative company that strives for constant improvement in the coffee experience through exploration of new technology and premier service, guided by traditional brewing techniques. We believe Reborn differentiates Coffee itself from other coffee roasters through its innovative techniques, including sourcing, washing, roasting, and brewing our coffee beans with a balance of precision and craft.

Previous wording

Founded in 2015 by Jay Kim, our Chief Executive Officer, Mr. Kim and his team launched Reborn Coffee with the vision of using the finest pure ingredients and pristine water. We currently serve customers through our retail store locations in California: Brea, La Crescenta, Corona Del Mar, Laguna Woods, Manhattan Beach, Cabazon, Glendale, Arcadia, Riverside, San Francisco and Irvine, with 3 other locations in development. We expect to open up to 20 company-owned retail locations by the end of 2023.

Current wording

Founded in 2015 by Jay Kim, our Chief Executive Officer, Mr. Kim and his team launched Reborn Coffee with the vision of using the finest pure ingredients and pristine water. We currently serve customers through our 10 retail stores located in California, 1 store in Korea, and 1 store in Malaysia.

Previous wording

Currently, we have the following fourteen retail coffee locations:

Current wording

We have the following twelve retail coffee locations as of December 31, 2024:

Previous wording

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. The Company’s net revenue primarily consists of revenues from its retail locations and wholesale and online store. Accordingly, the Company recognizes revenue as follows:

Current wording

We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers. Our net revenue primarily consists of revenues from our retail locations and wholesale and online stores. Accordingly, we recognize revenue as follows:

Previous wording

Retail store revenues are recognized when payment is tendered at the point of sale. Retail store revenues are reported net of sales, use or other transaction taxes that are collected from customers and remitted to taxing authorities. Sales taxes that are payable are recorded as accrued as other current liabilities. Retail store revenue makes up approximately 98% of the Company’s total revenue.

Current wording

Retail store revenues are recognized when payment is tendered at the point of sale. Retail store revenues are reported net of sales, use or other transaction taxes that are collected from customers and remitted to taxing authorities. Sales taxes that are payable are recorded as accrued as other current liabilities. Retails store revenue makes up approximately [98]% of our total revenue.

Previous wording

Wholesale and online revenues are recognized when the products are delivered, and title passes to customers or to the wholesale distributors. When customers pick up the products at the Company’s warehouse, or the products are delivered to the wholesale distributors, the title of the products passes and revenue is recognized. Wholesale revenues make up approximately 2% of the Company’s total revenue.

Current wording

Wholesale and online revenues are recognized when the products are delivered, and title passes to customers or to the wholesale distributors. When customers pick up the products at our warehouse, or the products are delivered to the wholesale distributors, the title of the products passes and revenue is recognized. Wholesale revenues make up between [4% to 6%] of our total revenue.

Previous wording

Historical results are not necessarily indicative of the results expected for any future period. You should read the summary of historical consolidated financial data below, together with our audited consolidated financial statements and related notes thereto.

Current wording

The following tables present the summary of historical consolidated financial data for Reborn Coffee, Inc. and its subsidiaries for the periods and at the dates indicated. Historical results are not necessarily indicative of the results expected for any future period. You should read the summary of historical consolidated financial data below, together with our audited consolidated financial statements and related notes thereto.

Previous wording

*Revenues.*Revenues were approximately $6.0 million for the year ended December 31, 2023, compared to $3.2 million for the year ended December 31, 2022, representing an increase of approximately $2,713,000, or 45.6%. The increase in sales for the periods was primarily driven by the opening of new locations, and to the continued focus on marketing efforts to grow brand recognition.

Current wording

**Net Revenues –**Revenues were approximately $5.9 million for the year ended December 31, 2024, compared to $5.5 million for the year ended December 31, 2023, representing an increase of approximately $0.4 million, or 7.6%. The increase in sales for the periods was primarily driven by the opening of new locations, and to the continued focus on marketing efforts to grow brand recognition.

Previous wording

Product, food and drink costs. Product, food and drink costs were approximately $1,758,000 for the year ended December 31, 2023 compared to $1,093,000 for the comparable period in 2022, representing an increase of approximately $666,000, or 37.9%. The increase in costs was partially driven by the opening of new locations and the overall increase in sales for the period.

Current wording

**Product, Food and Drink Costs (stores) –**Product, food and drink costs were approximately $2.1 million for the year ended December 31, 2024 compared to $1.8 million for the comparable period in 2023, representing an increase of approximately $0.3 million, or 15.7%. The increase in costs was partially driven by the opening of new locations and the overall increase in sales for the period.

Previous wording

General and administrative expenses. General and administrative expenses were approximately $7,968,000 for the year ended December 31, 2023 compared to $5,664,000 for the comparable period in the prior year, representing an increase of approximately $2,304,000, or 28.9%. The increase was mainly caused by increased occupancy expenses and labor costs with opening of new locations.

Current wording

**General and administrative expenses –**General and administrative expenses were approximately $8.3 million for the year ended December 31, 2024 compared to $8.2 million for the comparable period in the prior year, representing an increase of approximately $0.1 million, or 1.2%. The increase was mainly caused by increased occupancy expenses and labor costs with opening of new locations.

Previous wording

We have a history of operating losses and negative cash flow in operating activities. We have incurred recurring net losses, including net losses from operations before income taxes of $3.7 million and $3.5 million for the year ended December 31, 2023 and 2022, respectively. We used $3.1 million and $3.3 million of cash for operating activities the year ended December 31, 2023 and 2022, respectively, and we had an accumulated deficit of $15,303,487 at December 31, 2023. These factors raise substantial doubt as to our ability to continue as a going concern, and our independent registered public accounting firm has included a going concern uncertainty explanatory paragraph in their report for 2023.

Current wording

We have a history of operating losses and negative cash flow in operating activities. We have incurred recurring net losses, including net losses from operations before income taxes of $4.8 million and $4.7 million for the years ended December 31, 2024 and 2023, respectively. We used $3.5 million and $3.2 million cash for operating activities during the years ended December 31, 2024 and 2023, respectively. These factors raise substantial doubt as to our ability to continue as a going concern, and our independent registered public accounting firm has included a going concern explanatory paragraph in our audit report for 2024.

Previous wording

To support our existing and planned business model, the Company needs to raise additional capital to fund our future operations. The Company has not experienced any difficulty in raising funds through loans, and has not experienced any liquidity problems in settling payables in the normal course of business and repaying loans when they fall due. Successful renewal of our loans, however, is subject to numerous risks and uncertainties. In addition, the increasingly competitive industry conditions under which we operate may negatively impacted our results of operations and cash flows. Additional debt financing is anticipated to fund the Company’s operations in near future. However, there are no current agreements or understandings with regard to the form, time or amount of such financing and there is no assurance that any of this financing can be obtained or that the Company can continue as a going concern.

Current wording

To support our existing and planned business model, we need to raise additional capital to fund our future operations. We have not experienced any difficulty in raising funds through loans, and have not experienced any liquidity problems in settling payables in the normal course of business and repaying loans when they fall due. Successful renewal of our loans, however, is subject to numerous risks and uncertainties. In addition, the increasingly competitive industry conditions under which we operate may negatively impacted our results of operations and cash flows. Additional financing is anticipated to fund our operations in near future. However, other than the ELOC Agreement and the Arena Debenture Transaction, there are no current agreements or understandings with regard to the form, time or amount of such financing and there is no assurance that any of this financing can be obtained or that we can continue as a going concern.

Previous wording

Net cash used in operating activities during the year ended December 31, 2022 was approximately $3.3 million, which resulted from net loss of $3.5 million, non-cash charges of $441,000 for stock compensation, $21,000 for operating lease and $210,616 for depreciation, and net cash outflows of $415,000 from changes in operating assets and liabilities.

Current wording

Net cash used in operating activities during the year ended December 31, 2024 was approximately $3.5 million, which resulted from net loss of $4.8 million, non-cash charges of $0.8 million for stock compensation, and $0.4 million for depreciation, and net cash inflows of $0.2 million from changes in operating assets and liabilities.

Previous wording

Net cash used in operating activities during the year ended December 31, 2023 was approximately $2.8 million, which resulted from net loss of $3.7 million, non-cash charges of $285,000 for stock compensation, $272,000 for operating lease and $262,000 for depreciation, and net cash outflows of $388,000 from changes in operating assets and liabilities.

Current wording

Net cash used in operating activities during the year ended December 31, 2023 was approximately $3.2 million, which resulted from net loss of $4.7 million, non-cash charges of $0.3 million for stock compensation, $0.3 million for operating lease and $0.3 million for depreciation, and net cash inflows of $0.7 million from changes in operating assets and liabilities.

Previous wording

Net cash used in investing activities for the year ended December 31, 2023 and 2022 was $1,019,353 and $681,531, respectively, These expenditures in each period are primarily related to purchases of property and equipment in connection with current and future location openings and maintaining our existing locations.

Current wording

Net cash used in investing activities for the years ended December 31, 2024 and 2023 was $1.0 million and $2.4 million, respectively. These expenditures in each period are primarily related to purchases of property and equipment in connection with current and future location openings and maintaining our existing locations.

Previous wording

Net cash provided by financing activities during the year ended December 31, 2023 was $1.5 million, which was primarily a proceeds from the credit line and loans.

Current wording

Net cash provided by financing activities during the year ended December 31, 2024 was $4.4 million, which was primarily due to proceeds from issuances of common stock and off-set by repayments of loans payable. Net cash provided by financing activities during the year ended December 31, 2023 was $2.7 million, which was primarily from proceeds from the credit line and loans.

Previous wording

On May 16, 2020, the Company executed the EIDL Loan from the SBA under its EIDL assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. As of December 31, 2023, the loan payable, EIDL Loan noted above is not in default.

Current wording

On May 16, 2020, we executed the EIDL Loan from the SBA under its EIDL assistance program in light of the impact of the COVID-19 pandemic on our business. As of December 31, 2024, the loan payable, EIDL Loan noted above is not in default.

Previous wording

Pursuant to the SBA Loan Agreement, the Company borrowed an aggregate principal amount of the EIDL Loan of $500,000, with proceeds to be used for working capital purposes. Interest accrues at the rate of 3.75% per annum and will accrue only on funds actually advanced from the date of each advance. Installment payments, including principal and interest, are due monthly beginning May 16, 2021 (twelve months from the date of the SBA Loan Agreement) in the amount of $731. The balance of principal and interest is payable thirty years from the date of the SBA Loan. In connection therewith, the Company also received a $10,000 grant, which does not have to be repaid. During the year ended December 31, 2020, $10,000 was recorded in Economy injury disaster loan (EIDL) grant income in the Statements of Operations. The schedule of payments on this loan was later deferred to commence 24 months from the date of loan and the Company had paid the payments since May 2022.

Current wording

Pursuant to the SBA Loan Agreement, we borrowed an aggregate principal amount of the EIDL Loan of $500,000, with proceeds to be used for working capital purposes. Interest accrues at the rate of 3.75% per annum and will accrue only on funds actually advanced from the date of each advance. Installment payments, including principal and interest, are due monthly beginning May 16, 2021 (twelve months from the date of the SBA Loan Agreement) in the amount of $731. The balance of principal and interest is payable thirty years from the date of the SBA Loan. In connection therewith, we also received a $10,000 grant, which does not have to be repaid. During the year ended December 31, 2020, $10,000 was recorded in Economy injury disaster loan (EIDL) grant income in the Statements of Operations. The schedule of payments on this loan was later deferred to commence 24 months from the date of loan and we have paid the payments since May 2022.

Previous wording

In connection therewith, the Company executed (i) a loan for the benefit of the SBA, which contains customary events of default and (ii) a Security Agreement, granting the SBA a security interest in all tangible and intangible personal property of the Company, which also contains customary events of default (the “SBA Security Agreement”).

Current wording

In connection therewith, we executed (i) a loan for the benefit of the SBA, which contains customary events of default and (ii) a Security Agreement, granting the SBA a security interest in all of our tangible and intangible personal property, which also contains customary events of default (the “SBA Security Agreement”).

Previous wording

In May 2020, the Company secured a loan under the PPP administered by the SBA in the amount of $115,000. In February 2021, the Company secured a second loan under this program in the amount of approximately $167,000. The interest rate of the loan is 1.00% per annum and accrues on the unpaid principal balance computed on the basis of the actual number of days elapsed in a year of 360 days. Commencing seven months after the effective date of each PPP Loan, the Company is required to pay the Lender equal monthly payments of principal and interest as required to fully amortize any unforgiven principal balance of the loan by the two-year anniversary of the effective date of the loan. The PPP Loan contains customary events of default relating to, among other things, payment defaults, making materially false or misleading representations to the SBA or the Lender, or breaching the terms of the PPP Loan. The occurrence of an event of default may result in the repayment of all amounts outstanding under the PPP Loan, collection of all amounts owing from the Company, or filing suit and obtaining judgment against the Company. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of the loan granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. Recent modifications to the PPP by the U.S. Treasury and Congress have extended the time period for loan forgiveness beyond the original eight-week period, making it possible for the Company to apply for forgiveness of its PPP loan. The Company was granted forgiveness for the initial PPP Loan prior to December 31, 2021.

Current wording

In May 2020, we secured a loan under the PPP administered by the SBA in the amount of $115,000. In February 2021, we secured a second loan under this program in the amount of approximately $167,000. The interest rate of the loan is 1.00% per annum and accrues on the unpaid principal balance computed on the basis of the actual number of days elapsed in a year of 360 days. Commencing seven months after the effective date of each PPP Loan, we are required to pay the Lender equal monthly payments of principal and interest as required to fully amortize any unforgiven principal balance of the loan by the two-year anniversary of the effective date of the loan. The PPP Loan contains customary events of default relating to, among other things, payment defaults, making materially false or misleading representations to the SBA or the Lender, or breaching the terms of the PPP Loan. The occurrence of an event of default may result in the repayment of all amounts outstanding under the PPP Loan, collection of all amounts we owe, or filing suit and obtaining judgment against us. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of the loan granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. Recent modifications to the PPP by the U.S. Treasury and Congress have extended the time period for loan forgiveness beyond the original eight-week period, making it possible for us to apply for forgiveness of our PPP loan. The Company was granted forgiveness for the initial PPP Loan prior to December 31, 2021.

Previous wording

Reborn files income tax returns in the U.S. federal and California state jurisdictions.

Current wording

We file income tax returns in the U.S. federal and California state jurisdictions. We also file income tax returns in South Korea and Malaysia related to our subsidiaries located in those countries. Income taxes in South Korea and Malaysia is not material.