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Reborn Coffee, Inc. (REBN) Risk Analysis
Risk Overview Q4, 2023
Risk Change Over Time
- Share Price & Shareholder Rights - Risk 1We do not have the right to control the timing and amount of the issuance of our shares of common stock to YA Fund under the PPA and, accordingly, it is not possible to predict the actual number of shares we will issue pursuant to the PPA at any one time or in total.
We do not have the right to control the timing and amount of any issuances of our shares of common stock to YA Fund under the PPA. Sales of our common stock, if any, to YA Fund under the PPA will depend upon market conditions and other factors, and the discretion of YA Fund. We may ultimately decide to sell to YA Fund all, some or none of the shares of our common stock that may be available for us to sell to YA Fund pursuant to the PPA. The Pre-Paid Advance matures within one year. Because 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. In addition, unless we obtain stockholder approval, we will not be able to issue shares of our common stock in excess the Exchange Cap of 414,693 under the PPA (or any other transaction that is integrated with the PPA) in accordance with applicable Nasdaq rules. Depending on the market prices of our common stock in the future, this could be a significant limitation on the amount of funds we are able to raise pursuant to the PPA. Further, the resale by YA Fund of a significant amount of shares registered in this offering at any given time, or the perception that these sales may occur, could cause the market price of our common stock to decline and to be highly volatile.
- Share Price & Shareholder Rights - Risk 2Substantial blocks of our common stock may be sold into the market as a result of the Pre-Paid Advance Agreement.
The price of our common stock could decline if there are substantial sales of shares of our common stock, if there is a large number of shares of our common stock available for sale, or if there is the perception that these sales could occur. On February 12, 2024, we entered into a Pre-Paid Advance Agreement (the "PPA") with EF Hutton YA Fund, LP, a Delaware limited partnership ("YA Fund"). Pursuant to the PPA, on February 12, 2024, YA Fund advanced to us a pre-paid advance of $1,100,000 (the "Pre-Paid Advance"). The Pre-Paid Advance was purchased by YA Fund at 90% of the face amount. At the request and sole discretion of YA Fund, the Pre-Paid Advance will be correspondingly reduced upon the issuance of our common stock to YA Fund at a Purchase Price equal to the lower of: (a) 100% of the volume weighted average price (as reported during regular trading hours by Bloomberg) (the "VWAP") of our common stock on the trading day immediately preceding the closing of the Pre-Paid Advance (the "Fixed Price") or (b) 87% of the lowest daily VWAP of the shares during the five trading days immediately prior to each request (as applicable, the "Purchase Price"), subject to the Floor Price. Any issuances of shares of our common stock pursuant to the PPA to offset the Pre-Paid Advance will dilute the percentage ownership of stockholders and may dilute the per share projected earnings (if any) or book value of our common stock. Sales of a substantial number of shares of our common stock in the public market or other issuances of shares of our common stock, or the perception that these sales or issuances could occur, could cause the market price of our common stock to decline and may make it more difficult for you to sell your shares at a time and price that you deem appropriate.
- Share Price & Shareholder Rights - Risk 3We are not in compliance with the Nasdaq continued listing requirements. If we are unable to comply with the continued listing requirements of The Nasdaq Capital Market, our common stock could be delisted, which could affect our common stock's market price and liquidity and reduce our ability to raise capital.
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"). At the Panel hearing, which occurred on January 18, 2024, we, represented by members of senior management and outside counsel, advised that we intended to regain compliance with the Bid Price Rule by effecting a reverse stock split at a ratio of 1-for-8, which we have effected – our common stock has since had a closing bid price greater than $1.00 for ten consecutive trading days. We also informed the Panel that we intend to regain compliance with the Equity Rule by completing one or more equity financings. Finally, we informed the Panel that we intend to regain compliance with the Meeting Rule by holding an annual meeting of stockholders in the first quarter of 2024. As such, we proposed to the Panel a compliance plan that included a tentative schedule to complete the reverse stock split (which has now been completed), the equity financings, and the annual meeting and requested an extension of time to fully comply with Nasdaq listing requirements so that we could demonstrate to the Panel that it should not be delisted from Nasdaq. On February 2, 2024, we received a letter (the "Letter") from Nasdaq notifying us that the Panel had granted the Company's request to continue its listing on Nasdaq until March 29, 2024, subject to certain conditions. We intend to comply with the conditions set forth by the Panel, as stated in the Letter. There can be no assurance that the Panel will afford us more time to complete the compliance plan it articulated in the hearing, or that we will be able to remain in compliance with the applicable Nasdaq listing requirements on an ongoing basis. If our common stock is delisted, it could be more difficult to buy or sell our common stock and to obtain accurate quotations, and the price of our common stock could suffer a material decline. 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.
- Debt & Financing - Risk 4Upon an Amortization Event under the PPA, we may be required to make payments that could cause financial hardship to the company.
Pursuant to the PPA, an "Amortization Event" occurs if (1) the daily VWAP of our common stock (as reported by Bloomberg) is lower than the Floor Price for any five of seven consecutive trading days, (2) we have issued in excess of 99% of all of the shares available under the Exchange Cap, or (3) YA Fund is unable to use the initial registration statement we filed (and any one or more additional registration statements filed with the SEC that include the shares of our common stock that may be issued and sold by us to YA Fund under the PPA) for period of ten consecutive trading days. Within ten trading days of an Amortization Event, we must pay YA Fund the Cash Payment equal to $500,000, plus any accrued and unpaid interest (if any), and a 10% redemption premium. This financial obligation may cause an undue and unsustainable burden on us and cause a material adverse effect on our operations and financial condition.
Risk Highlights Q4, 2023
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 51
- Share Price & Shareholder Rights - Risk 1Our 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.
Our amended and restated articles of incorporation provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: - any derivative claim or cause of action brought on our behalf;- any claim or cause of action for a breach of fiduciary duty owed by any of our current or former directors, officers or other employees to us or our stockholders;- any claim or cause of action against us or any of our current or former directors, officers or other employees arising out of or pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws (as each may be amended from time to time);- any claim or cause of action seeking to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws (as each may be amended from time to time, including any right, obligation or remedy thereunder);- any claim or cause of action as to which the Delaware General Corporation Law confers jurisdiction to the Court of Chancery of the State of Delaware; and - any claim or cause of action against us or any of our current or former directors, officers or other employees governed by the internal-affairs doctrine. This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction. In addition, our amended and restated certificate of incorporation that will be in effect prior to the closing of this offering will provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause or causes of action arising under the Securities Act, including all causes of action asserted against any defendant to such complaint. For the avoidance of doubt, this provision is intended to benefit and may be enforced by us, our officers and directors, the underwriters to any offering giving rise to such complaint, and any other professional entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering. If a court were to find either choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions. For example, the Court of Chancery of the State of Delaware recently determined that the exclusive forum provisions of federal district courts of the United States of America for resolving any complaint asserting a cause of action arising under the Securities Act is not enforceable. These choice of forum provisions may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions, and there can be no assurance that such provisions will be enforced by a court in those other jurisdictions. We note that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. 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. 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. Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibit a person who owns 15% or more of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. Any provision in our amended and restated certificate of incorporation or our amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.
- Share Price & Shareholder Rights - Risk 2Our trading price and trading volume could decline if securities or industry analysts do not publish research about our business, or if they publish unfavorable research.
Equity research analysts do not currently provide coverage of our common stock, and we cannot assure that any equity research analysts will adequately provide research coverage of our common stock after the listing of our common stock on the Nasdaq Stock Exchange. A lack of adequate research coverage may harm the liquidity and trading price of our common stock. To the extent equity research analysts do provide research coverage of our common stock, we will not have any control over the content and opinions included in their reports. The trading price of our common stock could decline if one or more equity research analysts downgrade our stock or publish other unfavorable commentary or research. 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.
- Share Price & Shareholder Rights - Risk 3The trading price of our securities may be volatile, and you could lose all or part of your investment.
The trading price of our securities is likely to be volatile and could be subject to fluctuations in response to various factors, some of which are beyond our control. These fluctuations could cause you to lose all or part of your investment in our common stock as you might be unable to sell your shares at or above the price you paid for your shares. 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;- 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. In addition, in the past, following periods of volatility in the overall market and in the market price of a particular company's securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management's attention and resources.
- Share Price & Shareholder Rights - Risk 4Reborn Coffee, Inc. is a holding company.
Reborn Coffee, Inc. will be a holding company, and has no independent means of generating revenue or cash flow, and its ability to pay taxes, operating expenses and dividends in the future, if any, will be dependent upon the financial results and cash flows of Reborn Global, Reborn Coffee Franchise, and Reborn Realty.
- Share Price & Shareholder Rights - Risk 5AddedWe do not have the right to control the timing and amount of the issuance of our shares of common stock to YA Fund under the PPA and, accordingly, it is not possible to predict the actual number of shares we will issue pursuant to the PPA at any one time or in total.
We do not have the right to control the timing and amount of any issuances of our shares of common stock to YA Fund under the PPA. Sales of our common stock, if any, to YA Fund under the PPA will depend upon market conditions and other factors, and the discretion of YA Fund. We may ultimately decide to sell to YA Fund all, some or none of the shares of our common stock that may be available for us to sell to YA Fund pursuant to the PPA. The Pre-Paid Advance matures within one year. Because 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. In addition, unless we obtain stockholder approval, we will not be able to issue shares of our common stock in excess the Exchange Cap of 414,693 under the PPA (or any other transaction that is integrated with the PPA) in accordance with applicable Nasdaq rules. Depending on the market prices of our common stock in the future, this could be a significant limitation on the amount of funds we are able to raise pursuant to the PPA. Further, the resale by YA Fund of a significant amount of shares registered in this offering at any given time, or the perception that these sales may occur, could cause the market price of our common stock to decline and to be highly volatile.
- Share Price & Shareholder Rights - Risk 6AddedSubstantial blocks of our common stock may be sold into the market as a result of the Pre-Paid Advance Agreement.
The price of our common stock could decline if there are substantial sales of shares of our common stock, if there is a large number of shares of our common stock available for sale, or if there is the perception that these sales could occur. On February 12, 2024, we entered into a Pre-Paid Advance Agreement (the "PPA") with EF Hutton YA Fund, LP, a Delaware limited partnership ("YA Fund"). Pursuant to the PPA, on February 12, 2024, YA Fund advanced to us a pre-paid advance of $1,100,000 (the "Pre-Paid Advance"). The Pre-Paid Advance was purchased by YA Fund at 90% of the face amount. At the request and sole discretion of YA Fund, the Pre-Paid Advance will be correspondingly reduced upon the issuance of our common stock to YA Fund at a Purchase Price equal to the lower of: (a) 100% of the volume weighted average price (as reported during regular trading hours by Bloomberg) (the "VWAP") of our common stock on the trading day immediately preceding the closing of the Pre-Paid Advance (the "Fixed Price") or (b) 87% of the lowest daily VWAP of the shares during the five trading days immediately prior to each request (as applicable, the "Purchase Price"), subject to the Floor Price. Any issuances of shares of our common stock pursuant to the PPA to offset the Pre-Paid Advance will dilute the percentage ownership of stockholders and may dilute the per share projected earnings (if any) or book value of our common stock. Sales of a substantial number of shares of our common stock in the public market or other issuances of shares of our common stock, or the perception that these sales or issuances could occur, could cause the market price of our common stock to decline and may make it more difficult for you to sell your shares at a time and price that you deem appropriate.
- Share Price & Shareholder Rights - Risk 7AddedWe are not in compliance with the Nasdaq continued listing requirements. If we are unable to comply with the continued listing requirements of The Nasdaq Capital Market, our common stock could be delisted, which could affect our common stock's market price and liquidity and reduce our ability to raise capital.
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"). At the Panel hearing, which occurred on January 18, 2024, we, represented by members of senior management and outside counsel, advised that we intended to regain compliance with the Bid Price Rule by effecting a reverse stock split at a ratio of 1-for-8, which we have effected – our common stock has since had a closing bid price greater than $1.00 for ten consecutive trading days. We also informed the Panel that we intend to regain compliance with the Equity Rule by completing one or more equity financings. Finally, we informed the Panel that we intend to regain compliance with the Meeting Rule by holding an annual meeting of stockholders in the first quarter of 2024. As such, we proposed to the Panel a compliance plan that included a tentative schedule to complete the reverse stock split (which has now been completed), the equity financings, and the annual meeting and requested an extension of time to fully comply with Nasdaq listing requirements so that we could demonstrate to the Panel that it should not be delisted from Nasdaq. On February 2, 2024, we received a letter (the "Letter") from Nasdaq notifying us that the Panel had granted the Company's request to continue its listing on Nasdaq until March 29, 2024, subject to certain conditions. We intend to comply with the conditions set forth by the Panel, as stated in the Letter. There can be no assurance that the Panel will afford us more time to complete the compliance plan it articulated in the hearing, or that we will be able to remain in compliance with the applicable Nasdaq listing requirements on an ongoing basis. If our common stock is delisted, it could be more difficult to buy or sell our common stock and to obtain accurate quotations, and the price of our common stock could suffer a material decline. 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.
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