DEF 14A: Reborn Coffee Seeks Stockholder Approval for Share Issuance to EF Hutton and Yorkville

Reborn Coffee is seeking stockholder approval to issue shares of common stock to EF Hutton and Yorkville in excess of the Exchange Cap, as required by Nasdaq Listing Rule 5635(d).

Summary

• Reborn Coffee is holding a special meeting of stockholders on May 10, 2024, to vote on proposals related to the issuance of common stock to EF Hutton YA Fund, LP (EF Hutton) and YA II PN, LTD. (Yorkville).
• The company seeks approval to issue shares beyond the Exchange Cap under a Pre-Paid Advance Agreement (PPA) with EF Hutton and a Standby Equity Purchase Agreement (SEPA) with Yorkville.
• The PPA, dated February 12, 2024, involves a $1,100,000 pre-paid advance from EF Hutton, which can be repaid through the issuance of common stock.
• The SEPA, also dated February 12, 2024, allows Reborn Coffee to sell up to $5,000,000 of common stock to Yorkville at the company's request.
• Both agreements contain Exchange Cap limitations, restricting the number of shares that can be issued without stockholder approval to 19.99% of the outstanding shares as of the agreement date.
• The company is seeking approval to waive these Exchange Cap limitations to maximize capital-raising opportunities.
• Failure to obtain approval may require Reborn Coffee to seek alternative financing, which may not be available on favorable terms.

Sentiment

Score: 6

Explanation: The document is neutral in tone, presenting the facts of the proposed share issuance and the rationale behind it. While the agreements provide access to capital, there are also potential dilutive effects and risks associated with the transactions.

Positives

• The PPA and SEPA provide Reborn Coffee with access to capital.
• The company's board of directors believes that the agreements are in the best interests of the company and its shareholders.
• The company is proactively seeking stockholder approval to comply with Nasdaq Listing Rule 5635(d) and maximize capital-raising opportunities.

Negatives

• The issuance of common stock to EF Hutton and Yorkville will have a dilutive effect on existing shareholders.
• Sales of common stock by EF Hutton and Yorkville in the public market could adversely affect the prevailing market prices of Reborn Coffee's common stock.
• Failure to obtain stockholder approval may require the company to seek alternative financing, which may not be available on advantageous terms.

Risks

• 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.
• The issuance of common stock will dilute existing shareholders' ownership and voting power.
• Market conditions and other factors could affect the company's ability to raise capital on favorable terms.
• The company may be unable to repay the Pre-Paid Advance in cash if shareholder approval of Proposal No. 1 is not obtained.

Future Outlook

The company's future success depends on its ability to raise capital and implement its business plans. The company is seeking stockholder approval to maximize its capital-raising opportunities through the PPA and SEPA.

Management Comments

• The Companys Board of Directors has determined that the PPA and our ability to issue Common Stock to EF Hutton pursuant to the PPA is in the best interests of the Company and its shareholders because the PPA provided us with capital in exchange for the issuance of equity.
• The Companys Board of Directors has determined that the SEPA and our ability to issue Common Stock to Yorkville pursuant to the SEPA is in the best interests of the Company and its shareholders because the SEPA provides us with a reliable source of capital.

Industry Context

Many small-cap companies use equity financing agreements like the PPA and SEPA to raise capital. These agreements can be beneficial for companies that need access to capital but may also result in dilution for existing shareholders.

Comparison to Industry Standards

• The use of prepaid advance agreements and standby equity purchase agreements is a common practice among small-cap companies seeking financing.
• Similar agreements are often seen with companies like those listed on the Russell 2000 index, which frequently utilize such mechanisms to secure funding for growth initiatives.
• The terms of the PPA and SEPA, including the discount rates and exchange cap limitations, are generally consistent with industry standards for these types of agreements.

Stakeholder Impact

• Shareholders will be impacted by the potential dilution of their ownership and voting power.
• The company's employees and customers may benefit from the increased financial stability provided by the capital raised through the PPA and SEPA.
• The company's creditors may be impacted by the company's ability to repay its debts.

Next Steps

• Stockholders will vote on the proposals at the Special Meeting on May 10, 2024.
• The company will proceed with the share issuance to EF Hutton and Yorkville if the proposals are approved.
• If the proposals are not approved, the company will need to seek alternative financing.

Key Dates

Keywords

Reborn Coffee, EF Hutton, Yorkville, Stockholder Approval, Share Issuance, Exchange Cap, PPA, SEPA, Nasdaq Listing Rule 5635(d), Dilution, Financing