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What changed in Reborn Coffee, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Reborn Coffee, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+269 added−243 removedSource: 10-K (2025-03-31) vs 10-K (2024-03-28)

Top changes in Reborn Coffee, Inc.'s 2024 10-K

269 paragraphs added · 243 removed · 176 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeKim and his team launched Reborn Coffee with the vision of using the finest pure ingredients and pristine water. We serve customers through our retail store locations in Southern California: Brea, La Crescenta, Huntington Beach, Corona Del Mar, Arcadia, Laguna Woods, Riverside, San Francisco, Cabazon, Manhattan Beach, two locations in Irvine, Diamond Bar and Anaheim with one location in development.
Biggest changeWe serve customers through our retail store locations in Southern California: Brea, La Crescenta, Huntington Beach, Corona Del Mar, Laguna Woods, Riverside, Manhattan Beach, Irvine, Diamond Bar and Anaheim. In addition to the locations in the United States, we have two international locations in South Korea and Malaysia. As of December 31, 2024, all of our 12 locations were company-operated.
Item 1. Business Corporate History and Background Reborn Coffee, Inc. (“Reborn”) was incorporated in the State of Florida in January 2018. In July 2022, Reborn was migrated from Florida to Delaware, and filed a certificate of incorporation with the Secretary of State of the State of Delaware having the same capitalization structure as the Florida predecessor entity.
Item 1. Business Corporate History and Background Reborn Coffee, Inc. (“Reborn”) was incorporated in the State of Florida in January 2018. In July 2022, Reborn migrated was from Florida to Delaware, and filed a certificate of incorporation with the Secretary of State of the State of Delaware having the same capitalization structure as the Florida predecessor entity.
Other members of our executive leadership team bring high growth, franchise and sector expertise. Our Commitment to Our Team Reborn Coffee believes in mentoring the developing the next generation of premium coffee baristas. Through our in-depth training, we aim to train dedicated employees who understand the science and art behind every cup of coffee.
Other members of our executive leadership team bring high growth, franchise and sector expertise. Our Commitment to Our Team Reborn Coffee believes in mentoring the developing the next generation of premium coffee baristas. Through our in-depth training, we aim to train dedicated employees who understand science and art behind every cup of coffee.
Reborn Coffee plans to expand not only by growing its retail location footprint, but also through the development of more hotel partnerships, expansion into grocery stores and markets, expansion of our e-commerce and wholesale. Reborn Coffee believes the grocery market is another major channel through which we expect to access.
Reborn Coffee plans to expand not only by growing its retail location footprint, but also through the development of more hotel partnerships, expansion into grocery stores and markets, and expansion of our e-commerce and wholesale. Reborn Coffee believes the grocery market is another major channel through which we expect to access.
We have increased roasting capacity and our paper goods supplies, including an emphasis on eco-friendly products. B2B Strategy Reborn Coffee products are unique given their potential to engage with business partners for large wholesale orders. Currently, Reborn Coffee builds strong relationships with hotel management companies within California and out-of-state.
We have increased roasting capacity and our paper goods supplies, including an emphasis on eco-friendly products. 6 B2B Strategy Reborn Coffee products are unique given their potential to engage with business partners for large wholesale orders. Currently, Reborn Coffee builds strong relationships with hotel management companies within California and out-of-state.
Yelp advertising is also used to engage local customers and tourists who visit specific areas where Reborn Coffee retail locations are located. 5 In-Person Marketing Engagement Engaging customers in-store with a marketing plan is essential for customer retention and new customer generation. Reborn Coffee’s customer loyalty program provides free drinks for every 10 drinks purchased.
Yelp advertising is also used to engage local customers and tourists who visit specific areas where Reborn Coffee retail locations are located. In-Person Marketing Engagement Engaging customers in-store with a marketing plan is essential for customer retention and new customer generation. Reborn Coffee’s customer loyalty program provides free drinks for every 10 drinks purchased.
The distribution of coffee samples has expanded customers’ knowledge of our products and, led to increased contributing to whole bean sales. Reborn Coffee locations are located in heavily trafficked areas as well as popular malls. As such, the potential for marketing and branding is very high in these locations.
The distribution of coffee samples has expanded customers’ knowledge of our products and led to increased contributions to whole bean sales. Reborn Coffee locations are located in heavily trafficked areas as well as popular malls. As such, the potential for marketing and branding is very high in these locations.
In addition, the Company had agreed to issue to the representative of the several underwriters warrants to purchase the number of shares of common stock in the aggregate equal to five percent (5%) of the shares of common stock to be issued and sold in the IPO.
In addition, we had agreed to issue to the representative of the several underwriters warrants to purchase the number of shares of common stock in the aggregate equal to five percent (5%) of the shares of common stock to be issued and sold in the IPO.
Reborn Coffee Franchise does not have any franchisee as of December 31, 2023. ● Reborn Realty, LLC (the “Reborn Realty”), a California limited liability corporation formed in March 2023, is an entity which acquired a real property located at 596 Apollo Street, Brea, California.
Reborn Coffee Franchise does not have any franchisee as of December 31, 2024. ● Reborn Realty, LLC (the “Reborn Realty”), a California limited liability corporation formed in March 2023, is an entity which acquired a real property located at 596 Apollo Street, Brea, California. ● Reborn Coffee Korea, Inc.
The warrants are exercisable for a price per share equal to 125% of the public offering price. No over-allotment option or representative’s warrants have been exercised. On August 12, 2022, the Company’s stock began trading on the Nasdaq Capital Market under the symbol “REBN”.
The warrants are exercisable for a price per share equal to 125% of the public offering price. No over-allotment option or representative’s warrants have been exercised. On August 12, 2022, our common stock began trading on the Nasdaq Capital Market under the symbol “REBN”.
Net proceeds from the IPO was approximately $6.2 million after deducting underwriting discounts and commissions and other offering expenses of approximately $998,000. The Company had granted the underwriters a 45-day option to purchase up to 216,000 additional shares (equal to 15% of the shares of common stock sold in the offering) to cover over-allotments.
Net proceeds from the IPO were approximately $6.2 million after deducting underwriting discounts and commissions and other offering expenses of approximately $998,000. We had granted the underwriters a 45-day option to purchase up to 216,000 additional shares (equal to 15% of the shares of common stock sold in the offering) to cover over-allotments.
Reborn Coffee, Inc., Reborn Global Holdings, Inc., Reborn Coffee Franchise, LLC, and Reborn Realty, LLC will be collectively referred as the “Company”. In August 2022, the Company consummated its initial public offering (the “IPO”) of 1,440,000 shares of its common stock at a public offering price of $5.00 per share, generating gross proceeds of $7,200,000.
Reborn Coffee, Inc., Reborn Global Holdings, Inc., Reborn Coffee Franchise, LLC, Reborn Realty, LLC, Reborn Korea and Reborn Malaysia will be collectively referred as the “Company”. In August 2022, we consummated our initial public offering (the “IPO”) of 1,440,000 shares of our common stock at a public offering price of $5.00 per share, generating gross proceeds of $7,200,000.
We believe that the retail coffee market in the US is large and growing. According to IBIS, in 2023, the retail market for coffee in the United States is expected to be $48.7 billion. This is expected to grow due to a shift in consumer preferences to premium coffee, including specialized blends, espresso-based beverages, and cold brew options.
We believe that the retail coffee market in the US is large and growing. According to IBIS, in 2025, the retail market for coffee in the United States is expected to be $74.3 billion. This is expected to grow due to a shift in consumer preferences to premium coffee, including specialized blends, espresso-based beverages, and cold brew options.
The Company plans to charge future franchisees a non-refundable franchise fee and certain marketing and royalty fees based on gross sales, however we presently have no contractual commitments or other agreements to do so. We expect to begin franchise sales in 2024.
We plan to charge future franchisees a non-refundable franchise fee and certain marketing and royalty fees based on gross sales, however we presently have no contractual commitments or other agreements to do so. We expect to begin franchise sales in 2025.
Social media is an important leg that creates engagement and education of Reborn Coffee’s brand. Customers primarily engage the brand on Instagram, where we host giveaways, share new store openings, and promote seasonal menus.
Digital Channels Reborn Coffee focuses on many digital channels in its marketing strategy. Social media is an important leg that creates engagement and education of Reborn Coffee’s brand. Customers primarily engage the brand on Instagram, where we host giveaways, share new store openings, and promote seasonal menus.
Information contained on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K, and you should not consider information on our website to be part of this Annual Report on Form 10-K.
Our telephone number is (714) 784-6369. Our website address is http://www.reborncoffee.com. Information contained on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K, and you should not consider information on our website to be part of this Annual Report on Form 10-K.
Reborn Coffee’s continuous Research and Development is essential to developing new parameters in the production of new blends. Our first place position in “America’s Best Cold Brew” competition by Coffee Fest in 2017 in Portland and 2018 in Los Angeles is a testament to the way we believe we lead the “fourth wave” movement by example.
Our first place position in “America’s Best Cold Brew” competition by Coffee Fest in 2017 in Portland and 2018 in Los Angeles is a testament to the way we believe we lead the “fourth wave” movement by example.
We meet with coffee farmers, test coffee bean samples, and roast the beans in our headquarters in Southern California. ● Service. Reborn Coffee provides the highest quality service to our customers.
Since our founding, we have focused on delivering: ● Quality. Reborn Coffee sources the highest quality whole beans globally. We meet with coffee farmers, test coffee bean samples, and roast the beans in our headquarters in Southern California. ● Service. Reborn Coffee provides the highest quality service to our customers.
We also expect to form a training school specializing in creating passionate baristas and coffee connoisseurs, by educating its students about coffee processes and preparation methods. The efforts for the training school are underway and we expect to launch the program in 2024.
We also expect to form a training school specializing in creating passionate baristas, coffee connoisseurs, and future franchisee by educating its students about coffee processes and preparation methods.
Through both bulk sales of roasted beans and in-store kiosks, as well sales of pre-packaged products, Reborn Coffee will access customers who purchase both in volume and for those customers looking for a handcrafted beverage during their in-store shopping experience.
Through both bulk sales of roasted beans and in-store kiosks, as well sales of pre-packaged products, Reborn Coffee will access customers who purchase both in volume and for those customers looking for a handcrafted beverage during their in-store shopping experience. Corporate Information Our principal executive offices are located at 580 N. Berry Street, Brea, CA 92821.
A portion of the roasted coffee is also allotted to create our award-winning cold brew concentrate. Our cold brew production is created using a proprietary percolation technique, also using magnetized water at each step to enhance the flavor of the cold brew. We continually innovate in the way we serve coffee.
Our cold brew production is created using a proprietary percolation technique, also using magnetized water at each step to enhance the flavor of the cold brew. We continually innovate in the way we serve coffee. At our cafes, we serve customers our award-winning coffee through cold brew taps in addition to freshly ground coffee beans in espresso-made drinks.
After the wash, we roast our washed-green beans based on the profile of each single-origin. After the coffee beans are roasted, they are then packaged into various products such as whole bean coffee, pour over packs, and cold brew packs. Additionally, whole bean inventory is also supplied to the kiosk and cafes.
After the coffee beans are roasted, they are then packaged into various products such as whole bean coffee, pour over packs, and cold brew packs. Additionally, whole bean inventory is also supplied to the kiosk and cafes. A portion of the roasted coffee is also allotted to create our award-winning cold brew concentrate.
Our success in innovating within the “fourth wave” coffee movement is measured by our success in B2B sales with our introduction of Reborn Coffee Pour Over Packs to hotels. With the introduction of our Pour Over Packs to major hotels, our B2B sales increased as these companies recognized the convenience and functionality our Pour Over Packs serve to their customers.
With the introduction of our Pour Over Packs to major hotels, our B2B sales increased as these companies recognized the convenience and functionality our Pour Over Packs serve to their customers. Reborn Coffee’s continuous Research and Development is essential to developing new parameters in the production of new blends.
Our Wash Process is distinguished by the use of magnetized water to wash our green coffee beans when they arrive at the Reborn facility, in order to extract impurities and enhance hydration before the roasting process. Magnetizing water is a process that converts the particles of water, which can naturally appear in various sizes, into evenly sized particles.
Differentiated from other coffee companies, the Reborn Wash Process is the key to creating the clean flavor of our coffee. Our Wash Process is distinguished by the use of magnetized water to wash our green coffee beans when they arrive at the Reborn facility, in order to extract impurities and enhance hydration before the roasting process.
We further engage with the community by organizing our own latte art competitions, in which baristas can compete for prizes and customers in the audience can witness the competitive passion Reborn Coffee encompasses. Digital Channels Reborn Coffee focuses on many digital channels in its marketing strategy.
We have also hosted pop-up locations on the Facebook campus, further expanding our outreach and introducing our brand name to different communities. We further engage with the community by organizing our own latte art competitions, in which baristas can compete for prizes and customers in the audience can witness the competitive passion Reborn Coffee encompasses.
As a result of this process, we believe that the water increases its hydration and ability to absorb into organic material. Our water is created through a water magnetizing device in which water is flowed through the device and magnetizes the water on-site immediately prior to use.
Magnetizing water is a process that converts the particles of water, which can naturally appear in various sizes, into evenly sized particles. As a result of this process, we believe that the water increases its hydration and ability to absorb into organic material.
Our Highly Engaged Customers Reborn Coffee customers are loyal to our brand due to our intense focus on premium coffee and customer service. Community engagement is another essential element of Reborn Coffee’s in-person marketing strategy. Reborn hosts on-site engagements, such as event sponsorships, and engages with local Chambers of Commerce.
The efforts for the training school are underway and we expect to launch the program in 2025. 5 Our Highly Engaged Customers Reborn Coffee customers are loyal to our brand due to our intense focus on premium coffee and customer service. Community engagement is another essential element of Reborn Coffee’s in-person marketing strategy.
Previously, we have worked with Lululemon to host yoga sessions outside of our retail locations, creatively engaging the community while simultaneously promoting Reborn as an active lifestyle. We have also hosted pop-up locations on the Facebook campus, further expanding our outreach and introducing our brand name to different communities.
Reborn hosts on-site engagements, such as event sponsorships, and engages with local Chambers of Commerce. Previously, we have worked with Lululemon to host yoga sessions outside of our retail locations, creatively engaging the community while simultaneously promoting Reborn as an active lifestyle.
Our Menu and Products We purchase and roast high-quality coffees that we sell, along with handcrafted coffee, tea and other beverages and a variety of high-quality food items. We believe in offering customers the same great taste and quality whether served in store or on the go.
All of our products aim to make customers feel “reborn” through quality, service, and innovation. Our Menu and Products We purchase and roast high-quality coffees that we sell, along with handcrafted coffee, tea and other beverages and a variety of high-quality food items.
Arabia beans are considered premier due to the specific requirements for growth and the high-quality flavor they produce. Arabica coffee is required to be grown in higher, cooler elevations in regions. 1 Differentiated from other coffee companies, the Reborn Wash Process is the key to creating the clean flavor of our coffee.
Single-origin beans can focus on specific countries and can also have hyper-focused on specific regions in the third wave of coffee, such as Coban in Guatemala. Arabia beans are considered premier due to the specific requirements for growth and the high-quality flavor they produce. Arabica coffee is required to be grown in higher, cooler elevations in regions.
We also partner with third-party importers and exporters to purchase and import our green coffee beans.
We believe in offering customers the same great taste and quality whether served in store or on the go. We also partner with third-party importers and exporters to purchase and import our green coffee beans.
In the first and second waves of coffee, the single-origin source and type of the coffee is not necessarily in the forefront during the sourcing process. As such, much of the coffee may be a blend with various sources and a mix of Robusta and Arabica coffee beans.
As such, much of the coffee may be a blend with various sources and a mix of Robusta and Arabica coffee beans. The third wave of coffee focuses on a single-origin source and one variety of coffee bean (specifically Arabica beans).
Our Company Reborn Coffee is a high growth operator and franchisor of retail locations and kiosks that focus on serving high quality, specialty-roasted coffee. 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 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.
We consider ourselves leaders of the “fourth wave” coffee movement because we are constantly developing our bean processing methods, researching design concepts, and reinventing new ways of drinking coffee. For instance, the current transition from the K-Cup trend to the pour over drip concept allowed us to reinvent the way people consume coffee, by merging convenience and quality.
For instance, the current transition from the K-Cup trend to the pour over drip concept allowed us to reinvent the way people consume coffee, by merging convenience and quality. We took the pour over drip concept and made it available and affordable to the public through our Reborn Coffee Pour Over packs.
The Reborn brand is essential to our marketing strategy, as it allows us to stand out compared to our competitors. The products aim to make customers feel “reborn” after drinking a cup of coffee.
Whether customers visit us for a specialty pour over, a matcha latte, or a fresh pastry, the Reborn brand aims to deliver a moment of rejuvenation and enjoyment. The Reborn Coffee brand is essential to our marketing strategy, as it allows us to stand out compared to our competitors.
At our cafes, we serve customers our award-winning coffee through cold brew taps in addition to freshly ground coffee beans in espresso-made drinks. Other brew methods, such as an in-house pour over and drip coffee, are also available. In 2015 Jay Kim, our Chief Executive Officer, founded Reborn Coffee. Mr.
Other brew methods, such as an in-house pour over and drip coffee, are also available. In 2015 Jay Kim, our Chief Executive Officer, founded Reborn Coffee. Mr. Kim and his team launched Reborn Coffee with the vision of using the finest pure ingredients and pristine water.
Expanding Sales Channels Today, we sell a variety of our coffee and tea products through the enterprise, or commercial, channel, which we refer to as “B2B”, as well as direct-to-consumer via our website.
Expanding Sales Channels Today, we sell a variety of our coffee and tea products through both enterprise (B2B) and direct-to-consumer (DTC) channels. Our B2B efforts focus on supplying premium coffee and tea products to hotels, offices, and hospitality groups.
Reborn aims to capture a growing portion of the market as we expand and increase consumer awareness of our brand.
We aim to capture a growing portion of the market as we expand and increase consumer awareness of our brand. Branding Reborn Coffee focuses on three key features in our branding: “Introducing the Fourth Wave,” “America’s Best Cold Brew,” and our newly launched “Tea and Bakery” concept.
Our retail locations generated AUV of approximately $458,000 in 2023. As we expand our retail footprint and improve customer awareness, we expect our AUV to grow. Franchise Operations In January 2021, the Company formed Reborn Coffee Franchise LLC in the State of California in order to begin franchising Reborn Coffee retail stores and kiosks.
Our stores feature patios, modern design, and inviting interiors that encourage customers to socialize, study, or work. As of December 31, 2024, we operated 12 corporate-owned retail locations across California. Franchise Operations In January 2021, we formed Reborn Coffee Franchise LLC in the State of California in order to begin franchising Reborn Coffee retail stores and kiosks.
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. The source of coffee is pinnacle to specialty coffee. The coffee industry has gone through various phases including the first, second, third and fourth wave.
The source of coffee is pinnacle to specialty coffee. The coffee industry has gone through various phases including the first, second, third and fourth wave. In the first and second waves of coffee, the single-origin source and type of the coffee is not necessarily in the forefront during the sourcing process.
We took the pour over drip concept and made it available and affordable to the public through our Reborn Coffee Pour Over packs. Our Pour Over Packs allow our consumers to consume our specialty coffee outdoors and on-the-go.
Our Pour Over Packs allow our consumers to consume our specialty coffee outdoors and on-the-go. 2 Our success in innovating within the “fourth wave” coffee movement is measured by our success in B2B sales with our introduction of Reborn Coffee Pour Over Packs to hotels.
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The third wave of coffee focuses on a single-origin source and one variety of coffee bean (specifically Arabica beans). Single-origin beans can focus on specific countries and can also have hyper-focused on specific regions in the third wave of coffee, such as Coban in Guatemala.
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(the “Reborn Korea”) – a Korea corporation located in Daejeon, South Korea formed in October 2023, is a wholly owned subsidiary of Reborn Holdings with one retail coffee store under the brand name of Reborn Coffee. ● Reborn Malaysia, Inc.
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We expect to continue to develop additional retail locations. In 2023, we opened up 2 retail locations, Diamond Bar and Anaheim, California and currently are developing a location in Pasadena, California. As evidence of our success, we received 1st place traditional still in “America’s Best Cold Brew” competition by Coffee Fest in 2017 in Portland and 2018 in Los Angeles.
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(the “Reborn Malaysia”) – a Malaysian corporation located in Kuala Lumpur, Malaysia formed in October 2023, is majority owned subsidiary, with 60% ownership, of Reborn Holdings with one retail coffee store under the brand name of Reborn Coffee.
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As of December 31, 2023, all of our 14 locations were company-operated. Our retail locations, which opened through whole year of 2023, generated AUV of approximately $458,000.
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On January 12, 2024, we filed a Certificate of Amendment to our Certificate of Incorporation to effect a reverse stock split of our issued common stock in the ratio of 1-for-8 (the “Reverse Stock Split”). Our common stock began trading on the Nasdaq Capital Market on a Reverse Stock Split-adjusted basis at the market open on Monday, January 22, 2024.
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In 2023, we generated approximately $6.0 million of revenue, $4.0 million of net loss, a net loss margin of -67.1%, and approximately -$3.6 million of Adjusted EBITDA, a non-GAAP financial measure, resulting in an Adjusted EBITDA margin, a non-GAAP financial measure, of -61.0%.
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Except for our historical financial statements and unless otherwise stated, all option, share, and per share information in this Annual Report on Form 10-K gives effect to the Reverse Stock Split. 1 Our Company We are a high growth operator and franchisor of retail locations and kiosks that focus on serving high quality, specialty-roasted coffee.
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In 2022, we generated approximately $3.2 million of revenue, $3.6 million of net loss, a net loss margin of –109.7%, and approximately -$3.3 million of Adjusted EBITDA, a non-GAAP financial measure, resulting in an Adjusted EBITDA margin, a non-GAAP financial measure, of -102.8%.
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Our water is created through a water magnetizing device in which water is flowed through the device and magnetizes the water on-site immediately prior to use. After the wash, we roast our washed-green beans based on the profile of each single-origin.
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A reconciliation of net income to EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin is provided below: Years ended December 31, 2023 2022 Total net revenue, as reported $ 5,953,986 $ 3,240,523 Loss from operations, as reported $ (3,878,078 ) $ (3,540,542 ) Operating margin -65.1 % -109.3 % Net loss, as reported $ (3,997,686 ) $ (3,554,897 ) Interest, net 129,480 29,195 Taxes 800 1,600 Depreciation and amortization 245,064 210,616 EBITDA (3,622,342 ) (3,313,486 ) Other expense (income) 6,283 (16,440 ) Gain on the sale of a building (16,955 ) - Adjusted EBITDA $ (3,633,014 ) $ (3,329,926 ) Adjusted EBITDA margin -61.0 % -102.8 % 2 The Experience, Reborn As leading pioneers of the emerging “Fourth Wave” movement, Reborn Coffee is redefining specialty coffee as an experience that demands much more than premium quality.
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The Experience, Reborn As leading pioneers of the emerging “Fourth Wave” movement, Reborn Coffee is redefining specialty coffee as an experience that demands much more than premium quality. We consider ourselves leaders of the “fourth wave” coffee movement because we are constantly developing our bean processing methods, researching design concepts, and reinventing new ways of drinking coffee.
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Branding Reborn Coffee focuses on two key features in our branding, including “Introducing the Fourth Wave” and “America’s Best Cold Brew.” These phrases encapsulate the quality of the Reborn Process of sourcing, washing, roasting, and brewing coffee and the quality of the product that we create.
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These elements encapsulate the quality of the Reborn Coffee Process—from sourcing, washing, roasting, and brewing coffee to our growing selection of handcrafted tea offerings and artisanal baked goods. The addition of premium teas and bakery products complements our coffee program and expands the Reborn experience into a more complete and versatile lifestyle brand.
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We expect to increase our channel presence by increasing the availability of Reborn Coffee in businesses and enterprises, and expand upon the partnerships we have in place with hotel operators to increase the use and brand awareness in hospitality. We also expect to grow our online sales through new partnerships with third-party retailers.
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Reborn Coffee is built upon superior customer service, convenience, and a modern customer experience, as well as safe, clean, and well-maintained stores that reflect the personalities of the communities in which they operate, thereby building a high degree of customer loyalty.
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Our products are available in various form factors, such as whole bean roasted coffee bags, single-serve drip bags, and pour over packs. We are exploring partnerships with grocery operators and foodservice providers to expand the Reborn Coffee brand.
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Our strategy for expanding our retail business is to aggressively increase our market share by opening additional stores in both new and existing markets, while also driving sales growth at our current locations. The pace of store development in each market is guided by factors such as expected financial returns, market maturity, economic conditions, consumer trends, and local business environments.
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Our brand experience has enabled strong growth and financial performance. Revenue grew from $3.2 million in the 12 months ended December 31, 2022, to $6.0 million in the 12 months ended December 31, 2023.
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Our highly efficient retail stores and kiosks prioritize customer convenience without sacrificing personalization or quality. Most new locations are between 800 to 1,500 square feet and situated in upscale shopping plazas or key urban centers. We often target spaces vacated by larger national coffee chains, enabling us to remodel purpose-built stores and open quickly in high-traffic areas with pre-existing demand.
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We continue to accelerate the pace of new “corporate-owned” (i.e., directly owned by Reborn) stores openings and intend to operate over 20 corporate-owned locations and 10 franchised locations by year end 2024. 4 Since our founding, we have focused on delivering: ● Quality. Reborn Coffee sources the highest quality whole beans globally.
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These strategic decisions support customer conversion by delivering a specialty coffee experience that was previously unavailable in the area. In addition to coffee, we are rolling out a Tea and Bakery concept that integrates seamlessly with our retail footprint, enhancing dwell time, increasing average ticket size, and diversifying our product mix.
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We are exploring discussions with a variety of retailers and expect to access these additional sales channels in 2023. 6 Corporate Information Our principal executive offices are located at 580 N. Berry Street, Brea, CA 92821. Our telephone number is (714) 784-6369. Our website address is http://www.reborncoffee.com.
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In 2024, we expanded our partnerships with hotel operators nationwide, enhancing brand presence in the hospitality sector through bulk ordering and custom offerings like pour over packs and cold brew. 4 On the consumer side, we have significantly expanded our online sales presence, including through Amazon, our own reborncoffee.com platform, and third-party retailers.
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Amazon has become a key growth channel for our packaged products, supported by digital marketing and logistics optimization. Our products are now available in multiple forms, such as whole bean roasted coffee bags, single-serve drip bags, pour over packs, and cold brew concentrates.
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We are also in discussions with grocery chains and foodservice distributors to increase retail availability, including shelf-ready products and kiosk-style formats. As part of our 2025 growth strategy, we plan to further scale both B2B and DTC distribution, supported by targeted ad campaigns, customized B2B outreach, and expanded fulfillment capabilities.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeBecause the purchase price per share to be paid by YA Fund for the shares of common stock that we may elect to sell to YA Fund under the PPA, if any, will fluctuate based on the market prices of our common stock, if any, it is not possible for us to predict, as of the date of this report and prior to any such sales, the number of shares of common stock that we will sell to YA Fund under the PPA, the purchase price per share that YA Fund will pay for shares purchased from us under the PPA, or the aggregate gross proceeds that we will receive from those purchases by YA Fund under the PPA, if any.
Biggest changeThe purchase price per share for the shares of common stock that we may elect to sell to Arena under the ELOC Agreement will fluctuate based on the market prices of our common stock for each purchase made pursuant to the ELOC Agreement, if any.
As a public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations of the applicable listing standards of the Nasdaq Exchange.
As a public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations of the applicable listing standards of Nasdaq.
Our quarterly and annual financial results may fluctuate due to a variety of factors, many of which are outside of our control and may be difficult to predict, including, but not limited to: ● the level of demand for our products; ● our ability to grow or maintain our dollar-based net retention rate, expand usage within organizations, and sell subscriptions; ● the timing and success of new features, integrations, capabilities, and enhancements by us to our products, or by our competitors to their products, or any other changes in the competitive landscape of our market; ● our ability to achieve widespread acceptance and use of our products; ● errors in our forecasting of the demand for our products, which would lead to lower revenue, increased costs, or both; ● security breaches, technical difficulties, or interruptions to our systems; ● pricing pressure as a result of competition or otherwise; ● the continued ability to hire high quality and experienced talent in a fiercely competitive environment; ● the timing of the grant or vesting of equity awards to employees, directors, or consultants; ● declines in the values of foreign currencies relative to the U.S. dollar; ● changes in, and continuing uncertainty in relation to, the legislative or regulatory environment; ● legal and regulatory compliance costs in new and existing markets; ● costs and timing of expenses related to the potential acquisition of businesses, talent, technologies, or intellectual property, including potentially significant amortization costs and possible write-downs; ● environmental matters, such as wildfires, and health epidemics, such as the COVID-19 pandemic, influenza, and other highly communicable diseases or viruses; ● adverse litigation judgments, other dispute-related settlement payments, or other litigation-related costs; and ● general economic conditions in either domestic or international markets, including geopolitical uncertainty and instability and their effects on beverage purchases.
Our quarterly and annual financial results may fluctuate due to a variety of factors, many of which are outside of our control and may be difficult to predict, including, but not limited to: ● the level of demand for our products; ● our ability to grow or maintain our dollar-based net retention rate, expand usage within organizations, and sell subscriptions; ● the timing and success of new features, integrations, capabilities, and enhancements by us to our products, or by our competitors to their products, or any other changes in the competitive landscape of our market; 33 ● our ability to achieve widespread acceptance and use of our products; ● errors in our forecasting of the demand for our products, which would lead to lower revenue, increased costs, or both; ● security breaches, technical difficulties, or interruptions to our systems; ● pricing pressure as a result of competition or otherwise; ● the continued ability to hire high quality and experienced talent in a fiercely competitive environment; ● the timing of the grant or vesting of equity awards to employees, directors, or consultants; ● declines in the values of foreign currencies relative to the U.S. dollar; ● changes in, and continuing uncertainty in relation to, the legislative or regulatory environment; ● legal and regulatory compliance costs in new and existing markets; ● costs and timing of expenses related to the potential acquisition of businesses, talent, technologies, or intellectual property, including potentially significant amortization costs and possible write-downs; ● environmental matters, such as wildfires, and health epidemics, such as the COVID-19 pandemic, influenza, and other highly communicable diseases or viruses; ● adverse litigation judgments, other dispute-related settlement payments, or other litigation-related costs; and ● general economic conditions in either domestic or international markets, including geopolitical uncertainty and instability and their effects on beverage purchases.
Our substantial debt could have important consequences to you, including the following: ● it may be difficult for us to satisfy our obligations, including debt service requirements under our outstanding debt, resulting in possible defaults on and acceleration of such indebtedness; ● our ability to obtain additional financing for working capital, capital expenditures, debt service requirements or other general corporate purposes may be impaired; ● a substantial portion of cash flow from operations may be dedicated to the payment of principal and interest on our debt, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures, future business opportunities, acquisitions and other general corporate purposes; ● we are more vulnerable to economic downturns and adverse industry conditions and our flexibility to plan for, or react to, changes in our business or industry are more limited; ● our ability to capitalize on business opportunities and to react to competitive pressures, as compared to our competitors, may be compromised due to our level of debt; and ● our ability to borrow additional funds or to refinance debt may be limited.
Our substantial debt could have important consequences to you, including the following: ● it may be difficult for us to satisfy our obligations, including debt service requirements under our outstanding debt, resulting in possible defaults on and acceleration of such indebtedness; ● our ability to obtain additional financing for working capital, capital expenditures, debt service requirements or other general corporate purposes may be impaired; 34 ● a substantial portion of cash flow from operations may be dedicated to the payment of principal and interest on our debt, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures, future business opportunities, acquisitions and other general corporate purposes; ● we are more vulnerable to economic downturns and adverse industry conditions and our flexibility to plan for, or react to, changes in our business or industry are more limited; ● our ability to capitalize on business opportunities and to react to competitive pressures, as compared to our competitors, may be compromised due to our level of debt; and ● our ability to borrow additional funds or to refinance debt may be limited.
Factors that could cause fluctuations in the trading price of our common stock include the risk factors set forth in this section as well as the following: ● price and volume fluctuations in the overall stock market from time to time; ● volatility in the trading prices and trading volumes of technology stocks; ● changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; ● sales of shares of our common stock by us or our stockholders; ● failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; ● changes in our financial, operating or other metrics, regardless of whether we consider those metrics as reflective of the current state or long-term prospects of our business, and how those results compare to securities analyst expectations, including whether those results fail to meet, exceed or significantly exceed securities analyst expectations, particularly in light of the significant portion of our revenue derived from a limited number of customers; ● announcements by us or our competitors of new products or services; ● the public’s reaction to our press releases, other public announcements, and filings with the SEC; ● rumors and market speculation involving us or other companies in our industry; ● actual or anticipated changes in our results of operations or fluctuations in our results of operations; ● actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; ● litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; 26 ● actual or perceived privacy or data security incidents; ● developments or disputes concerning our intellectual property or other proprietary rights; ● announced or completed acquisitions of businesses, applications, products, services or technologies by us or our competitors; ● new laws or regulations or new interpretations of existing laws or regulations applicable to our business; ● changes in accounting standards, policies, guidelines, interpretations or principles; ● any significant change in our management; and ● general political and economic conditions and slow or negative growth of our markets.
Factors that could cause fluctuations in the trading price of our common stock include the risk factors set forth in this section as well as the following: ● price and volume fluctuations in the overall stock market from time to time; ● volatility in the trading prices and trading volumes of technology stocks; ● changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; ● sales of shares of our common stock by us or our stockholders; ● failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; ● changes in our financial, operating or other metrics, regardless of whether we consider those metrics as reflective of the current state or long-term prospects of our business, and how those results compare to securities analyst expectations, including whether those results fail to meet, exceed or significantly exceed securities analyst expectations, particularly in light of the significant portion of our revenue derived from a limited number of customers; 29 ● announcements by us or our competitors of new products or services; ● the public’s reaction to our press releases, other public announcements, and filings with the SEC; ● rumors and market speculation involving us or other companies in our industry; ● actual or anticipated changes in our results of operations or fluctuations in our results of operations; ● actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; ● litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; ● actual or perceived privacy or data security incidents; ● developments or disputes concerning our intellectual property or other proprietary rights; ● announced or completed acquisitions of businesses, applications, products, services or technologies by us or our competitors; ● new laws or regulations or new interpretations of existing laws or regulations applicable to our business; ● changes in accounting standards, policies, guidelines, interpretations or principles; ● any significant change in our management; and ● general political and economic conditions and slow or negative growth of our markets.
Any such inability to retain or recruit qualified employees, increased costs of attracting qualified employees or delays in location openings could harm our business. Our expansion into new domestic markets may present increased risks, which could affect our profitability. We plan to open additional company-operated Reborn Coffee locations in domestic markets where we have little or no operating experience.
Any such inability to retain or recruit qualified employees, increased costs of attracting qualified employees or delays in location openings could harm our business. 12 Our expansion into new domestic markets may present increased risks, which could affect our profitability. We plan to open additional company-operated Reborn Coffee locations in domestic markets where we have little or no operating experience.
Delisting could also impair the liquidity of our common stock and could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in potential loss of confidence by investors, employees, and fewer business development opportunities. 25 Reborn Coffee, Inc. is a holding company.
Delisting could also impair the liquidity of our common stock and could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in potential loss of confidence by investors, employees, and fewer business development opportunities. Reborn Coffee, Inc. is a holding company.
Even if such unsuccessful operations do not rise to the level of breaching the related franchise documents, they may be attributed by customers to our Reborn brand and could have a negative impact on our business. Our future franchise partners may not be able to secure adequate financing to open or continue operating their Reborn Coffee locations.
Even if such unsuccessful operations do not rise to the level of breaching the related franchise documents, they may be attributed by customers to our Reborn brand and could have a negative impact on our business. 13 Our future franchise partners may not be able to secure adequate financing to open or continue operating their Reborn Coffee locations.
Our ability to manage our growth effectively will require us to continue to enhance our systems, procedures and controls and to locate, hire, train and retain management and staff, particularly in new markets which may require significant capital expenditures. Damage to our brand or reputation and negative publicity could negatively impact our business, financial condition and results of operations.
Our ability to manage our growth effectively will require us to continue to enhance our systems, procedures and controls and to locate, hire, train and retain management and staff, particularly in new markets which may require significant capital expenditures. 11 Damage to our brand or reputation and negative publicity could negatively impact our business, financial condition and results of operations.
Moreover, our privacy risks are likely to increase as we continue to expand, grow our customer base, and process, store, and transmit increasingly large amounts of personal and/or sensitive data. Pandemics or disease outbreaks such as the COVID-19 pandemic have had, and may continue to have, an effect on our business and results of operations.
Moreover, our privacy risks are likely to increase as we continue to expand, grow our customer base, and process, store, and transmit increasingly large amounts of personal and/or sensitive data. 17 Pandemics or disease outbreaks such as the COVID-19 pandemic have had, and may continue to have, an effect on our business and results of operations.
Pandemics or disease outbreaks such as the COVID-19 pandemic have impacted and are likely to continue to impact customer traffic at our Reborn locations and may make it more difficult to staff our locations and, in more severe cases, may cause a temporary inability to obtain supplies and increase commodity costs.
Pandemics or disease outbreaks such as the COVID-19 pandemic have impacted and are likely to continue to impact customer traffic at our Reborn Coffee locations and may make it more difficult to staff our locations and, in more severe cases, may cause a temporary inability to obtain supplies and increase commodity costs.
Moreover, our business may be harmed if we experience problems with any new systems and controls that result in delays in their implementation or increased costs to correct any post-implementation issues that may arise. 30 Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future.
Moreover, our business may be harmed if we experience problems with any new systems and controls that result in delays in their implementation or increased costs to correct any post-implementation issues that may arise. Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future.
Accordingly, it is not possible for us to predict the duration and extent to which this will affect our business at this time. Risks Related to Our Brand Our success depends substantially on the value of our brand and failure to preserve its value could have a negative impact on our financial results.
Accordingly, it is not possible for us to predict the duration and extent to which this will affect our business at this time. 18 Risks Related to Our Brand Our success depends substantially on the value of our brand and failure to preserve its value could have a negative impact on our financial results.
Kim’s services became unavailable to Reborn for any reason, it may be difficult or challenging for us to find an adequate replacement, which could cause us to be less successful in maintaining our culture and developing and effectively executing on our company strategies.
Kim’s services became unavailable to Reborn Coffee for any reason, it may be difficult or challenging for us to find an adequate replacement, which could cause us to be less successful in maintaining our culture and developing and effectively executing on our company strategies.
Further, if we are unable to obtain additional capital when required, or are unable to obtain additional capital on satisfactory terms, our ability to continue to support our business growth or to respond to business opportunities, challenges, or unforeseen circumstances would be adversely affected. 31 Our amended and restated articles of incorporation provide that the Court of Chancery of the State of Delaware and, to the extent enforceable, the federal district courts of the United States of America are the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Further, if we are unable to obtain additional capital when required, or are unable to obtain additional capital on satisfactory terms, our ability to continue to support our business growth or to respond to business opportunities, challenges, or unforeseen circumstances would be adversely affected. 36 Our amended and restated articles of incorporation provide that the Court of Chancery of the State of Delaware and, to the extent enforceable, the federal district courts of the United States of America are the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
To be successful in the future, particularly outside of the Southern California region of the United States where the Reborn brand may be less well known, we believe we must preserve, grow and leverage the value of our brand across interactions.
To be successful in the future, particularly outside of the Southern California region of the United States where the Reborn Coffee brand may be less well known, we believe we must preserve, grow and leverage the value of our brand across interactions.
Reborn continues to be led by our Founder, Jay Kim, who plays an important role in driving our culture, determining the strategy, and executing against that strategy across the company. If Mr.
Reborn Coffee continues to be led by our Founder, Jay Kim, who plays an important role in driving our culture, determining the strategy, and executing against that strategy across the company. If Mr.
Noncompliance could result in Adverse Data Protection Impact, including proceedings against us by governmental and regulatory entities, collaborators, individuals or others. 23 We rely on a variety of marketing techniques and practices, including email and social media marketing, online targeted advertising, and cookie-based Processing, to sell our products and services and to attract new customers, and we, and our vendors, are subject to various current and future Data Protection Laws and Data Protection Obligations that govern marketing and advertising practices.
Noncompliance could result in Adverse Data Protection Impact, including proceedings against us by governmental and regulatory entities, collaborators, individuals or others. 26 We rely on a variety of marketing techniques and practices, including email and social media marketing, online targeted advertising, and cookie-based Processing, to sell our products and services and to attract new customers, and we, and our vendors, are subject to various current and future Data Protection Laws and Data Protection Obligations that govern marketing and advertising practices.
In addition, the insurance we maintain would likely not be adequate to cover our losses resulting from disasters or other business interruptions. Item 1B. Unresolved Staff Comments None.
In addition, the insurance we maintain would likely not be adequate to cover our losses resulting from disasters or other business interruptions. 38 Item 1B. Unresolved Staff Comments None.
These matters and our efforts to address them could expose us to market, operational, reputational and execution costs or risks. 17 We may not be able to adequately protect our intellectual property, including trademarks, trade names, and service marks, which, in turn, could harm the value of our brand and adversely affect our business.
These matters and our efforts to address them could expose us to market, operational, reputational and execution costs or risks. 19 We may not be able to adequately protect our intellectual property, including trademarks, trade names, and service marks, which, in turn, could harm the value of our brand and adversely affect our business.
A judgment or other liability in excess of our insurance coverage for any claims or any adverse publicity resulting from claims could harm our business. 24 New information or attitudes regarding diet and health or adverse opinions about the health effects of consuming our menu offerings, could affect consumer preferences and negatively impact our business, financial condition and results of operations.
A judgment or other liability in excess of our insurance coverage for any claims or any adverse publicity resulting from claims could harm our business. 27 New information or attitudes regarding diet and health or adverse opinions about the health effects of consuming our menu offerings, could affect consumer preferences and negatively impact our business, financial condition and results of operations.
We cannot make any assurances regarding our ability to effectively respond to changes in consumer health perceptions or our ability to successfully implement the nutrient content disclosure requirements and to adapt our menu offerings to trends in drinking and consumption habits.
We cannot make any assurances regarding our ability to effectively respond to changes in consumer health perceptions or our ability to successfully implement the nutrient content disclosure requirements and to adapt our menu offerings to trends in drinking and consumption habits. The U.S.
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.
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 2024.
Our ability to operate new locations profitably and increase average location revenue and comparable location sales will depend on many factors, some of which are beyond our control, including: ● consumer awareness and understanding of the Reborn brand; ● general economic conditions, which can affect location traffic, local labor costs and prices we pay for the beverage and other supplies we use; ● consumption patterns and beverage preferences that differ from region to region; ● changes in consumer preferences and discretionary spending; ● difficulties obtaining or maintaining adequate relationships with distributors or suppliers in new markets; ● increases in prices for commodities, including coffee, and milk; ● inefficiency in our labor costs as the staff gains experience; ● competition, either from our competitors in the beverage industry or our own locations; ● temporary and permanent site characteristics of new locations; ● changes in government regulation; and ● other unanticipated increases in costs, any of which could give rise to delays or cost overruns. 10 If our new locations do not perform as planned or close, our business and future prospects could be harmed.
Our ability to operate new locations profitably and increase average location revenue and comparable location sales will depend on many factors, some of which are beyond our control, including: ● consumer awareness and understanding of the Reborn brand; ● general economic conditions, which can affect location traffic, local labor costs and prices we pay for the beverage and other supplies we use; 10 ● consumption patterns and beverage preferences that differ from region to region; ● changes in consumer preferences and discretionary spending; ● difficulties obtaining or maintaining adequate relationships with distributors or suppliers in new markets; ● increases in prices for commodities, including coffee, and milk; ● inefficiency in our labor costs as the staff gains experience; ● competition, either from our competitors in the beverage industry or our own locations; ● temporary and permanent site characteristics of new locations; ● changes in government regulation; and ● other unanticipated increases in costs, any of which could give rise to delays or cost overruns.
Small Business Administration Loan No. 7331917406 under its Economic Injury Disaster Loan assistance program in light of the impact of the COVID-19 pandemic, which we refer to as our EIDL Loan, $97,273 in principal outstanding under the Paycheck Protection Program Loan administered by the U.S.
Small Business Administration Loan No. 7331917406 under its Economic Injury Disaster Loan assistance program in light of the impact of the COVID-19 pandemic, which we refer to as our EIDL Loan, $63,801 in principal outstanding under the Paycheck Protection Program Loan administered by the U.S.
On November 1, 2024 we requested a hearing by the Nasdaq Hearings Panel (the “Panel”) of The Nasdaq Stock Market LLC to appeal delisting determinations made by the Listing Qualifications Department of Nasdaq: (i) on April 28, 2023 for failure to comply with the bid price requirement of Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”), (ii) on September 5, 2023 for failure to comply with the minimum stockholders equity required for continued listing on Nasdaq, or any of the alternative requirement to Nasdaq Listing Rule 5550(b) (the “Equity Rule”), and (iii) on January 4, 2024 for failure to hold an annual meeting of stockholders for the fiscal year ended December 31, 2023 as required by Nasdaq Listing Rule 5620(a) (the “Meeting Rule”).
As previously disclosed, we requested a hearing by the Nasdaq Hearings Panel (the “Panel”) of Nasdaq to appeal delisting determinations made by the Listing Qualifications Department (the “Staff”) of Nasdaq: (i) on April 28, 2023 for failure to comply with the bid price requirement of Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”), (ii) on September 5, 2023 for failure to comply with the minimum stockholders equity required for continued listing on Nasdaq, or any of the alternative requirement to Nasdaq Listing Rule 5550(b) (the “Equity Rule”), and (iii) on January 4, 2024 for failure to hold an annual meeting of stockholders for the fiscal year ended December 31, 2023 as required by Nasdaq Listing Rule 5620(a) (the “Meeting Rule”).
Our locations are geographically concentrated in California, and we could be negatively affected by conditions specific to that state. As of December 31, 2023, all of our company-operated locations were located in California. Adverse changes in demographic, unemployment, economic, regulatory or weather conditions in California have, and may continue, to harm our business.
Our locations are geographically concentrated in California, and we could be negatively affected by conditions specific to that state. As of December 31, 2024, all of our company-operated locations in the United States were located in California. Adverse changes in demographic, unemployment, economic, regulatory or weather conditions in California have, and may continue, to harm our business.
Our ability to open new locations is dependent upon a number of factors, many of which are beyond our control, including our and our future franchise partners’ ability to: ● identify available and suitable sites; ● compete for such sites; ● reach acceptable agreements regarding the lease of locations; ● obtain or have available the financing required to acquire and operate a location, including construction and opening costs, which includes access to build-to-suit leases and ground lease construction or renovation arrangements; ● respond to unforeseen engineering or environmental problems with leased premises; ● avoid the impact of inclement weather, natural disasters and other calamities; ● hire, train and retain the skilled management and other employees necessary to meet staffing needs; ● obtain, in a timely manner and for an acceptable cost, required licenses, permits and regulatory approvals and respond effectively to any changes in local, state or federal law and regulations that adversely affect our and our future franchise partners’ costs or ability to open new locations; and ● control construction and equipment cost increases for new locations and secure the services of qualified contractors and subcontractors in an increasingly competitive environment.
Our ability to open new locations is dependent upon a number of factors, many of which are beyond our control, including our and our future franchise partners’ ability to: ● identify available and suitable sites; ● compete for such sites; ● reach acceptable agreements regarding the lease of locations; ● obtain or have available the financing required to acquire and operate a location, including construction and opening costs, which includes access to build-to-suit leases and ground lease construction or renovation arrangements; ● respond to unforeseen engineering or environmental problems with leased premises; ● avoid the impact of inclement weather, natural disasters and other calamities; ● hire, train and retain the skilled management and other employees necessary to meet staffing needs; ● obtain, in a timely manner and for an acceptable cost, required licenses, permits and regulatory approvals and respond effectively to any changes in local, state or federal law and regulations that adversely affect our and our future franchise partners’ costs or ability to open new locations; and ● control construction and equipment cost increases for new locations and secure the services of qualified contractors and subcontractors in an increasingly competitive environment. 9 There is no guarantee that a sufficient number of suitable sites for new locations will be available in desirable areas or on terms that are acceptable to us in order to achieve our growth plan.
We may be unsuccessful in opening new locations or establishing new markets, which could adversely affect our growth. As of December 31, 2023, Reborn had 14 company-owned locations. One of the key means to achieving our growth strategy will be through opening new locations and operating those locations on a profitable basis. We opened 4 new company-operated locations in 2023.
We may be unsuccessful in opening new locations or establishing new markets, which could adversely affect our growth. As of December 31, 2024, Reborn had 12 company-owned locations. One of the key means to achieving our growth strategy will be through opening new locations and operating those locations on a profitable basis.
Any one or more of the factors listed below or described elsewhere in this section could harm our business: ● increases in real estate or labor costs in certain markets; ● consumer preferences, including those described above; ● severe weather or other natural or man-made disasters affecting a large market or several closely located markets that may temporarily but significantly affect our business in such markets; ● especially in our large markets, labor discord or disruption, geopolitical events, social unrest, war, terrorism, political instability, acts of public violence, boycotts, hostilities and social unrest and other health pandemics that lead to avoidance of public places or cause people to stay at home; and ● adverse outcomes of litigation.
Any one or more of the factors listed below or described elsewhere in this section could harm our business: ● increases in real estate or labor costs in certain markets; ● consumer preferences, including those described above; ● severe weather or other natural or man-made disasters affecting a large market or several closely located markets that may temporarily but significantly affect our business in such markets; ● especially in our large markets, labor discord or disruption, geopolitical events, social unrest, war, terrorism, political instability, acts of public violence, boycotts, hostilities and social unrest and other health pandemics that lead to avoidance of public places or cause people to stay at home; and ● adverse outcomes of litigation. 8 Our marketing programs may not be successful, and our new menu items and advertising campaigns may not generate increased sales or profits.
Additionally, a significant theft, loss or misappropriation of, or access to, customers’ or other proprietary data or other breach of our information technology systems could result in fines, legal claims or proceedings, including regulatory investigations and actions, or liability for failure to comply with privacy and information security laws, which could disrupt our operations, damage our reputation and expose us to claims from customers and employees, any of which could harm our business.
Additionally, a significant theft, loss or misappropriation of, or access to, customers’ or other proprietary data or other breach of our information technology systems could result in fines, legal claims or proceedings, including regulatory investigations and actions, or liability for failure to comply with privacy and information security laws, which could disrupt our operations, damage our reputation and expose us to claims from customers and employees, any of which could harm our business. 21 Risks Related to People and Culture Changes in the availability of and the cost of labor could harm our business.
The loss of these vendors or failures by our suppliers to meet our standards, provide products in a timely and efficient manner, or comply with applicable laws is beyond our control and could have a material adverse effect on the Company.
For certain products, we may rely very few suppliers. The loss of these vendors or failures by our suppliers to meet our standards, provide products in a timely and efficient manner, or comply with applicable laws is beyond our control and could have a material adverse effect on the Company.
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.
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 the Company’s operations in near future. 7 Evolving consumer preferences and tastes may adversely affect our business.
An actual or perceived breach of our security systems or those of our third-party service providers may require notification under applicable data privacy regulations or for customer relations or publicity purposes, which could result in reputational harm, costly litigation (including class action litigation), material contract breaches, liability, settlement costs, loss of sales, regulatory scrutiny, actions or investigations, a loss of confidence in our business, systems and Processing, a diversion of management’s time and attention, and significant fines, penalties, assessments, fees and expenses. 15 The costs to respond to a security breach and/or to mitigate any security vulnerabilities that may be identified could be significant, our efforts to address these problems may not be successful.
An actual or perceived breach of our security systems or those of our third-party service providers may require notification under applicable data privacy regulations or for customer relations or publicity purposes, which could result in reputational harm, costly litigation (including class action litigation), material contract breaches, liability, settlement costs, loss of sales, regulatory scrutiny, actions or investigations, a loss of confidence in our business, systems and Processing, a diversion of management’s time and attention, and significant fines, penalties, assessments, fees and expenses.
Additionally, our amended and restated certificate of incorporation provide that any person or entity holding, owning or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to these provisions. 32 Our charter documents also contain other provisions that could have an anti-takeover effect, such as: ● permitting the board of directors to establish the number of directors and fill any vacancies and newly created directorships; ● providing that directors may only be removed pursuant to the provisions of Section 141(k) of the Delaware General Corporation Law; ● prohibiting cumulative voting for directors; ● requiring super-majority voting to amend some provisions in our amended and restated bylaws; ● authorizing the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; and ● eliminating the ability of stockholders to call special meetings of stockholders.
Our charter documents also contain other provisions that could have an anti-takeover effect, such as: ● permitting the board of directors to establish the number of directors and fill any vacancies and newly created directorships; ● providing that directors may only be removed pursuant to the provisions of Section 141(k) of the Delaware General Corporation Law; ● prohibiting cumulative voting for directors; ● requiring super-majority voting to amend some provisions in our amended and restated bylaws; ● authorizing the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; and ● eliminating the ability of stockholders to call special meetings of stockholders.
We are subject to numerous statutory, regulatory and legal requirements. Our operating results could be negatively impacted by developments in these areas due to the costs of compliance in addition to possible government penalties and litigation in the event of deemed noncompliance.
Our operating results could be negatively impacted by developments in these areas due to the costs of compliance in addition to possible government penalties and litigation in the event of deemed noncompliance.
We are or may also be subject to the terms of our external and internal privacy and security policies, codes, representations, certifications, industry standards, publications and frameworks (“Privacy Policies”) and contractual obligations to third parties related to privacy, information security and Processing, including contractual obligations to indemnify and hold harmless third parties from the costs or consequences of non-compliance with Data Protection Laws or other obligations (“Data Protection Obligations”).
We are or may also be subject to the terms of our external and internal privacy and security policies, codes, representations, certifications, industry standards, publications and frameworks (“Privacy Policies”) and contractual obligations to third parties related to privacy, information security and Processing, including contractual obligations to indemnify and hold harmless third parties from the costs or consequences of non-compliance with Data Protection Laws or other obligations (“Data Protection Obligations”). 25 We strive to comply with applicable Data Protection Laws, Privacy Policies and Data Protection Obligations to the extent possible, but we may at times fail to do so, or may be perceived to have failed to do so.
Violations of these laws could lead to costly litigation or governmental investigation or proceedings. We are subject to the Americans with Disabilities Act (the “ADA”), which, among other things, requires our locations to meet federally mandated requirements for the disabled. The ADA prohibits discrimination in employment and public accommodations on the basis of disability.
We are subject to the Americans with Disabilities Act (the “ADA”), which, among other things, requires our locations to meet federally mandated requirements for the disabled. The ADA prohibits discrimination in employment and public accommodations on the basis of disability.
Any material interruption in our supply chain, such as material interruption of the supply of coffee, dairy, coffee machines and other restaurant equipment or packaging for our proprietary products due to the casualty loss of any of our roasting plant, interruptions in service by our third-party logistic service providers or common carriers that ship goods within our distribution channels, trade restrictions, such as increased tariffs or quotas, embargoes or customs restrictions, pandemics, social or labor unrest, natural disasters or political disputes and military conflicts that cause a material disruption in our supply chain could have a negative material impact on our business and our profitability.
Any material interruption in our supply chain, such as material interruption of the supply of coffee, dairy, coffee machines and other restaurant equipment or packaging for our proprietary products due to the casualty loss of any of our roasting plant, interruptions in service by our third-party logistic service providers or common carriers that ship goods within our distribution channels, trade restrictions, such as increased tariffs or quotas, embargoes or customs restrictions, pandemics, social or labor unrest, natural disasters or political disputes and military conflicts that cause a material disruption in our supply chain could have a negative material impact on our business and our profitability. 14 Additionally, most of our beverage and other products are sourced from a wide variety of domestic and international business partners and we rely on these suppliers to provide high quality products and to comply with applicable laws.
Also, should we choose to purchase real property for various locations in the future, we would be subject to all the risks generally associated with owning real estate, including changes in the investment climate for real estate, demographic trends and supply or demand for the use of the locations, which may result from competition from similar restaurants in the area as well as strict, joint and several liability for environmental contamination at or from the property, regardless of fault. 12 Our operating results and growth strategies will be closely tied to the success of our future franchise partners and we will have limited control with respect to their operations.
Also, should we choose to purchase real property for various locations in the future, we would be subject to all the risks generally associated with owning real estate, including changes in the investment climate for real estate, demographic trends and supply or demand for the use of the locations, which may result from competition from similar restaurants in the area as well as strict, joint and several liability for environmental contamination at or from the property, regardless of fault.
Any significant change to Data Protection Laws and Data Protection Obligations, including without limitation, regarding the manner in which the express or implied consent of customers for Processing is obtained, could increase our costs and require us to modify our operations, possibly in a material manner, which we may be unable to complete and may limit our ability to store and process customer data and operate our business. 22 Data Protection Laws are, and are likely to remain, uncertain for the foreseeable future, and our actual or perceived failure to address or comply with these laws could: increase our compliance and operational costs; limit our ability to market our products or services and attract new and retain current customers; limit or eliminate our ability to Process; expose us to regulatory scrutiny, actions, investigations, fines and penalties; result in reputational harm; lead to a loss of customers; reduce the use of our products or services; result in litigation and liability, including class action litigation; cause to incur significant costs, expenses and fees (including attorney fees); cause a material adverse impact to business operations or financial results, and; otherwise result in other material harm to our business (“Adverse Data Protection Impact”).
Data Protection Laws are, and are likely to remain, uncertain for the foreseeable future, and our actual or perceived failure to address or comply with these laws could: increase our compliance and operational costs; limit our ability to market our products or services and attract new and retain current customers; limit or eliminate our ability to Process; expose us to regulatory scrutiny, actions, investigations, fines and penalties; result in reputational harm; lead to a loss of customers; reduce the use of our products or services; result in litigation and liability, including class action litigation; cause to incur significant costs, expenses and fees (including attorney fees); cause a material adverse impact to business operations or financial results, and; otherwise result in other material harm to our business (“Adverse Data Protection Impact”).
You should not rely on our past results as an indicator of our future performance. 29 Our outstanding indebtedness could materially adversely affect our financial condition and our ability to operate our business, pursue our growth strategy, and react to changes in the economy or industry. As of December 31, 2023, we had $500,000 in principal amount outstanding under U.S.
Our outstanding indebtedness could materially adversely affect our financial condition and our ability to operate our business, pursue our growth strategy, and react to changes in the economy or industry. As of December 31, 2024, we had $500,000 in principal amount outstanding under U.S.
In addition, an inability to achieve our expected average location revenue could harm our business. Additionally, opening new locations in existing markets may negatively impact sales at our existing, and our future franchise partners’, locations.
If our new locations do not perform as planned or close, our business and future prospects could be harmed. In addition, an inability to achieve our expected average location revenue could harm our business. Additionally, opening new locations in existing markets may negatively impact sales at our existing, and our future franchise partners’, locations.
Small Business Administration, $165,722 in principal outstanding under our loans with Square Capital, LLC, $300,00 of short term borrowing from a private party, and $100,000 of short term borrowing from a shareholder.
Small Business Administration, $111,300 in principal outstanding under our loans with Square Capital, LLC and $727,073 of short term borrowing from a private party.
If we fail to manage our anticipated growth and change in a manner that preserves the key aspects of our corporate culture, the quality of our beverages and services may suffer, which could negatively affect our brand and reputation and harm our ability to attract users, employees, and organizations. 14 To manage growth in our operations and personnel, we will need to continue to grow and improve our operational, financial, and management controls and our reporting systems and procedures.
If we fail to manage our anticipated growth and change in a manner that preserves the key aspects of our corporate culture, the quality of our beverages and services may suffer, which could negatively affect our brand and reputation and harm our ability to attract users, employees, and organizations.
Increases in the cost of such commodities may increase the cost of our packing materials, or lack of availability, whether due to supply shortages, delays or interruptions in processing, or otherwise, especially in international markets, could harm our business. If we fail to offer high-quality customer experience, our business and reputation will suffer.
Increases in the cost of such commodities may increase the cost of our packing materials, or lack of availability, whether due to supply shortages, delays or interruptions in processing, or otherwise, especially in international markets, could harm our business.
The availability of information on social media platforms is virtually immediate as is its impact. Many social media platforms immediately publish the content their subscribers and participants can post, often without filters or checks on accuracy of the content posted. The opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily available.
Many social media platforms immediately publish the content their subscribers and participants can post, often without filters or checks on accuracy of the content posted. The opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily available. Information concerning us may be posted on such platforms at any time.
In addition, our future franchise activities will be subject to laws enacted by a number of states and rules and regulations promulgated by the Federal Trade Commission (the “FTC”).
In addition, our employment practices are subject to the requirements of the Immigration and Naturalization Service relating to citizenship and residency. 24 In addition, our future franchise activities will be subject to laws enacted by a number of states and rules and regulations promulgated by the Federal Trade Commission (the “FTC”).
In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC and the Nasdaq Capital Market, may increase legal and financial compliance costs and make some activities more time consuming.
As a public company listed in the United States, we will incur significant additional legal, accounting, and other expenses. In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC and the Nasdaq Capital Market, may increase legal and financial compliance costs and make some activities more time consuming.
We have incurred recurring net losses, including net losses from operations before income taxes of $6.0 million and $3.5 million for the year ended December 31, 2023 and 2022, respectively, and we had an accumulated deficit of $15.3 million at December 31, 2023.
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, and we had an accumulated deficit of $21.6 million at December 31, 2024.
These types of employee claims could also be asserted against us, on a co-employer theory, by employees of our future franchise partners.
These types of employee claims could also be asserted against us, on a co-employer theory, by employees of our future franchise partners. A significant increase in the number of these claims or an increase in the number of successful claims could harm our business.
We may not choose to increase prices in order to pass future increased labor costs on to customers, in which case our margins would be negatively affected.
We may not choose to increase prices in order to pass future increased labor costs on to customers, in which case our margins would be negatively affected. If we do not increase prices to cover increased labor costs, the higher prices could result in lower revenue, which may also reduce margins.
If our information technology networks and systems or data processing suffers damage, security breaches, vulnerabilities, disruption or shutdown, and we do not effectively resolve the issues in a timely manner, they could cause a material adverse impact to, our Business Functions and our business, reputation and financial condition.
If our information technology networks and systems or data processing suffers damage, security breaches, vulnerabilities, disruption or shutdown, and we do not effectively resolve the issues in a timely manner, they could cause a material adverse impact to, our Business Functions and our business, reputation and financial condition. 16 Hackers and data thieves are increasingly sophisticated and operate large-scale and complex automated attacks, which may remain undetected until after they occur.
Any one or more of the factors above may result in significant fluctuations in our results of operations, which may negatively impact the trading price of our common stock.
Any one or more of the factors above may result in significant fluctuations in our results of operations, which may negatively impact the trading price of our common stock. You should not rely on our past results as an indicator of our future performance.
Incidents or reports, whether true or not, of food-borne or water-borne illness or other food safety issues, food contamination or tampering, employee hygiene and cleanliness failures or improper employee conduct at our locations could lead to product liability or other claims. Such incidents or reports could negatively affect our brand and reputation as well as our business, revenue and profits.
Any possible instances or reports, whether true or not, of food and/or beverage-borne illness could reduce our sales. Incidents or reports, whether true or not, of food-borne or water-borne illness or other food safety issues, food contamination or tampering, employee hygiene and cleanliness failures or improper employee conduct at our locations could lead to product liability or other claims.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: ● changes in the valuation of our deferred tax assets and liabilities; ● expected timing and amount of the release of any tax valuation allowance; ● changes in tax laws, regulations or interpretations thereof; or ● future earnings being lower than anticipated in jurisdictions where we have lower statutory tax rates and higher than anticipated earnings in jurisdictions where we have higher statutory tax rates.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: ● changes in the valuation of our deferred tax assets and liabilities; ● expected timing and amount of the release of any tax valuation allowance; ● changes in tax laws, regulations or interpretations thereof; or ● future earnings being lower than anticipated in jurisdictions where we have lower statutory tax rates and higher than anticipated earnings in jurisdictions where we have higher statutory tax rates. 23 In addition, our effective tax rate in a given financial statement period may be materially impacted by a variety of factors including but not limited to changes in the mix and level of earnings, varying tax rates in the different jurisdictions in which we operate, fluctuations in the valuation allowance or by changes to existing accounting rules or regulations.
The development and operation of a location depends, to a significant extent, on the selection of suitable sites, which are subject to unique permitting, zoning, land use, environmental, traffic and other regulations and requirements.
The development and operation of a location depends, to a significant extent, on the selection of suitable sites, which are subject to unique permitting, zoning, land use, environmental, traffic and other regulations and requirements. We are also subject to licensing and regulation by state and local authorities relating to health, sanitation, safety and fire standards.
Under the ADA, we could be required to expend funds to modify our locations to provide service to, or make reasonable accommodations for the employment of, disabled persons. In addition, our employment practices are subject to the requirements of the Immigration and Naturalization Service relating to citizenship and residency.
Under the ADA, we could be required to expend funds to modify our locations to provide service to, or make reasonable accommodations for the employment of, disabled persons.
Should our competitors increase spending on marketing and advertising and other initiatives or our marketing funds decrease for any reason, or should our advertising, promotions and new menu items be less effective than our competitors, there could be an adverse effect on our results of operations and financial condition. 8 We may not be able to compete successfully with other specialty coffee locations, including the growing number of coffee delivery options.
Should our competitors increase spending on marketing and advertising and other initiatives or our marketing funds decrease for any reason, or should our advertising, promotions and new menu items be less effective than our competitors, there could be an adverse effect on our results of operations and financial condition.
Intense competition could make it more difficult to expand our business and could also have a negative impact on our operating results if customers favor our competitors or we are forced to change our pricing and other marketing strategies.
We may not be able to compete successfully with other specialty coffee locations, including the growing number of coffee delivery options. Intense competition could make it more difficult to expand our business and could also have a negative impact on our operating results if customers favor our competitors or we are forced to change our pricing and other marketing strategies.
These initiatives may not be successful, resulting in expenses incurred without the benefit of higher revenue. Additionally, some of our competitors have greater financial resources than we do, which enable them to spend significantly more on marketing and advertising and other initiatives than we can.
Additionally, some of our competitors have greater financial resources than we do, which enable them to spend significantly more on marketing and advertising and other initiatives than we can.
This risk exists even if it were later determined that the illness was wrongly attributed to one of our locations. Additionally, even if food-borne illnesses were not identified at our locations, our sales could be adversely affected if instances of food-borne illnesses at other coffee and beverage chains were highly publicized.
Additionally, even if food-borne illnesses were not identified at our locations, our sales could be adversely affected if instances of food-borne illnesses at other coffee and beverage chains were highly publicized.
The impact of these events would also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors or as members of senior management. 27 Substantial blocks of our common stock may be sold into the market as a result of the Pre-Paid Advance Agreement.
The impact of these events would also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors or as members of senior management. Due to the implementation of the Reverse Stock Split, the liquidity of our common stock may be adversely effected.
With respect to any third party intellectual property that we use or wish to use in our business (whether or not asserted against us in litigation), we may not be able to enter into licensing or other arrangements with the owner of such intellectual property at a reasonable cost or on reasonable terms.
With respect to any third party intellectual property that we use or wish to use in our business (whether or not asserted against us in litigation), we may not be able to enter into licensing or other arrangements with the owner of such intellectual property at a reasonable cost or on reasonable terms. 20 Food safety and quality concerns may negatively impact our brand, business and profitability, our internal operational controls and standards may not always be met and our employees may not always act professionally, responsibly and in our and our customers’ best interests.
A significant increase in the number of these claims or an increase in the number of successful claims could harm our business. 11 Additionally, there has been a marked increase in the use of social media platforms and similar devices, including blogs, social media websites and other forms of internet-based communications that provide individuals with access to a broad audience of consumers and other interested persons.
Additionally, there has been a marked increase in the use of social media platforms and similar devices, including blogs, social media websites and other forms of internet-based communications that provide individuals with access to a broad audience of consumers and other interested persons. The availability of information on social media platforms is virtually immediate as is its impact.
Information concerning us may be posted on such platforms at any time. Information posted may be adverse to our interests or may be inaccurate, each of which may harm our performance, prospects or business. The harm may be immediate without affording us an opportunity for redress or correction.
Information posted may be adverse to our interests or may be inaccurate, each of which may harm our performance, prospects or business. The harm may be immediate without affording us an opportunity for redress or correction. Ultimately, the risks associated with any such negative publicity or incorrect information cannot be completely eliminated or mitigated and may harm our business.
Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting.
As a public company, we are required to provide an annual management report on the effectiveness of our internal control over financial reporting. 35 Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting.
Our marketing programs may not be successful, and our new menu items and advertising campaigns may not generate increased sales or profits. We incur costs and expend other resources in our marketing efforts on new menu items and advertising campaigns to raise brand awareness and attract and retain customers.
We incur costs and expend other resources in our marketing efforts on new menu items and advertising campaigns to raise brand awareness and attract and retain customers. These initiatives may not be successful, resulting in expenses incurred without the benefit of higher revenue.
As a result of our concentration in this market, we have been, and in the future may be, disproportionately affected by these adverse conditions compared to other chain beverage locations with a national footprint. 13 Interruption of our supply chain of coffee or other ingredients, coffee machines and other restaurant equipment or packaging could affect our ability to produce or deliver our products and could negatively impact our business and profitability.
As a result of our concentration in this market, we have been, and in the future may be, disproportionately affected by these adverse conditions compared to other chain beverage locations with a national footprint.
Our success also depends substantially on the contributions and abilities of our staff on whom we rely to give customers a superior experience and elevate our brand.
Our inability to identify, recruit and retain qualified individuals for our locations could slow our growth and adversely impact our ability to operate. Our success also depends substantially on the contributions and abilities of our staff on whom we rely to give customers a superior experience and elevate our brand.
If we are unable to open new locations, or if future franchise partners do not open new locations, or if location openings are significantly delayed, our revenue or earnings growth could be adversely affected and our business may be harmed. 9 As part of our longer term growth strategy, we expect to enter into geographic markets in which we have little or no prior operating experience.
If we are unable to open new locations, or if future franchise partners do not open new locations, or if location openings are significantly delayed, our revenue or earnings growth could be adversely affected and our business may be harmed.
Additionally, our future franchise partners’ interests may conflict or diverge with our interests in the future, which could have a negative impact on our business. As we grow, we will depend on the financial success and cooperation of our future franchise partners for our success.
Our operating results and growth strategies will be closely tied to the success of our future franchise partners and we will have limited control with respect to their operations. Additionally, our future franchise partners’ interests may conflict or diverge with our interests in the future, which could have a negative impact on our business.
Any failure to preserve our culture could negatively affect our future success, including our ability to retain and recruit personnel, and loss of customer loyalty. Unionization activities may disrupt our operations and affect our profitability. Although none of our employees are currently covered under collective bargaining agreements, our employees may elect to be represented by labor unions in the future.
Any failure to preserve our culture could negatively affect our future success, including our ability to retain and recruit personnel, and loss of customer loyalty. 22 Unionization activities may disrupt our operations and affect our profitability.
If one or more equity research analysts cease coverage of our company, or fail to regularly publish reports on us, the demand for our common stock could decrease, which in turn could cause our trading price or trading volume to decline.
If one or more equity research analysts cease coverage of our company, or fail to regularly publish reports on us, the demand for our common stock could decrease, which in turn could cause our trading price or trading volume to decline. 30 We will incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies in the United States, which may harm our business.
If we are not able to continue to provide high levels of customer service, our reputation, as well as our business could be harmed.
As our customer base continues to grow, we will need to expand our customer service and other personnel, which will require more complex management and systems. If we are not able to continue to provide high levels of customer service, our reputation, as well as our business could be harmed.
Our staff put customer needs first and we give them the flexibility required to build genuine, meaningful connections that keep our customers returning for more. As we grow, it may be difficult for us to identify, recruit, train and manage enough people with enough skill and talent to provide this enhanced customer experience.
As we grow, it may be difficult for us to identify, recruit, train and manage enough people with enough skill and talent to provide this enhanced customer experience.
We will require significant capital expenditures and the allocation of valuable management resources to grow and change in these areas. Our expansion has placed, and our expected future growth will continue to place, a significant strain on our management, customer experience, research and development, sales and marketing, administrative, financial, and other resources.
Our expansion has placed, and our expected future growth will continue to place, a significant strain on our management, customer experience, research and development, sales and marketing, administrative, financial, and other resources. In addition, as we expand our business, it is important that we continue to maintain a high level of customer service and satisfaction.
In 2024, we expect to open up to 20 company-operated retail locations and 10 franchise locations.
In 2025, we expect to open up to 20 franchise locations.
We are also subject to a variety of other employee relations laws including FMLA and state leave laws, employment discrimination laws, predictive scheduling laws, occupational health and safety laws and regulations and the NLRA, to name a few. Together, these many laws and regulations present a thicket of compliance obligations and liability risks.
The failure to comply with these laws could adversely affect our business as a result of costly litigation or government enforcement actions. We are also subject to a variety of other employee relations laws including FMLA and state leave laws, employment discrimination laws, predictive scheduling laws, occupational health and safety laws and regulations and the NLRA, to name a few.
As we grow, we will need to continue to increase our compliance efforts in these areas, which may affect our results from operations. Changes to these laws and regulations may increase these costs beyond our expectations or predictions, which would adversely affect our business operations and financial results.
Together, these many laws and regulations present a thicket of compliance obligations and liability risks. As we grow, we will need to continue to increase our compliance efforts in these areas, which may affect our results from operations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAs of the date of this report, we are not aware of any cybersecurity incidents, that have had a materially adverse effect on our operations, business, results of operations, or financial condition. 33 Governance Our Board of Directors considers cybersecurity risk as part of its risk oversight function.
Biggest changeAs of the date of this report, we are not aware of any cybersecurity incidents, that have had a materially adverse effect on our operations, business, results of operations, or financial condition. Governance Our Board of Directors considers cybersecurity risk as part of its risk oversight function.
Our cybersecurity incident response plan governs our assessment and response upon the occurrence of a material cybersecurity incident, including the process for informing senior management and our Board of Directors.
Our cybersecurity incident response plan governs our assessment and response upon the occurrence of a material cybersecurity incident, including the process for informing senior management and our Board of Directors. 39

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our executive office is located at 580 N. Berry Street, Brea, California and our telephone number is (714) 784-6369. As of December 31, 2023, we had 14 company-owned retail locations across California, all of which are leased.
Biggest changeItem 2. Properties Our executive office is located at 580 N. Berry Street, Brea, California and our telephone number is (714) 784-6369. As of December 31, 2024, we had 12 company-owned retail locations across California, in Korea, and in Malaysia, all of which are leased.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAs a result, the outcome of a particular matter or a combination of matters may be material to our results of operations for a particular period, depending upon the size of the loss or our income for that particular period.
Biggest changeAs a result, the outcome of a particular matter or a combination of matters may be material to our results of operations for a particular period, depending upon the size of the loss or our income for that particular period. Item 4. Mine Safety Disclosures Not applicable. 40 PART II
Removed
Item 3. Legal Proceedings The Company is subject to various legal proceedings from time to time as part of its business.
Added
Item 3. Legal Proceedings There are no material proceedings to which any director or officer, or any associate of any such director or officer, is a party that is adverse to our company or any of our subsidiaries or has a material interest adverse to our company or any of our subsidiaries.
Added
No director or executive officer has been a director or executive officer of any business which has filed a bankruptcy petition or had a bankruptcy petition filed against it during the past ten years.
Added
No current director or executive officer has been convicted of a criminal offense or is the subject of a pending criminal proceeding during the past ten years.
Added
No current director or executive officer has been the subject of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities during the past ten years.
Added
No current director or officer has been found by a court to have violated a federal or state securities or commodities law during the past ten years. We are subject to various legal proceedings from time to time as part of its business.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Removed
Recent Sales of Unregistered Equity Securities None. Issuer Purchases of Equity Securities None. Item 6. [Reserved]
Added
Recent Sales of Unregistered Equity Securities None. Reverse Stock Split On January 12, 2024, we filed a Certificate of Amendment (the “Certificate of Amendment”) to our Certificate of Incorporation to effect a reverse stock split of our issued common stock in the ratio of 1-for-8 (the “Reverse Stock Split”).
Added
The common stock began trading on the Nasdaq Capital Market on a Reverse Stock Split-adjusted basis at the market open on Monday, January 22, 2024.
Added
As a result of the Reverse Stock Split, the total number of shares of common stock held by each shareholder was converted automatically into the number of whole shares of common stock equal to (i) the number of shares of common stock held by such shareholder immediately prior to the Reverse Split, divided by (ii) 8, and then rounded up to the nearest whole number.
Added
No fractional shares were issued, and no cash or other consideration was paid to any shareholder. Instead, we issued one whole share of the post-Reverse Stock Split common stock to any shareholder who otherwise would have received a fractional share as a result of the Reverse Stock Split.
Added
Except for our historical financial statements and unless otherwise stated, all option, share, and per share information gives effect to the Reverse Stock Split. Issuer Purchases of Equity Securities None. 41 Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWe 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.
Biggest changeBusiness 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.
Recent Accounting Pronouncements We have determined that all other issued, but not yet effective accounting pronouncements are inapplicable or insignificant to us and once adopted are not expected to have a material impact on our financial position. 41
Recent Accounting Pronouncements We have determined that all other issued, but not yet effective accounting pronouncements are inapplicable or insignificant to us and once adopted are not expected to have a material impact on our financial position.
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 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.
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.
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.
Paycheck Protection Program Loan 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.
Paycheck Protection Program Loan 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.
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”).
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”).
As of December 31, 2023, the loan payable, EIDL Loan noted above is not in default. 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.
As of December 31, 2024, the loan payable, EIDL Loan noted above is not in default. 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.
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.
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.
Retail store revenue makes up approximately 98% of the Company’s total revenue. ● Wholesale and Online Revenue Wholesale and online revenues are recognized when the products are delivered, and title passes to customers or to the wholesale distributors.
Retails store revenue makes up approximately [98]% of our total revenue. ● Wholesale and Online Revenue Wholesale and online revenues are recognized when the products are delivered, and title passes to customers or to the wholesale distributors.
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.
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.
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.
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.
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.
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.
Upon the closing of this offering, we will be taxed at the prevailing U.S. corporate tax rates. We will be treated as a U.S. corporation and a regarded entity for U.S. federal, state and local income taxes.
Income taxes in South Korea and Malaysia is not material. Upon the closing of this offering, we will be taxed at the prevailing U.S. corporate tax rates. We will be treated as a U.S. corporation and a regarded entity for U.S. federal, state and local income taxes.
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.
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.
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.
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.
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.
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.
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: ● Retail Store Revenue Retail store revenues are recognized when payment is tendered at the point of sale.
Our net revenue primarily consists of revenues from our retail locations and wholesale and online stores. Accordingly, we recognize revenue as follows: ● Retail Store Revenue Retail store revenues are recognized when payment is tendered at the point of sale.
Cash Flows Used in Investing Activities 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.
Cash Flows Used in Investing Activities 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.
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.
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.
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.
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.
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 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.
Reborn Coffee continues to elevate the high-end coffee experience and we received 1st place traditional still in “America’s Best Cold Brew” competition by Coffee Fest in 2017 in Portland and 2018 in Los Angeles.
We currently serve customers through our 10 retail stores located in California, 1 store in Korea, and 1 store in Malaysia. Reborn Coffee continues to elevate the high-end coffee experience, and we received 1st place traditional still in “America’s Best Cold Brew” competition by Coffee Fest in 2017 in Portland and 2018 in Los Angeles.
Currently, we have the following fourteen retail coffee locations: ● La Floresta Shopping Village in Brea, California; ● La Crescenta, California; ● Corona Del Mar, California; ● Home Depot Center in Laguna Woods, California; ● Manhattan Village at Manhattan Beach, California. ● Cabazon, California; ● Huntington Beach, California; ● Santa Anita Westfield Mall in Arcadia, California; ● Galleria at Tyler in Riverside, California; ● Stonestown Galleria in San Francisco, California; ● Intersect in Irvine, California; ● Dupont Drive in Irvine, California; ● Diamond Bar, California; and ● Anaheim, California Components of Our Results of Operations Revenue The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers.
We have the following twelve retail coffee locations as of December 31, 2024: ● La Floresta Shopping Village in Brea, California; ● La Crescenta, California; ● Corona Del Mar, California; ● Home Depot Center in Laguna Woods, California; ● Manhattan Village at Manhattan Beach, California. ● Huntington Beach, California; ● Galleria at Tyler in Riverside, California; ● Intersect in Irvine, California; ● Diamond Bar, California; and ● Anaheim, California ● Daejeon, Korea ● Kuala Lumpur, Malaysia 42 Components of Our Results of Operations Revenue We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers.
Reborn aims to capture a growing portion of the market as we expand and increase consumer awareness of our brand. 36 Current Operations We have a production and distribution center at our headquarters that we use to process and roast coffee for wholesale and retail distribution.
Current Operations We have a production and distribution center at our headquarters that we use to process and roast coffee for wholesale and retail distribution.
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 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. 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.
Pre-opening rent is included in selling, general and administrative expenses on the accompanying consolidated statements of income. Tenant incentives used to fund leasehold improvements are recorded in deferred rent and amortized as reductions to rent expense over the term of the lease. Income Taxes Reborn files income tax returns in the U.S. federal and California state jurisdictions.
Tenant incentives used to fund leasehold improvements are recorded in deferred rent and amortized as reductions to rent expense over the term of the lease. 46 Income Taxes 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.
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.
You should read the summary of historical consolidated financial data below, together with our audited consolidated financial statements and related notes thereto. 43 For the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023.
Results of Operations 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. The summary of historical consolidated statements of income data and summary historical consolidated statements of cash flows data presented below for the years ended December 31, 2023 and 2022.
Results of Operations 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.
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.
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.
Rent expense for operating leases is recorded on a straight-line basis over the lease term and begins when Reborn has the right to use the property. The difference between rent expense and cash payment is recorded as deferred rent on the accompanying consolidated balance sheets.
Leases Operating Leases We currently lease all company-owned retail locations. Operating leases typically contain escalating rentals over the lease term, as well as optional renewal periods. Rent expense for operating leases is recorded on a straight-line basis over the lease term and begins when Reborn has the right to use the property.
Year Ended December 31, 2023 2022 Statement of Cash Flow Data: Net cash used in operating activities (2,790,956 ) (3,297,058 ) Net cash used in investing activities (1,019,353 ) (681,531 ) Net cash provided by financing activities 1,467,722 6,092,573 Cash Flows Used in Operating Activities 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.
Years Ended December 31, 2024 2023 Statement of Cash Flow Data: Net cash used in operating activities (3,452,229 ) (3,179,003 ) Net cash provided by (used in) investing activities (977,217 ) (2,413,257 ) Net cash provided by financing activities 4,423,360 2,737,526 Cash Flows Used in Operating Activities 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.
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.
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%.
Cash Flows Provided by Financing Activities 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. Net cash provided by financing activities during the year ended December 31, 2022 was $6.1 million, which was primarily a proceeds from the IPO.
Cash Flows Provided by Financing Activities 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.
Cost of Sales Cost of sales includes costs associated with generating revenue within our company-owned retail locations and through wholesale and online platform. Shipping and Handling Costs The Company incurred freight out cost and is included in the Company’s cost of sale.
Cost of Sales Cost of sales includes costs associated with generating revenue within our company-owned retail locations and through wholesale and online platform. General and Administrative Expense General and administrative expenses include store-related expenses as well as our corporate headquarters’ expenses.
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%.
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.
As of December 31, 2023, there was a balance outstanding of $1,126,500. Economic Injury Disaster Loan 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.
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. 45 Credit Facilities Economic Injury Disaster Loan 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.
The increase was mainly caused by increased occupancy expenses and labor costs with opening of new locations. 38 Liquidity and Capital Resources We have a history of operating losses and negative cash flow in operating activities.
The increase was primarily due to increase in high interest rate for the monies borrowed during 2024. 44 Liquidity and Capital Resources We have a history of operating losses and negative cash flow in operating activities.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K and with our audited consolidated financial statements included in our Registration Statement on Form S-1 (File No: 333-261937), as amended (the “Registration Statement”).
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding and assessing the trends and significant changes in our results of operations and financial condition. Historical results may not be indicative of future performance.
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As discussed in the section titled “Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements.
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The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and all other non-historical statements in this discussion are forward-looking statements and are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management.
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Factors that could cause or contribute to these differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” in our Registration Statement. 35 Business Reborn Coffee is focused on serving high quality, specialty-roasted coffee at retail locations, kiosks and cafes.
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Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this report, particularly in “Risk Factors” or in other sections of this Annual Report on Form 10-K.
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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.
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Reverse Stock Split On January 12, 2024, we filed the Certificate of Amendment to our Certificate of Incorporation to effect the Reverse Stock Split of our issued common stock in the ratio of 1-for-8. The common stock began trading on the Nasdaq Capital Market on a Reverse Stock Split-adjusted basis at the market open on Monday, January 22, 2024.
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The Experience, Reborn As leading pioneers of the emerging “Fourth Wave” movement, Reborn Coffee is redefining specialty coffee as an experience that demands much more than premium quality. We consider ourselves leaders of the “fourth wave” coffee movement because we are constantly developing our bean processing methods, researching design concepts, and reinventing new ways of drinking coffee.
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Years Ended December 31, Changes 2024 2023 Amount % Net revenues: Stores $ 5,573,247 $ 5,266,783 $ 306,464 5.8 % Wholesale and online 355,286 241,356 113,930 47.2 % Total net revenues 5,928,533 5,508,139 420,394 7.6 % Operating costs and expenses: Product, food and drink costs - stores 2,062,460 1,782,681 279,779 15.7 % Cost of sales—wholesale and online 142,114 105,714 36,400 34.4 % General and administrative 8,343,505 8,162,523 180,982 2.2 % Total operating costs and expenses 10,548,079 10,050,918 497,161 4.9 % Loss from operations (4,619,546 ) (4,542,779 ) (76,767 ) 1.7 % Other income (expense): Other income (expense) 55,140 (8,942 ) 64,082 -716.6 % Asset impairment loss (25,602 ) - (25,602 ) n/a Loss on the sale of building - (36,094 ) 36,094 -100.0 % Interest expense (215,140 ) (129,480 ) (85,660 ) 66.2 % Total other expense, net (185,602 ) (174,516 ) (11,086 ) 6.4 % Loss before income taxes (4,805,148 ) (4,717,295 ) (87,853 ) 1.9 % Provision for income taxes 800 7,828 (7,028 ) -89.8 % Net loss $ (4,805,948 ) $ (4,725,123 ) $ (80,825 ) 1.7 % 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%.
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For instance, the current transition from the K-Cup trend to the pour over drip concept allowed us to reinvent the way people consume coffee, by merging convenience and quality. We took the pour over drip concept and made it available and affordable to the public through our Reborn Coffee Pour Over packs.
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The increase in costs was partially driven by the opening of new locations and the overall increase in sales for the period.
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Our Pour Over Packs allow our consumers to consume our specialty coffee outdoors and on-the-go. Our success in innovating within the “fourth wave” coffee movement is measured by our success in B2B sales with our introduction of Reborn Coffee Pour Over Packs to hotels.
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Other Income (Expense) – Other income or expense primarily includes interest expense. Interest expense was $0.2 million for the year ended December 31, 2024 compared to $0.1 million for the year ended December 31, 2023, an increase of $0.1 million.
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With the introduction of our Pour Over Packs to major hotels (including one hotel company with 7 locations), our B2B sales increased as these companies recognized the convenience and functionality our Pour Over Packs serve to their customers. Reborn Coffee’s continuous Research and Development is essential to developing new parameters in the production of new blends.
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The difference between rent expense and cash payment is recorded as deferred rent on the accompanying consolidated balance sheets. Pre-opening rent is included in selling, general and administrative expenses on the accompanying consolidated statements of income.
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Our first place position in “America’s Best Cold Brew” competition by Coffee Fest in 2017 in Portland and 2018 in Los Angeles is a testament to the way we believe we lead the “fourth wave” movement by example.
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Centered around its core values of service, trust, and well-being, Reborn Coffee delivers an appreciation of coffee as both a science and an art. Developing innovative processes such as washing green coffee beans with magnetized water, we challenge traditional preparation methods by focusing on the relationship between water chemistry, health, and flavor profile.
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Leading research studies, testing brewing equipment, and refining roasting/brewing methods to a specific, Reborn Coffee proactively distinguishes exceptional quality from good quality by starting at the foundation and paying attention to the details. Our mission places an equal emphasis on humanizing the coffee experience, delivering a fresh take on “farm-to-table” by sourcing internationally.
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In this way, Reborn Coffee creates opportunities to develop transparency by paying homage to origin stories and spark new conversations by building cross-cultural communities united by a passion for the finest coffee. Through a broad product offering, Reborn Coffee provides customers with a wide variety of beverages and coffee options.
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As a result, we believe we can capture share of any experience where customers seek to consume great beverages whether in our inviting store atmospheres which are designed for comfort, or on the go through our pour over packs, or at home with our whole bean ground coffee bags.
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We believe that the retail coffee market in the US is large and growing. According to IBIS, in 2021, the retail market for coffee in the United States is expected to be $46.2 billion. This is expected to grow due to a shift in consumer preferences to premium coffee, including specialized blends, espresso-based beverages, and cold brew options.
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General and Administrative Expense General and administrative expense includes store-related expense as well as the Company’s corporate headquarters’ expenses. 37 Advertising Expense Advertising expenses are expensed as incurred.
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Advertising expenses amounted to $71,072 and $52,688 for the years ended December 31, 2023 and 2022, respectively, and are recorded under general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.
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Pre-opening Costs Pre-opening costs for new stores, which are not material, consist primarily of payroll and recruiting expense, training, marketing, rent, travel, and supplies, and are expensed as incurred depreciated over the shorter of the useful life of the improvement or the lease term, including renewal periods that are reasonably assured.
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Year Ended December 31, 2023 2022 Net revenues: Stores $ 5,712,630 $ 3,184,491 Wholesale and online 241,356 56,032 Total net revenues 5,953,986 3,240,523 Operating costs and expenses: Product, food and drink costs—stores 1,758,494 1,092,573 Cost of sales—wholesale and online 105,714 24,542 General and administrative 7,967,856 5,663,950 Total operating costs and expenses 9,832,064 6,781,065 Loss from operations (3,878,078 ) (3,540,542 ) Other income (expense): Other income (expense) (6,283 ) 16,440 Paycheck protection program (PPP) loan forgiven income - - Interest expense (129,480 ) (29,195 ) Gain on the sale of building 16,955 - Total other expense (118,808 ) (12,755 ) Loss before income taxes (3,996,886 ) (3,553,297 ) Provision for income taxes 800 1,600 Net loss $ (3,997,686 ) $ (3,554,897 ) Earnings (loss) per share: Basic and diluted $ (0.30 ) $ (0.29 ) Weighted average number of common shares outstanding: Basic and diluted 13,230,613 12,173,031 Revenues.
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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.
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In August 2022, the Company consummated the IPO of 1,440,000 shares of its common stock at a public offering price of $5.00 per share, generating gross proceeds of $7,200,000. Net proceeds from the IPO were approximately $6.2 million after deducting underwriting discounts and commissions and other offering expenses of approximately $998,000.
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As of December 31, 2023, the Company had total assets of approximately $9.0 million. Our cash balance as of December 31, 2023 was approximately $676,000. 39 Credit Facilities Loans with Square Capital During the fiscal year ended December 31, 2023, the Company entered into loan agreements with Square Capital.
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The Company was granted forgiveness for the initial PPP Loan prior to December 31, 2021. 40 Leases Operating Leases We currently lease all company-owned retail locations. Operating leases typically contain escalating rentals over the lease term, as well as optional renewal periods.

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