DEF 14A: Reborn Coffee Seeks Stockholder Approval for Director Elections, Auditor Ratification, and Share Issuance to Yorkville

Reborn Coffee, Inc. is holding its annual meeting of stockholders on October 24, 2024, to vote on the election of directors, ratification of the auditor, and approval of a share issuance to YA II PN, LTD. (Yorkville).

Summary

• Reborn Coffee, Inc. will hold its Annual Meeting of Stockholders on October 24, 2024.
• Stockholders will vote on three proposals: electing six directors, ratifying the appointment of BCRG Group as the independent auditor, and approving the issuance of shares to YA II PN, LTD. (Yorkville) related to a convertible promissory note and warrant.
• The record date for determining stockholders eligible to vote is September 23, 2024.
• As of the record date, there were 2,683,490 shares of Common Stock outstanding.
• The Board of Directors recommends voting for all director nominees and for the ratification of BCRG Group and for the approval of the share issuance to Yorkville.
• The company previously engaged Kreit & Chiu CPA LLP (K&C) and BF Borgers CPA PC (BF Borgers) as independent auditors before appointing BCRG Group.
• The company is seeking stockholder approval to issue up to $800,000 in shares of its Common Stock to Yorkville pursuant to the Note.
• The Note accrues interest at an annual rate of 0%, however, the interest rate will increase to an annual rate of 18% upon the occurrence of an event of default.
• The Note is convertible into Common Stock at a price equal to $2.29 per share (as may be reduced to a variable price equal to 85% of the lowest daily VWAP during the ten (10) consecutive trading days immediately preceding a conversion, but not be lower than $1.00 per share).

Sentiment

Score: 5

Explanation: The document presents a mix of positive and negative aspects. While the company is taking steps to comply with regulations and secure financing, there are concerns about dilution and past issues with auditors. The failure to make the first payment that was due on August 15, 2024, and thus the May Note is accruing interest at the default rate of 18% is a significant negative.

Positives

• The Board of Directors is actively engaged in overseeing the company's risk management processes.
• The company has established an Audit Committee and a Compensation Committee to ensure proper oversight of financial reporting and executive compensation.
• The company is seeking to comply with Nasdaq Listing Rules by seeking stockholder approval for the share issuance to Yorkville.
• The Note and Warrant provided the company with capital in exchange for the issuance of equity.

Negatives

• The company failed to make the first payment that was due on August 15, 2024, and thus the May Note is accruing interest at the default rate of 18%.
• The issuance of Common Stock to Yorkville pursuant to the terms of the Note and the Warrant will have a dilutive effect on our existing shareholders, including the voting power and economic rights of existing shareholders, and may result in a decline in our stock price or greater price volatility.
• The company terminated the engagement of BF Borgers following the SECs order declaring that BF Borgers is not permitted to appear or practice before the SEC.

Risks

• Failure to obtain stockholder approval for the share issuance to Yorkville may require the company to seek alternative financing, which may not be available on advantageous terms.
• The issuance of shares to Yorkville will dilute existing shareholders' ownership and could negatively impact the stock price.
• The company's reliance on debt financing, such as the convertible promissory note, could increase financial risk.
• The company has failed to make the first payment that was due on August 15, 2024, and thus the May Note is accruing interest at the default rate of 18%.

Future Outlook

The company's ability to successfully implement its business plans and generate value for shareholders is dependent on its ability to maximize capital raising opportunities.

Management Comments

• Our Board of Directors has determined that the Note, the Warrant, and our ability to issue Common Stock to Yorkville pursuant to the Note and/or the Warrant is in the best interests of the Company and its shareholders because the Note and Warrant provided us with capital in exchange for the issuance of equity.

Industry Context

The company's decision to seek stockholder approval for the share issuance to Yorkville is in line with Nasdaq Listing Rules, which aim to protect shareholder interests by requiring approval for significant equity issuances.

Comparison to Industry Standards

• The proxy statement follows standard SEC guidelines for disclosure and shareholder voting.
• The director qualifications and committee structures are typical for publicly traded companies of similar size.
• The related party transaction disclosures are consistent with regulatory requirements.
• The company's approach to executive compensation, including performance-based bonuses, is a common practice in the industry.

Related Party Transactions

• In December 2016, the company received a non-bearing interest loan from Farooq Arjomand, the Chairman of our Board of Directors.
• In May 2021, the company received a non-bearing interest loan from Dennis Egidi, a member of our Board of Directors.
• In May 2022, the company entered into a convertible note agreement with an entity controlled by Dennis Egidi, a member of our Board of Directors.
• In June 2022, the company entered into a debt agreement with an entity controlled by Dennis Egidi, a member of our Board of Directors.
• In January 2024, the company entered into a securities subscription agreement with Farooq M. Arjomand, the chairman of our Board of Directors, pursuant to which we issued 1,666,667 shares of Common Stock for approximately $1,000,000 in gross proceeds.

Stakeholder Impact

• Approval of the share issuance to Yorkville will allow the company to access capital but will dilute existing shareholders' ownership.
• Failure to approve the share issuance may require the company to seek alternative financing, potentially impacting the company's ability to execute its business plan.
• The election of directors will determine the leadership and oversight of the company.
• The ratification of the auditor will ensure the integrity of the company's financial reporting.

Next Steps

• Stockholders should review the proxy materials and vote on the proposals.
• The company will hold its Annual Meeting on October 24, 2024, to count the votes and take action on the proposals.
• The Audit Committee will investigate the reasons for stockholder rejection and will re-consider the appointment if the appointment is not ratified.

Key Dates

Keywords

proxy statement, annual meeting, directors, auditor, stockholders, share issuance, convertible note, Yorkville, BCRG Group, compensation, governance, Reborn Coffee